plus/minus epsilon


3 Oct 2020

Serverless is powerful because:

  • It’s often cheaper than running the same application on a VPS. Right now, this may be mostly because it’s under-priced. But it does actually require fewer physical resources, since applications scale on-demand and many applications can share the same physical host more efficiently.

  • Possibly also falling under “cheaper,” it has a lower operational burden. Developers simply upload their code and the cloud provider handles process management and scaling.

  • Applications that run on serverless platforms are faster because they’re always hosted near the end-user.

It’s such a good business because all of the benefits above come from strong network effects which entrench incumbents. Being able to charge a low price is the benefit of having a lot of customers and high hardware utilization. Being near end-users is the benefit of having built a large, distributed network of data centers. Reliability and scalability are the benefit of significant and prolonged technical investment. Additionally, serverless platforms have proprietary APIs that create lock-in and having a brand that's trustworthy enough to build a business on top of propretiary APIs is a significant accomplishment.

The flip side of all the aspects that make it a good business also make it a good product because application developers get access to the upside of all these network effects, without having to build them themselves. It ends up being a democratizing force more than a centralizing one.