XaaS’s three pillars: SaaS, IaaS and PaaS

Software As a Service, Infrastructure as a Service, and Platforms as a Service stand apart

The enterprise push to cloud services has created a marketplace for Anything as a Service (XaaS). Businesses are looking for flexibility and agility as they move away from siloed data center operations and into the cloud. Today’s landscape is dominated by a three-legged stool built on three key “as a Service” segments: Software As a Service (SaaS), Infrastructure as a Service (IaaS) and Platforms as a Service (PaaS). Not surprisingly, the hyperscalers dominate some of these segments, though they’ve left plenty of room for others.

XaaS solutions built using cloud infrastructure help businesses pay for this transition as they go — subscribing, rather than having to make huge capital investments in costly infrastructure which can turn obsolete overnight. 

End-user spending on public cloud services topped $332 billion in 2021, according to Gartner. $122.6 billion was spent on SaaS, $82 billion on IaaS and $59.4 billion on PaaS. Gartner also predicts these three segments will experience the most growth in the coming years.

The remainder comprises outsourced business processes such as accounting and payroll, cloud management and security and Desktop as a Service (DaaS), desktop virtualization systems made by companies like VMware and Citrix Systems.

The Big Three: SaaS, IaaS, PaaS

SaaS is the clear market leader. Gartner projects SaaS spending to exceed $145 billion in 2022, up from $122.6 billion in 2021. That’s been built on the success of companies which have brought solutions to bear like Customer Relationship Management (CRM) and Enterprise Resource Planning (ERP): Salesforce and SAP are examples. 

Zoom and other teleconferencing platforms, Microsoft Office 365 and Adobe’s ever-expanding suite of Creative Cloud tools have propelled those companies into dominant positions in the SaaS space as well. 

IaaS is also a key market driver according to the Gartner report. IaaS enables enterprise IT to outsource cloud computing network infrastructure like physical computing resources, scaling and security. 

Examples of IaaS include Amazon EC2, Microsoft Azure Virtual Machines and Google Compute Engine. Alibaba, IBM, Oracle and Rackspace also occupy this market segment. Customers spent more than $82 billion on IaaS in 2021, said Gartner, which projected a 30% spend increase in 2021 to top $106 billion.

What’s driving that unusual growth? In short, the pandemic and the massive changes it triggered in labor. IaaS spending has increased as more businesses invest in hybrid workforce solutions and digitalize their operations into the cloud.

PaaS is the third leg. PaaS delivers a framework for developers to create customized applications and middleware. Providers of PaaS offer host environments that deliver the app to users over the web. PaaS is a popular option for small to medium-sized businesses and bootstrap startup operations. They find it appealing as a cost-effective way to manage development resources. There is no lingering hardware to pay for. The core development stack is managed, and app time to market is rapid. 

SAP Cloud is an example of a PaaS solidly grounded in the enterprise space. It provides a way for developers to build applications using SAP’s open business platform. Another is Google’s App Engine, which lets developers create and host web apps. Gartner predicts 20.3% year-over-year market growth, from $59.4 to $71.5 billion.

Addressing enterprise need for agility and scale

The emergence of the XaaS trend answers the burgeoning enterprise need for agility and scale. Enterprise IT operations and data services are migrating to the cloud. Being cloud-native using other company’s service platforms also exposes businesses to risk.

Service dependency can complicate corporate data security. More scrutiny than ever is being paid to data sovereignty issues. Enterprises are looking at hybrid cloud solutions and other mitigations. Ones that combine the benefits of cloud infrastructure with specific security needs. As always when using someone else’s product or service, vendor lock-in can be a concern.

Gartner sees a bright outlook for the services market, all the same.

“It’s important to note that the usage and adoption of cloud that served enterprises well during the ongoing crisis will not look the same in the coming years. It will further evolve from serving pedestrian use cases such as infrastructure and application migration, to those that combine cloud with technologies such as artificial intelligence, the Internet of Things, 5G and more,” said Sid Nag, research vice president at Gartner.

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