Serverless Computing is being talked up, in many areas, as the future of computing. And (arguably) rightly so. As the diagram below shows, serverless is the next step in a progression of abstracting more and more of the “mechanics” of infrastructure away from the user’s concern and control. Otherwise known as Function as a Service, Serverless is available from the big three public cloud vendors (AWS has Lambda, Microsoft has Azure Functions and Google has Google Cloud Functions) as well as IBM’s OpenWhisk open source serverless offering.


At Microsoft’s recent developer conference, Build, the attending analysts spent time talking with Mark Russinovich, Microsoft’s CTO of all things Azure. Russinovich spent some time talking about the economics of serverless, in particular differentiating Microsoft’s charging approach with that of Amazon and suggesting that Serverless charges from AWS can be sub-optimal:

…Lambda has some serious economic issues at scale. With Lambda, developers pay for the invocations of a function – every time a function is triggered, a charge is made. And while these charges are tiny, they can, said Russinovich, end up extremely expensive. In many cases, it is better to simply pay for fully provisioned resources and fill those resources with the processing of functions. Either way, Microsoft offers developers the choice – they can either use Azure Functions on a consumption basis (like Lambda) or they can run Azure Functions in fully provisioned resources. The Azure AppService plan is simply infrastructure – developers can use it within a virtual machine (VM) construct, or a function-based one.

Of course taking what a vendor says as Gospel is a dangerous thing and so it is timely that 451 Research has just published an analysis of serverless cloud pricing. 451 Research’s Owen Rogers, the poor soul that has to obsess over cloud pricing so we don’t have to, came up with some interesting findings in his research. The first, and perhaps most important, thing to note is that serverless offers a lower cost of ownership (TCO) than virtual machines (VMs) and containers.

But what people really want to see is the relative economics of the various vendors who offer serverless. At a coarse level, Rogers found that IBM generally offers the least expensive service (compared to Amazon, Microsoft, and Google), with Microsoft leading for certain configurations.

The cloud price index methodology

451 Research’s Cloud Price Index is designed to give enterprises and service providers insight into the cloud landscape so they can make more informed decisions when buying and selling cloud services. Like a consumer price index, 451 Research’s Cloud Price Index is made up of a basket of goods. In this case, it is also a specification of the services required to operate a typical web server application including compute, storage, databases, management and serverless. The Cloud Price Index covers 30 public and private cloud capabilities from 50 providers, covering 90% of the global IaaS market.

Diving into the findings

Rogers gave some reasoning for the fact that serverless is generally cheaper than virtual servers and gave an example scenario: when a serverless function is active for just three-quarters of the month, it only takes a 10-minute saving in operational overhead for serverless to beat virtual machines on TCO. Even without the savings in developer time, the ability of serverless to increase utilization means it is cheaper than using VMs when the code is executed fewer than 500,000 times each month.

In terms of the various vendors, 451 Research’s Cloud Price Index finds that IBM is cheapest for 0.1-second duration scripts, and Azure is cheapest for 10-second scripts, assuming memory requirements match predetermined size allocations. Plus, IBM offers a distinct cost advantage by allowing users to choose exact memory requirements, whereas other providers round up the figures, resulting in users paying for unused capacity.

Considering the similarities in pricing methods and offerings between providers, 451 Research believes serverless is poised to undergo a round of price cutting this year.

“Serverless is more than just hype; it has the potential to transform the way we develop, build and run applications in the cloud. Understanding the economics of serverless technology is vital to understanding its potential to disrupt the industry. Freemium serverless offerings from the four big cloud providers are already fueling the growth of serverless services by stimulating experimentation and helping enterprises gain skills. This could lead serverless to be the next cloud price war battleground,” said Owen Rogers, research director, Digital Economics Unit at 451 Research.


I’m seeing more and more organizations that are leveraging serverless as part of their application stack. The economics aren’t the key driver in this decision, but nonetheless, having some metrics around costs will help the bean counters in their deliberations.

Ben Kepes

Ben Kepes is a technology evangelist, an investor, a commentator and a business adviser. Ben covers the convergence of technology, mobile, ubiquity and agility, all enabled by the Cloud. His areas of interest extend to enterprise software, software integration, financial/accounting software, platforms and infrastructure as well as articulating technology simply for everyday users.


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