serverless serivices

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S
Publication date
31 Jan 2023
Author
Michael Azoff
Chief Analyst
Serverless Services
Solutions, 2023
Brought to you by Informa Tech

Serverless Services Solutions, 2023 01
© 2023 Omdia. All rights reserved. Unauthorized reproduction prohibited.
Summary
Catalyst
Serverless computing fully automates all aspects of cloud infrastructure: provisioning,
administration, configuration, and maintenance, from servers to databases, and hiding compute
infrastructure, so developers focus on coding application logic. Public cloud providers offer
serverless services with a pay-per-use model down to a millisecond execution time. Serverless is
designed for real-time event-based applications and can scale from zero to thousands of containers
and then back to zero.
Figure 1: The Omdia Universe for serverless services
Source: Omdia
Licensed Reprint

Omdia view
The cloud-native computing paradigm opens several new ways of running software applications, one
of which is through serverless services. For the right type of application, the serverless computing
model offers rapid development and deployment without the burden of managing servers and other
infrastructure components such as databases and storage. The pay-per-use charging also provides
an attractive cost-benefit. However, this and the other benefits must be evaluated against the usage
pattern and compared with alternative models before deciding the right approach for the given
application.
Omdia has seen serverless computing erupt on the developer stage with much promise, and by
some in the media with hype after Amazon Web Services (AWS) started offering its Lambda function
as a service (FaaS) back in 2016. All the other public cloud providers soon launched their own FaaS,
and the competition has since intensified across a range of serverless services. Today, there is a rise
in interest and adoption of these services, which is now an established part of the cloud usage
repertoire.
For the IT user, serverless offers a purer form of cloud computing. Organizations use the cloud or a
colocation data center to reduce the need to own data center infrastructure. However, they still
need to hire IT operations staff to maintain and configure the software systems running on the
hardware. Figure 2 indicates the share of user-managed versus provider-managed responsibilities
for the different on-premises data center to cloud service options. As one moves to the right of the
chart, the user organization has fewer responsibilities and can focus more on the business
requirements. At the extreme end is software as a service (Saas), where the application is ready-
built. Yet, serverless is the next best option for organizations requiring to build their software
solutions. In this sense, serverless offers a purer cloud experience—it provides the minimum of
plumbing application code that needs writing and has the least responsibilities for running the
infrastructure (a good analogy is hiring a taxi versus renting or buying a car).
To understand who can benefit from serverless, consider that most established businesses will have
existing IT choices, so moving wholesale to serverless makes less sense. The best use case is to run
serverless for spot opportunities, enabling the IT department and line of business to accomplish
urgent tasks quickly. However, for the business startup, serverless offers the intriguing prospect of
going all in with serverless from the beginning. Startups want to achieve their business mission, and
owning or sharing the responsibilities of a data center is not one of them but has been a necessity.
Now, serverless offers an alternative option.
As a relatively new technology offering, there are still teething issues that need to be considered.
When serverless was first introduced, it was not designed for mission-critical applications. However,
as users push the technology, especially startups that rely on serverless for all their IT needs,
latencies must be reduced and meet mission-critical suitability. Vendors are working on lowering
these latencies; the challenge is what is known as cold and warm starts and scaling containers from
zero to hundreds or thousands. One approach is always maintaining a running container that
eliminates cold starts, but the scaling latency can be an issue.

As always, developers must match the right technology for the task requirements. No software
architecture and cloud model will be optimum for all use cases. Serverless offers a convenient
approach to cloud-native computing that reduces the burden on IT operations skills and frees users
to focus on business application logic.
Figure 2: The cloud and data center XaaS technology stack
Source: Omdia

