An employee resigned from a financial services company earlier this year. Three weeks later, the audit team discovered that the employee’s account could still access the corporate CRM system and email without anyone noticing.
Cases like this are far from rare. According to data compiled in a 2026 credential statistics report, more than 97 percent of attacks on digital identities exploit weak or leaked passwords, and incidents involving stolen credentials cost an average of USD 4.67 million per event.
Issues like these are pushing more and more companies toward Identity as a Service (IDaaS), a cloud-based identity management service model whose market value is projected to reach USD 18.1 billion in 2026, according to Fact.MR research. That kind of market growth isn’t a coincidence, it reflects a growing awareness among organizations that manually managing user identities is no longer adequate for the scale of their business.
This article discusses the pros and cons of IDaaS in depth, complete with real-world examples of its application. The goal is simple: to give you a complete picture so you can make the right decision before deciding to migrate.
What Is Identity as a Service (IDaaS)?
Identity as a Service is a delivery model for identity and access management (IAM) systems that is managed by a third-party vendor through the cloud, rather than being built and maintained in-house by an internal IT team. Companies simply subscribe to the service, similar to the usage pattern of software as a service in general.
There are four elements that distinguish IDaaS from conventional IAM systems. These elements include single sign-on (SSO) for logging into many applications at once, multi-factor authentication (MFA) as an additional verification layer, automated provisioning for creating and deactivating user accounts, and centralized audit and compliance reporting.
All four of these elements run on the vendor’s infrastructure. The internal team no longer needs to manage its own servers or perform routine patching every time there’s a security update.
As an illustration, a retail company with 500 employees and a dozen or so applications (from point-of-sale systems to ERP) can connect all of those applications to a single IDaaS portal. Employees only need to log in once in the morning, and the IT team can revoke access to every application simply by disabling a single account when an employee resigns, exactly the scenario that failed to happen in the case at the start of this article.
The key point is that IDaaS isn’t just a login tool. It’s a control layer that determines who can access what, when, and from which device, so that even a small misconfiguration can be spotted and fixed immediately from a single place.
Advantages of Using Identity as a Service (IDaaS)
The benefits of IDaaS don’t stop at ease of login. Here are five advantages organizations most often experience after adopting this model.
Cost and Implementation Time Efficiency
Building an IAM system in-house requires investment in servers, software licenses, and a dedicated team, all of which can take months before the system is truly up and running. With IDaaS, this process can typically go live within weeks because the infrastructure is already available on the vendor’s side.
For example, a startup with a limited IT budget can immediately activate SSO and MFA without needing to hire a full-time identity management specialist. The budget that would have gone toward servers and licenses can be redirected to product development.
Flexible Scalability
User identity needs can change drastically, especially when a company is hiring en masse or opening new branches. IDaaS allows the addition of thousands of user accounts simply by changing the subscription quota, without adding a single physical server.
When an e-commerce company experiences a surge in orders during an annual promotion and hires hundreds of freelance workers in a short period, the IT team can create bulk accounts through IDaaS within hours. A similar scenario could take days if done manually on an on-premise system.
Centralized, Consistent Security
Security policies, such as mandatory MFA or password complexity requirements, can be applied uniformly across all applications from a single control dashboard. This reduces the gaps that typically arise from having different policies across different systems.
For comparison, incidents involving stolen credentials take an average of 246 days to be identified and contained, according to the same data. With centralized MFA policies, this time gap can be narrowed because suspicious login attempts are detected immediately from a single monitoring point.
Easy Integration with Cloud Applications
Most IDaaS vendors already provide ready-made connectors for hundreds of popular applications, from Microsoft 365 and Google Workspace to Salesforce. The IT team no longer needs to write integration code from scratch for every new application the company uses.
For instance, when a company adds a new HR application, the admin simply selects an available connector and sets the access rules. A process that used to take weeks can now be completed in minutes.
A Simpler Login Experience for Users
Employees no longer need to remember dozens of username and password combinations for every application they use daily. A single credential is enough to access the entire digital work ecosystem of the company.
Compare this to conditions in many offices before IDaaS adoption, when employees wrote passwords on sticky notes because there were too many to remember. Simple habits like this often become the easiest security gaps to exploit.
Drawbacks of Identity as a Service (IDaaS) to Watch Out For
Despite its many benefits, IDaaS isn’t a solution without caveats. Here are four drawbacks that should be carefully considered before an organization decides to migrate.
