The global infrastructure-as-a-service (IaaS) may grow as much as 42.91 percent annually over the next five years, as growth-oriented companies try to keep their burgeoning technology costs under control, protect themselves from the risk of datacenter disasters, and manage Big Data traffic spikes, according to Infiniti Research.

The economics of IaaS can be fairly compelling. IaaS providers can achieve economies of scale unavailable to individual companies. As relatively young companies, they can also build more uniform environments than their potential customers, which typically must maintain multiple generations of information technology, further reducing their operating costs, according to the report. Plus, because infrastructure operations are their main business, IaaS providers can make investments in people, processes and technology that are necessary to achieve high efficiency and high performance.

Just as important, IaaS allows companies to rent infrastructure on an as-needed basis rather than making capital investments that drain vital cash reserves. This ability to replace capital expenditures with operating expenditures can be especially appealing in cases where additional IT capacity is only required to support temporary peaks in IT workloads, Ininity said. IaaS also helps mitigate the risk of business interruptions that can occur when a fire, flood, earthquake or other disaster knocks out a company’s datacenter, since it allows companies to shift their IT operations to alternative datacenter infrastructure in another location across town or in another state.

Smaller, growth-minded carriers may be especially interested in IaaS, since it can assist them in rapidly scaling up their operations without burdensome capital investments in infrastructure or in larger fixed IT payrolls, according to the report.

Of course, IaaS is not the only IT provisioning model the cloud offers insurers seeking to do more with less. Software-as-a-service (SaaS), for example, allows insurers to further reduce costs by avoiding a variety of costs associated with application development and deployment. SaaS can, however, limit the ability of insurers to differentiate themselves by their IT systems.

Platform-as-a-service (PaaS) avoids this problem by providing an environment that facilitates the development and deployment of custom software. One downside of PaaS, though is that it may lock a company into a limited set of hosting options.

Big Data Enters the Picture

The industry is responding to concerns about cloud vendor lock-in with standards such as OpenStack that make IT workloads more transportable between cloud providers. These standards may also make it easier for insurers to move workloads between the cloud and their own datacenter environments—making it even easier to support “spiky” workloads such as Big Data analytics without having to either over-provision the enterprise datacenter or spend more money than is necessary on cloud services.

Despite these selling points, a variety of factors are also inhibiting IaaS adoption. These factors include concerns about IaaS vendor performance and accountability, regulatory constraints on data hosting, and the potential for cost over-runs resulting from higher-than-expected utilization.

This article originally published by Insurance Networking News.

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