Analyzing the serverless
services universe
Market definition and benefits analysis
There was initial confusion over the language used to describe the serverless model and the need to
explain that serverless means no servers. Better descriptors would be hidden, autonomous, or zero
admin servers. Omdia uses the label “serverless services” or “serverless computing” as an umbrella
term to refer to a range of cloud services that encapsulate three essential characteristics as it affects
the user:
• No infrastructure provisioning, administration, and management
• Pay-per-use charging, based variously (depending on context) on function calls, code execution
time, and memory usage
• Near real-time availability of computing resources, at internet scale, for event-based
applications, with scale to zero when not required
The range of serverless services offered today by leading players goes beyond FaaS. Omdia divides
the serverless portfolio range between the following service categories:
• FaaS: The most commonly used and essential service; functions are typically small pieces of code
that carry out some business or application-related task. They are triggered by events or direct
calls, such as through API, and the user pays for the CPU execution time and memory used.
• Backend data as a service (BDaaS): These are data-related services such as databases and
storage. Where users build FaaS on a cloud platform, the local BDaaS is a useful option to store,
retrieve, and process data. As part of the serverless service, the cloud provider manages this
infrastructure, increasing the ease of use. Service costs are for CPU usage when a query is
submitted and the capacity required to answer the query. Furthermore, some providers do not
charge for data ingress but charge for data egress.
• Application integration: These services connect application components, such as offering an API
gateway, event bus, and messaging service. Charging may be based on the volume of calls, and a
free tier typically exists.
• Security, monitoring, and logging: These services the serverless provider offers to check on the
health and security of its serverless services and applications accessing these services.

Architecture blueprints for serverless services are available from some serverless service providers.
Figure 3 depicts a high-level view of how user applications access serverless services.
Figure 3: High-level view of serverless services on the cloud
Source: Omdia
As a development choice, serverless services can have advantages over running the same
applications on a platform as a service (PaaS) or infrastructure as a service (IaaS). The following
summarizes the benefits and limitations factors that developers need to consider when deciding on
which platform to build and run an application:
Benefits:
• Ease of use: Serverless services free users from all infrastructure considerations, letting them
focus on the application. Infrastructure management, including security, patching, and updating
components, is all part of the service. This separation of the infrastructure chores burden from
time spent on business applications is a key attraction of serverless.

• Cost: For the right use case, serverless can lower costs than running the same application on a
PaaS or IaaS. Serverless services are priced to milliseconds of CPU usage; such pay-per-use
pricing can be advantageous compared with traditional PaaS/IaaS, where servers may lie idle
and still be billable. Serverless services running on a private cloud can also be cost-effective for
an organization as users do not hog compute resources in expectation of future needs, and
resources are better allocated on a need basis.
• Scalability: Being able to rapidly scale high, such as during burst activity when demand for a
service escalates and being able to scale to zero when activity dies, is a key benefit.
• Developer advantages:
– Prototyping: Developers can rapidly test ideas before investing in a large-scale project, for
example, creating a minimum viable product (MVP).
– Quick applications: Serverless services work well for rapid computation using short-lived
and short-use applications.
– Event-based applications: Serverless uses an event-based model; therefore, ideal for
event-driven use cases, such as processing data streams.
– Polyglot programming: Serverless services provide developers with support for various
popular programming languages.
Limitations:
• Latencies: Latencies occur when a function is called for the first time and when there is a large
scale out. To avoid the first cold start challenge, users can periodically call the function to keep it
“warm.” Service providers can offer automated options to achieve such a warm start. Depending
on the application, latencies may exclude certain real-time use cases. The choice of
programming language (size of runtime load, scripting languages have lowest latencies) and
memory size allocated (the larger, the faster the startup) also have an impact.
• Execution time limits: Serverless functions are conceived for short-running applications, and
cloud providers set limits on execution time. This could be a challenge for traditional long-
running applications being ported to serverless, although the trend is to bridge the gap between
very short and longer running times. Public cloud service providers set an artificial limit on
function execution times that may require developers to create workarounds. Some providers
also limit the code size that can be run in a function.
• Lock-in: Depending on the extent of the use of APIs on the given cloud, there will inevitably be a
degree of lock-in. If functions are used simply, then some providers offer greater portability
options.
• Security: Some cloud providers offer dedicated private resources for the highest security.
Generally, cloud providers provide greater security than enterprises can offer on-premises, but