Dependence on Internet Connectivity and Vendor Uptime
Because the entire authentication process runs in the cloud, employees can’t log in to any application when the company’s internet connection is down. Downtime on the vendor’s side, no matter how brief, also directly impacts all operations that depend on the system.
If an IDaaS provider experiences a two-hour service outage during working hours, every employee who hasn’t already logged in will automatically be unable to access email or other internal systems. Operations grind to a halt until the vendor’s service is fully restored.
Vendor Lock-in Risk
Every IDaaS vendor has its own configuration methods and data formats, so moving all user identities to a different vendor down the line can take considerable time and cost. The deeper the integration already built, the harder the migration process becomes.
A company that has connected 40 applications to one IDaaS vendor, for example, would have to remap all of those configurations one by one if it ever decides to switch vendors. A migration process like this can take months depending on the complexity of the system.
Complexity of Cross-Jurisdiction Data Compliance
User identity data, including employees’ and customers’ personal information, is stored on vendor-owned servers that may be located in different countries. This adds an extra layer of compliance, especially for companies subject to data protection regulations such as Indonesia’s Personal Data Protection Law (UU PDP).
A multinational company operating in several countries, for example, needs to ensure its chosen IDaaS vendor offers data residency options that comply with regulations in each region. Negligence on this front can result in administrative sanctions, not just technical risk.
Subscription Costs That Can Balloon
IDaaS pricing models are generally calculated per active user per month, so total costs can rise significantly as headcount grows. Additional features such as advanced auditing or custom integrations are also often billed separately on top of the base package.
A company that grows from 200 to 800 employees over two years, for example, might find its IDaaS subscription costs quadrupling. Without careful budget planning from the start, a spike like this is often only noticed when the annual bill arrives.
When Is IDaaS a Good Fit, and When Should It Be Reconsidered?
Given the pros and cons above, the decision to adopt IDaaS should be tailored to each organization’s specific conditions, not simply follow an industry trend. The table below summarizes situations that are generally a good fit versus those that need further study before migrating.
| Organizational Condition | Recommendation |
|---|---|
| Limited IT team, wants to focus on core business | Good fit for IDaaS |
| Growing number of cloud applications | Good fit for IDaaS |
| Operations across multiple countries with strict data regulations | Needs data residency review first |
| Sector requiring full control over identity infrastructure | Needs in-depth review, consider a hybrid model |
| Office internet connection not yet stable | Needs downtime mitigation review |
The table above isn’t an absolute rule. Every organization still needs to conduct its own internal assessment before deciding which identity model best fits its business structure.
Setting the Direction for Your Organization’s Identity Strategy
Identity as a Service offers efficiency, scalability, and centralized security that’s hard to match with conventional IAM systems, especially for organizations with limited IT resources. However, vendor dependency, lock-in risk, and the potential for ballooning costs remain considerations that shouldn’t be ignored.
The final decision should be based on the organization’s actual conditions, from the number of applications in use and the stability of internet connectivity, to the data regulations applicable in the industry where the company operates. A thorough evaluation before migration is far cheaper than fixing identity misconfigurations after the system is already up and running.
The case of the resigned employee whose account remained active, mentioned at the start of this article, could actually have been prevented, provided the company’s identity architecture was designed correctly from the outset, whether through full IDaaS or a hybrid model. What separates a secure organization from a vulnerable one isn’t the size of the budget, but how mature the planning behind the system they use really is.
For organizations still weighing which path best fits their needs, Accelist Adaptist Consulting offers consulting and implementation services under the Adaptist PRIME product category, which helps companies design an identity management architecture tailored to their specific business needs. The Adaptist PRIME team can provide support from infrastructure readiness assessment and choosing the right IDaaS model, through to a migration process that minimizes daily operational disruption.
Ready to Manage Digital Identities as a Business Security Strategy?
Request a demo today and discover how IAM solutions centralize user logins through Single Sign-On (SSO), automate employee onboarding, and protect company data from unauthorized access without disrupting productivity with repeated logins.
FAQ
IDaaS is vendor-managed in the cloud; conventional IAM is built in-house.
Yes, SSO and MFA can go live fast without a large IT team.
Dependence on vendor uptime, lock-in, and rising subscription costs.
