The business benefits of Data Center as a Service (DCaaS) vs. Infrastructure as a Service (IaaS)

Wellington Lordelo, Director of Innovation Acceleration, Digital Realty
January 22, 2025

Every company is witnessing exponential data growth — especially as new artificial intelligence (AI) initiatives launch. Because of this, demand for data center capacity could increase by more than three times by 2030. Yet, to navigate the growing digital economy, organizations must implement a data management strategy built to handle the increasing amount of data and manage it properly and cost-effectively.

The good news is there are options available that can help organizations better optimize their IT infrastructure for efficiency, scalability, and business growth. Here’s what IT leaders need to know about Infrastructure as a Service (IaaS) and Data Center as a Service (DCaaS), and which solution can best serve their organization’s needs today and into the future.

Exploring Data Center as a Service (DCaaS)

Organizations need effective strategies to support their ongoing data requirements as they scale operations and grow data usage. Yet, this presents a challenge for many organizations with limitations to their physical IT hardware.

They may lack the space for on-premises equipment, the funds to invest in data center expansion (or to increase their IT team to support that expansion), the ability to support the power needed for increased IT activities, or any number of other prohibitive reasons.

With Data Center as a Service or DCaaS, organizations can leverage enterprise-grade data center facilities and professional IT management without the need to invest in and maintain their own equipment. This model allows businesses to focus on their core operations, while the DCaaS provider handles the infrastructure, including servers, storage, networking, power, cooling, and physical security.

This approach offers several benefits, including:

• Flexibility and scalability: With DCaaS, an organization’s growth is no longer hampered by its ability to expand its physical data centers. By renting data center space, organizations scale as needed, whether scaling up for growth or scaling back throughout the year as necessary.
• Enhanced control over hardware: Despite using a managed data center provider, IT leaders can still have control over their hardware, allowing for customization of cloud infrastructure, servers, operating systems, and more.
• Compliance with regulatory requirements: Following local and regional regulations and data sovereignty laws on how data is collected, stored, and managed becomes easier when the service provider oversees the data center.
• Reduced complexities: IT leaders can work with their data center service providers to customize their needs, then leave the management to the service provider, reducing overall IT complexities.
• Cost efficiencies: Organizations can save on the costs associated with building and managing on-premises data centers and instead pay a managed services fee.

Understanding Infrastructure as a Service (IaaS)

Another managed solution IT leaders can consider is Infrastructure as a Service or IaaS. Similarly to DCaaS, it’s a managed service with pay-as-you-go pricing, providing virtual computing resources, usually over the internet.

IaaS services allow organizations to access, manage, and scale their IT infrastructures like cloud, compute, storage, networking, servers, and virtualization on demand while managed by a third-party provider.

The benefits of IaaS are also similar to DCaaS. However, IaaS services allow for more cost savings because they don’t require prebuilt and in-house managed IT infrastructures. IaaS also offers scalability and flexibility, especially in cloud computing services: IaaS also offers scalability and flexibility, especially in cloud computing services, which organizations can scale up or back on infrastructure solutions as needed.
which organizations can scale up or back on infrastructure solutions as needed. Outsourcing IT infrastructure management reduces the need for managing physical hardware as well.

Key differences between DCaaS and IaaS

While both offer similar benefits to organizations looking to manage their IT environments more effectively, there are notable differences between IaaS and DCaaS that IT leaders should consider to make an informed decision.

DCaaS allows for the management and control of physical servers and other hardware, along with customization of that hardware as well. Meanwhile, with IaaS services, organizations typically don’t have access to or influence over the hardware on the back end. Instead, they interface with cloud computing services using the provider’s chosen technology.

While scaling up with IaaS may involve adding more virtual capacity from shared infrastructure, scaling up with DCaaS involves adding or leasing unique servers or hardware from the service provider.

Additionally, IaaS and DCaaS offer varied levels of cybersecurity as well, as securing cloud and virtual infrastructure will be different from securing physical machines.

When to choose DCaaS

For IT leaders looking to expand their data centers, DCaaS can offer a balance between control and outsourcing. An IT leader may choose DCaaS because they want physical control over their servers but lack the facilities to house them. DCaaS also gives organizations complete control over their hardware, which can be a benefit if they need custom hardware configurations.