there is also the shared responsibility aspect—a user revealing credentials can blow open
security.
• Event-driven development maturity: Given the suitability of an application for a serverless
approach, working with an event-based serverless model requires a degree of maturity in this
architecture. An organization may also struggle to find the right skilled developers.
• Configuration control: The service provider sets the configurations of the servers, with the users
having no custom control over the settings. Lack of control over networking may be a similar
issue. If this matters to the application, then serverless is not suitable. Troubleshooting and
testing can also be challenging because of a lack of access to the infrastructure. However, Omdia
expects new-generation observability tools to help here. There may also be fewer features
available in some services in the serverless mode, for example, when using a serverless
database.
• Stateless: The first generation of FaaS services were stateless, but some providers now offer
durable functions that can persist state to bridge the gap between traditional and new
generation software architectures.
• Double billing in nested FaaS: A double-billing quirk occurs when functions are nested inside
each other; the call to the second function will bill the first one again. Some service providers
offer workflow facilities to avoid this problem, but users must know this quirk.
That the list of limitations outnumbers the benefits above should not be read as a negative outlook
on serverless services. Rather it should be used as a checklist for the appropriateness of choosing an
application to run in serverless mode. There is certainly not a one-to-one correspondence in the
impact of one bullet over another—the benefit bullets count for a lot, and it is all about the choice of
application for serverless with a good fit to the following characteristics:
• Event-driven
• Highly modular
• Short-lived execution time
• Benefits from rapid and high scalability up and down
• Short time to get from concept to production
Market differentiation
In the analysis, Omdia looks for differentiating features, both functional and non-functional, that
leading serverless vendors offer the market beyond basic capabilities. The following functional
differentiators describe some of these features that form part of the Omdia Universe technology
assessment:

• Application development support, such as DevOps continuous integration and deployment
• FaaS-related:
– Performance: reducing cold and warm start latencies and scaling out concurrent functions
with a warm start
– Service limits: maximum single function execution time limit (the longer, the better) and
the maximum number of concurrent function calls
– Availability of independent performance benchmarks
– Workflow and composition: adding workflow automation to serverless, creating function
compositions (function calls within functions)
– Customization and durability: changing the RAM allocated to a function, the idle timeout,
and orchestrator functions for stateful workflows
• BDaaS management:
– Can the application state be stored in a database? Is there application pooling available for
the database services? Is there a limit to the number of database connections? Is there
support for globally distributed SQL databases?
• Security and privacy:
– What measures are in place to counter server-side request forgery (SSRF) attacks? Can the
user have dedicated servers allocated? Is there network encryption of serverless services?
• Containers support:
– Support for Kubernetes and running functions in containers
• Application integration:
– Offering a serverless event bus and support for GraphQL
Market dynamics
Two main groups divide the serverless services market: the major public cloud providers and
independent vendors offering alternative services hosted on the public clouds. For the major public
cloud providers, serverless provides a “stickiness” to their cloud when developers use the APIs
available on their choice of cloud for services such as databases, storage, and more. Once developers
begin to code on a serverless model, they inevitably become locked into that provider, but some
providers are more portable than others. For example, Cosmonic applications will run on any cloud,
and Oracle FaaS is based on the open source Fn. So, if all that is used are functions, then it is also
portable to other Fn instances.

In recent years, the rise of containers and Kubernetes has brought serverless on containers, for
example, through the use of Knative. Support for containers is now standard across serverless
services. Serverless is also a good way to avoid the complexity of working with Kubernetes since all
the environmental management is the provider’s responsibility. The future of the serverless services
market is looking strong as cloud providers grow the range of serverless services.
One of the biggest hurdles to adopting serverless computing is the mindset of developers who are
new to event-driven programming and have a traditional, monolithic software architecture heritage.
Compiling an application in a highly modular manner or using a microservices architecture with an
event-based model requires new thinking about code flow, messaging, the persistence of state, and
familiarity with a new set of APIs. FaaS generally are stateless, although service providers offer
durable functions that can hold state to cater as a bridge across more traditional applications. This
mindset problem will reduce over time as developers gain experience with serverless computing.
Those developers taking the plunge first can act as role models or evangelists within large enterprise
teams.
The other main consideration for developers is the type of applications most suitable for serverless
from a running time viewpoint. As first conceived, serverless functions are meant to run quickly, so
they spin up and can be killed in seconds or less. However, traditional applications tend to run
longer, so bridging the gap between conventional and rapid lifetimes can help developers, especially
if the same tool set can accommodate both scenarios. Omdia expects the market to address this split
in running times, something IBM is working on, for example.
Omdia’s side-by-side vendor product evaluation for serverless services consists of six vendors
evaluated across three dimensions:
• X-axis: Capabilities of the offering, spanning its range of technical, functional features in the
following categories:
– Basic functional features
– Differentiating features: FaaS
– Differentiating features: Other
– Evolving serverless services
• Y-axis:
– Differentiating non-functional features
– Market execution
• Z-axis: This is the circle size in the Universe chart.
– Market presence
Figure 1 shows the results of Omdia’s analysis. Figure 4 shows the rankings of participating vendors.

