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SaaS Startup? Here's How to Choose Between IaaS and PaaS

5 minute read
Jorge Sagastume avatar

I’m often asked whether a Software-as-a-Service (SaaS) startup, is better off contracting for Infrastructure-as-a-Service (IaaS) or Platform-as-a-Service (PaaS) services. However, that question begs the issue of how to take advantage of the range of available services and environments without becoming locked in to the point where we can never host in a different type of environment. 

IaaS and PaaS Allow Startups to Compete

Before I attempt to offer my advice, let’s take a minute to explore the similarities and differences between IaaS and PaaS. And as part of that exploration, let’s also look at the most popular IaaS and PaaS offerings and explore key trends in the market.

Both IaaS and PaaS providers help SaaS companies develop, host and run software in the cloud by minimizing upfront capital expenditures in hardware and networking. By using cloud-based IaaS or PaaS, SaaS startups can achieve gross margins in the 80 to 90 percent range, allowing them to compete on equal terms with established vendors of installed software.

The IaaS Market Currently Dominates

IaaS providers host SaaS startup applications on virtual machines and network services. They also provide a set of APIs and services for critical application functions like storage and databases, analytics, load balancing and scaling, deployment and monitoring. IaaS was a $24 billion market in 2016, whose key players are Amazon Web Services (AWS), Microsoft Azure and the Google Cloud Platform.

IaaS Revenue

The Growing Potential of PaaS

PaaS shares some features with IaaS but adds programming language capabilities, built-in services and APIs. Those may include user authentication APIs and NoSQL data stores to create scalable applications and backend services. The PaaS market grew to $3.06 billion in 2016, led by Google App Engine, by Salesforce and, again, Microsoft Azure. 

PaaS Revenue

Selecting the Right Vendor Will Become Even More Vital

Recent offerings have tended to combine IaaS and PaaS capabilities. Reports by Gartner (registration required) and IBM note that convergence between IaaS and PaaS is accelerating. This convergence will largely eliminate the dilemma of whether to choose PaaS or IaaS, bringing into focus the critical aspect of selecting a vendor who provides flexibility and the ability to migrate across platforms.

One caveat, in particular, emerges: SaaS entrepreneurs should beware of inflexible platforms whose proprietary features might limit the ability to scale, add new features or make major changes. Managing a PaaS plus IaaS platform is tricky and requires expert personnel.

Look for Scalability, Flexibility and Data Portability

That’s one reason why you should be looking for solutions that will allow your company to make easier updates and adaptations. What’s more, your chosen platform should be open enough to allow scalability, as well as the most complete a degree of control possible and major software tweaks.

Flexibility is another business-critical factor in selecting IaaS and PaaS vendors. If you cannot migrate workloads to another provider, you are limiting your growth. Data retention and data migration are other components of a viable SaaS solution, especially when one might wish to move to another provider to optimize costs or boost effectiveness.

Consider Business Continuity

Those are all crucial factors of SaaS solution suitability, whether you use pure PaaS, IaaS or a disruptive service that combines both. Availability emerges as an important factor as well because it is a vital component of your customers’ business continuity policy.

Learning Opportunities

After all, using a vendor whose platform’s proprietary features or restrictive policies might cause SaaS unavailability can easily ruin your business. You can solve the data retention issue by opting for an escrow service to protect and retain your data in case of trouble at your IaaS or PaaS provider. All the same, you must also be sure of your ability to migrate data to another provider effortlessly, and without service interruptions.

Learn a Lesson from the DAM Market

Use of PaaS plus IaaS eliminates much of the hassle of managing data and app storage, networking and other resource-consuming technologies. But you must be careful not to get stuck if your requirements change.

In that respect, the scenario resembles the digital asset management (DAM) platforms market, which allows organizations to harness the benefits of the cloud to manage rich media assets. DAM is indeed a convenient way of managing a whole lot of digital assets. But if a provider goes bust or data is stuck on their platform, your company’s day-to-day operations could come to a screeching halt.

Choose a Vendor You Can Grow With

By examining the technical details of PaaS and IaaS offerings, a SaaS founder can get an idea of what technologies each vendor uses and how each vendor will perform in terms of compatibility.

This due diligence will allow you to select a vendor who is looking to grow with the market and who is committed to keeping its solution compatible with emerging tech innovations. In addition, you should choose a provider whose policy does not restrict access to, or transfer of, your data and applications in any way.

Finally, always retain full rights over your data and be sure to introduce clauses guaranteeing that your SaaS solution can be transferred to another vendor at your sole discretion.

Read Your Contract Carefully 

As the SaaS market grows, further boosted by increasing IoT applications, a good many PaaS and IaaS platforms will try to cement their relationships with SaaS companies. This will involve adding contract clauses or developing proprietary features that prevent their clients from using rival platforms.

These moves are becoming widespread regardless of whether a provider is large or small. So one of the vital tasks facing a SaaS company owner is to secure a contract that is open and transparent, with a vendor whose platform is flexible enough to allow growth and provides maximum flexibility to move onto a new IaaS or PaaS platform as circumstances evolve.

About the author

Jorge Sagastume

Jorge Sagastume is a Vice President at EscrowTech International, Inc. with 12 years of experience protecting IP and earning the trust of the greatest companies in the world. Jorge has been invited to speak on IP issues by foreign governments and international agencies.

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