Outsourced Hedge Fund Technology: Understanding SaaS, PaaS and IaaS

As cloud services continue to become increasingly popular among hedge funds and investment firms, there still seems to be an area of confusion that surrounds this technology. We've talked through Why Cloud Computing is Right for your Hedge Fund and Understanding Public, Private, and Hybrid Clouds. Now, let's look at three key elements to consider within the cloud: Software as a Service (SaaS), Platform as a Service (PaaS), and Infrastructure as a Service (IaaS). 

Software-as-a-Service (SaaS)

In a SaaS model, firms are offered a complete range of applications via the Internet, all of which are managed by the hedge fund cloud provider. This means firms can forego upfront investments in servers and software licenses and pay a predictable per-user, per-month fee.

Platform-as-a-Service (PaaS)

PaaS is the delivery of a computing platform over the Internet. The PaaS model enables hedge funds to create Web applications quickly without incurring the cost and complexity of buying and managing the underlying software and hardware. Firms have control over the deployed applications and environment-related settings. PaaS is great for firms creating or managing their own applications or looking for testing and development environments.

Infrastructure-as-a-Service (IaaS)

Infrastructure as a Service provides data centre, infrastructure hardware and software resources over the Internet. Through IaaS, applications are delivered as a virtualisation platform by the cloud provider and can be accessed across the Internet. The firm has full control of the virtualised platform and is not responsible for managing the underlying infrastructure.

SaaS, PaaS and IaaS share some common traits. They are all delivered over the Web, and services can be accessed in the cloud on demand, usually via subscription payment. Hedge funds can easily upgrade or downgrade plans in real time to accommodate business needs for cloud business solutions.

The table below illustrates additional characteristics found in each cloud model:

Editor's Note: This article has been updated and was originally published in September 2011.