Figure 4: Vendor rankings in the serverless services Universe
Source: Omdia
Market leaders
The two market Leaders, Microsoft and Tencent, divide the global market, with Microsoft being a
global player with high adoption in North America and Europe, the Middle East, and Africa (EMEA),
while Tencent’s strongest market presence is in China. Microsoft’s and Tencent’s existing cloud
customers have a natural opportunity to try serverless, having data already present on these clouds,
making these leaders a natural choice for serverless.
Tencent’s WeChat mobile app combines instant messaging, social media, and mobile payments and
is highly popular in China, with 1.24 billion users. WeChat runs on Tencent’s serverless cloud and
allows developers to write serverless apps that run in WeChat, leading to a growth of a 1.5 million
serverless developer workforce on WeChat alone. Experience with WeChat has undoubtedly helped
Tencent achieve a high degree of maturity and innovation with serverless technology.
Tencent achieved the highest scores across the categories evaluated in this Universe, except in the
non-FaaS related differentiating functional features where Microsoft achieved the highest score.
Microsoft came a close second to Tencent in all the other categories.

In geographical regions where Microsoft’s offering is strongest, its nearest competitor is AWS, with
Lambda and other serverless services. AWS declined to participate in this report. In China, Tencent
contends with Huawei and Alibaba over serverless services; neither of these vendors wished to
participate in this report.
Market challengers
The serverless Universe challengers are IBM and Oracle, who scored very close to each other. Oracle
scored exceptionally well in the market execution category, while in the Universe technical features
axis, IBM had overall strength and edged ahead of Oracle. Oracle’s serverless services are built-in
into the new-generation cloud infrastructure that Oracle has built, named Oracle Cloud
Infrastructure (OCI), making it easy to access many serverless services across the Oracle enterprise
services portfolio. IBM also has next-generation technology in its Cloud Code Engine, which has
proved popular in the developer community; it is designed to bridge the gap between traditional
long-running applications and serverless computing. Omdia believes both these challengers will
enter the leadership ranking before long.
Market prospects
One of the trends shaping the serverless industry is bringing serverless to the edge, using functions
at the edge to process data at the point of origin rather than moving it to the data center or cloud.
Some of the vendors here have specific edge offerings, and this is a key focus for prospect-ranked
Netlify, which, apart from Netlify Functions, offers Netlify Function Edge. There are also competing
versions of Kubernetes for the edge, such as K3s, microKubernetes (or microk8s), and minikube, so
edge computing technology is evolving rapidly. The rise of WebAssembly (Wasm) has led to startups
exploiting this technology, including Prospect-ranked Cosmonic. Cosmonic is the company behind
open source project wasmCloud, and its Cosmonic PaaS adds more enterprise features.
For the right application, both vendors offer solutions that should be considered. Both prospects are
also independent of the major cloud providers, and while Netlify’s FaaS is based on AWS Lambda,
Cosmonic applications will run on any cloud. Netlify’s key strength is facilitating web development
on the Jamstack set of technologies, supporting the complete application lifecycle with serverless at
the core. Cosmonic brings multicloud computing to a new level by allowing applications to run on
any cloud and pull components from multiple clouds into an application. Both vendors offer
products that can bring applications faster to market with fewer resources and should be considered
for their specialties.
Opportunities
The serverless services market is on a growth curve, with the players increasing the features
available on their platforms. Serverless services are the highest enterprise spending category in the
Omdia Cloud Native Computing Market Tracker, so it is an important sector within the overall cloud-
native landscape. The ease of use with a focus on business logic without needing to be concerned
over infrastructure provisioning and administration makes this a highly attractive approach. Startups
with precious resources can focus on building the business without being distracted by the need to
run a data center. Omdia analysts have seen startups adopting serverless from the beginning as part
of their technology strategy. It is also popular with the line of business impacted by delays with
commissioning work from central IT.