DCaaS can be a good option for organizations requiring strict compliance with data sovereignty laws, as third-party colocation data center providers can give oversight and guidance to security and compliance.

Additionally, if an organization wants to adopt new initiatives like AI deployments but lacks the current infrastructure to accommodate the high levels of computing power needed for it, DCaaS providers can offer the capacity and computing power to handle AI deployments. By combining the control over hardware with the capability to deliver high-performance compute (HPC) deployments, DCaaS offers more efficient ways to scale with new technologies.

When to choose IaaS

For IT leaders looking to outsource support for their infrastructure, IaaS can offer flexibility and quick deployment due to its virtual infrastructure. IaaS is a great option for startups that need rapid scalability and the ability to launch new applications or workflows quickly.

Additionally, organizations can reduce capital expenditures (CapEx) with IaaS solutions, as these provide access to critical cloud computing services housed in one data center, enabling organizations wanting to leverage the latest cloud technology without managing physical hardware.

Hybrid solutions: Combining DCaaS and IaaS

Investing in in-house solutions can be costly and timely. However, DCaaS and IaaS, along with other “as a service” solutions, give organizations of any size the option to choose how much they want to outsource to managed service providers that can offer reduced complexity, cost efficiencies, and tailored guidance and expertise.

If an organization needs to manage on-premises hardware and virtual or cloud infrastructures, they may want to consider a hybrid solution that uses IaaS for some IT operations and DCaaS for others. This allows organizations to leverage the scalability of IaaS while maintaining control over critical applications through DCaaS. Combined, these services can optimize performance, enhance security, and increase flexibility.

Optimizing IT infrastructure for modern cloud computing with DCaaS and IaaS

As the need to manage data effectively grows, PlatformDIGITAL®, including the registered trademark symbol: As the need to manage data effectively grows, PlatformDIGITAL®, from Digital Realty, optimizes IT infrastructure for hybrid cloud computing.

We host and power numerous DCaaS and IaaS providers globally through our platform, providing organizations with neutral access to these services as options for building and expanding their data management and IT infrastructure:

• DCaaS can be a great option for organizations that want to expand their physical data centers and keep control over their hardware.
• IaaS can be a great option for organizations that don’t need control over physical equipment and want fast, flexible virtual computing environments.

Ultimately, choosing an IT infrastructure between IaaS and DCaaS must align with business goals and requirements, and IT leaders should first assess their specific needs to determine the most effective solution.

Digital Realty provides the infrastructure to connect with reliable partners for DCaaS and IaaS, serving as a convergence point for companies, data, technology, and possibilities.

Our global ecosystem not only powers major DCaaS, IaaS, and XaaS (Anything as a Service) providers but also offers a global connectivity fabric (via the ServiceFabric™ product family) that allows direct peering with enterprises, presenting a uniquely neutral and noncompetitive platform for digital businesses looking to scale in the digital economy.

When you’re ready to use your data to unlock insights and future-proof your IT solutions with best-of-breed capabilities, reach out to one of our experts to get started.

In the meantime, learn more about how Digital Realty can help your organization grow and innovate today.

FAQs

What is the difference between IaaS and PaaS?
IaaS provides virtual computing resources over the internet, allowing users to manage operating systems, applications, and storage. Platform as a Service (PaaS) offers a managed platform with tools and services for developers to build, run, and manage applications without handling the underlying infrastructure. While IaaS offers control over the infrastructure, PaaS provides a platform for application development and deployment.

What is the difference between IaaS and SaaS?
IaaS delivers virtual computing resources, giving users control over operating systems and applications. Software as a Service (SaaS) provides fully functional software applications over the internet, accessible via web browsers, without the need to manage any infrastructure or software. While IaaS offers infrastructure control for building custom solutions, SaaS delivers ready-to-use software managed entirely by the provider.

What are the benefits of DCaaS?
DCaaS offers organizations the following benefits:

• Cost efficiency: Reduces upfront CapEx on physical data centers.
• Scalability: Allows organizations to adjust resources to meet changing business demands.
• Expert management: Provides access to specialized professionals who manage and maintain the data center infrastructure.
• Reliability and security: Offers advanced security measures to protect data.
• Focus on core business: Allows organizations to concentrate on their core activities instead of data center management.