Threats
Enterprises are generally cautious about suffering from vendor lock-in, representing the greatest
impediment to adopting serverless services, as every public cloud provider has a unique set of APIs
for its serverless services. Independent serverless vendors that offer multicloud capabilities allow
enterprises to avoid lock-ins and are a threat to public cloud providers. Yet, the independent
providers have a unique set of APIs, so there is a lock-in to that provider. If a user only wants to use
FaaS, then an open source FaaS offers a way around the lock-in challenge.
Market outlook
Omdia conducted a market analysis of the size of the serverless services market and forecast its
growth, see Figure 5. Omdia estimates a four-fold increase over five years from the base year 2021.
Omdia’s data is based on estimates of the revenue from all the largest players in the market and
includes vendors who did not participate in the report.

Figure 5: Serverless services market forecast, $ millions by year
Source: Omdia

Vendor analysis
Microsoft, Omdia recommendation: Leader
Microsoft should appear on your shortlist if you are looking for comprehensive serverless services
that span Azure Functions, Azure Web apps, Azure Logic apps, Azure Spring Apps, and more.
Overview
Microsoft offers the Azure public cloud, and serverless services are part of this larger cloud platform
aimed at developers building event-based architecture applications. The serverless offering fits a
position across the control to productivity spectrum where VMs and Azure Kubernetes Service, for
example, offer greater developer control but require greater infrastructure attention. Serverless sits
in the middle of this spectrum, and low-code Power Apps and AI Builder are at the extreme end,
highly opinionated but offering greater productivity.
Serverless on Azure is built to support cloud-native applications and the Kubernetes ecosystem from
the ground up—see Figure 10. Looking at the types of apps that can be built on this platform, Azure
Web Apps share some similarities with serverless but do not scale to zero as serverless does and is
designed for large server platforms. Offerings for serverless development on Azure comprise Azure
Container Apps, Azure Functions, and Azure Logic Apps. The latter enables automated workflows to
be created with little to no code, using a visual designer, and will integrate with Azure Functions and
third-party applications through around 300 connectors.

Figure 10: Azure Application Platform
Source: Microsoft
In 2022, Microsoft launched Azure Container Apps, a serverless layer on top of Azure Kubernetes
Service (AKS), the fully managed Kubernetes service from Azure. Azure Container Apps combines
serverless with cloud-native development, i.e., building microservices and running them in serverless
containers. Developers can run their apps written in users’ preferred programming languages and
frameworks on Azure Container Apps, with full support for Distributed Application Runtime (Dapr),
an open source project from Microsoft that offers a service mesh “sidecar” that takes care of service
discovery, message broker integration, encryption, observability, and secrets management. Azure
Container Apps can be scaled dynamically using HTTP traffic or events powered by Kubernetes
Event-driven Autoscaling (KEDA), where containers are scaled based on the number of events that
need processing. KEDA is an open source project from Microsoft and Red Hat and plugs into
Kubernetes to enable automated scalability features.
The spectrum of offerings from Azure reflects this. It varies in the degree of serverless services
offered from not having to manage infrastructure, scaling is automated and event-driven, and the
cost is pay-per-use. Microsoft sees serverless as a natural evolution of computing where the level of
abstraction keeps increasing, and the user can focus more on business logic.
Azure’s FaaS offering is designed for coding functions with a single purpose, such as processing input
and returning a result. Once completed, the function is terminated and no longer consumes
resources, resulting in a cost-effective solution for the end user. The original form of FaaS was

stateless, meaning it did not hold any persistent state and did not rely on the state of other
processes. However, Microsoft offers durable functions to cater to application use cases that require
some degree of state.
Azure Functions offer an integrated programming model where events from any source or party can
trigger a function and connect with various data sources. These connections are purely
configuration-based without the need to write code. Events can be forwarded downstream for
persistence or image rendering in a mobile UI or browser. All plumbing code, such as retrying and
pooling, is automated.
A distinguishing feature of serverless offerings on Azure is end-to-end support for the application
lifecycle. Starting with source control, there is plug-in integration with GitHub (a Microsoft
company), plus many native integrations with other source control tools (Bitbucket, GitLab),
integration with an integrated development environment (IDE) Visual Studio Code, and integration
with other popular IDEs such as IntelliJ. Developers can build and debug locally on major platforms:
Windows, MacOS, and Linux, and deploy and monitor on the cloud.
Users can run Azure Functions on Azure or any Kubernetes environment hosted on Azure or on-
premises. Azure Functions is open source and enables the flexibility to deploy it anywhere. Microsoft
offers some monitoring of security and health within Azure Functions. Users can also subscribe to
Microsoft Defender for Cloud for the full range of security measures. Similarly, Azure Monitor is a
separate subscription deeply integrated with the application platform services on Azure.
Typical use cases cited by Microsoft for Azure Functions span the following:
• ML
• Real-time stream processing (the most popular)
• Workflows and orchestration
• Scheduled task automation
• The Internet of Things (IoT) backend connections
• Web/mobile application backends
Microsoft finds that adopting FaaS starts with tackling a known problem and spreads with growing
awareness.
Azure Functions builds on the failover, geographical distribution, disaster recovery, and compliance
adherence that Azure offers. Microsoft has done a lot of work on the variability of instance startup
times and reduced it to less than a second, which meets most requirements. However, Microsoft
says most of its customers are more concerned with throughput cold start, i.e., running many
instances (containers) from zero. This issue is reduced by having placeholders behind the scene and
predicting the next load spin-up time by looking at recent dynamic concurrency needs while
inspecting compute and event sources.

Figure 11 presents the percentage scores across the evaluation categories for Microsoft.
Figure 11: Omdia Universe ratings – Microsoft
Source: Omdia
Strengths
• Azure has the full range of database types that cloud-native developers want to work with:
object stores, relational databases, and key-value and document stores.

• The consumption tier uses preconfigured computing to reduce latency to overcome cold starts.
In the premium tier, using pre-allocated instances eliminates a cold start. Furthermore, idle
warmed-up containers are not shut down if configured to stay alive.
• Microsoft offers custom handlers (lightweight web servers) that receive events from the
Functions host and can be used to implement function apps in languages not available out of the
box, such as Go, Rust, and Swift.
Limitations
• There is no support for running functions on ARM processors, possibly impacting Microsoft’s
serverless model for edge devices.
• In Omdia’s review, Microsoft had the lowest concurrency limit for the number of function calls
at a time limit—at 200.
• There is no versioning of Functions built-in to the serverless development environment, which
would be a useful lifecycle feature to add. Microsoft points out that Functions integrate into
external depots, enabling continuous deployment/versioning.

Appendix
Methodology
A Universe is Omdia’s flagship report that brings together multiple strands of research, as follows:
• Omdia analysts perform an in-depth review of the market using Omdia’s market forecasting data
and Omdia’s enterprise insights survey data.
• Omdia creates a matrix of capabilities, attributes, and features that it considers important now
and in the next 12–18 months for the market.
• Vendors are interviewed and provide in-depth briefings on the current solutions and future
plans.
• Analysts supplement these briefings with other information obtained from industry events and
user conferences.
• Other Omdia analysts peer-review the Universe before a team of dedicated editors proofreads
it.
Inclusion criteria
The criteria for the inclusion of a vendor solution in this project are as follows:
• The vendor must have a FaaS offering.
• The vendor should have additional serverless services.
• Two categories of vendors are considered for this project:
– The vendor has a significant market share relative to peers and is either a recognized
leader in the market or has the potential to become one.
– The vendor is a niche or emerging player with outstanding market-leading technology.
Further reading
Cloud Native Computing Tracker – 2022 (September 2022)
Cloud Native Software Development End-User Survey – 2022 Analysis (September 2022)

Cloud Native Software Development End-User Survey – 2022 Data (September 2022)
Cloud Native Computing Ecosystem – Technology Stack (August 2022)
GitHub, Inc., “Netlify Edge Functions Examples,” github.com (retrieved January 5, 2023)
Author
Michael Azoff, Chief Analyst, Cloud & Data Center Practice
askananalyst@omdia.com

Citation policy
Request external citation and usage of Omdia research and data via citations@omdia.com.
Omdia consulting
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about Omdia’s consulting capabilities, please contact us directly at consulting@omdia.com.
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