Serverless: The Hidden Costs

Hidden costs of serverless compute

Introduction

The rapid rise of serverless computing brought with it the promise of cutting operational complexities and reducing costs. Initially touted as a cost-efficient solution for businesses of all sizes, serverless technology was supposed to revolutionize how we deploy applications by shifting the focus purely to code without worrying about the underlying infrastructure.

However, as businesses scale, the long-term financial ramifications of serverless architectures become apparent, often proving to be more expensive than anticipated.

The Dream Sold

In the early days of serverless, we were mesmerized by the simplicity and the seemingly negligible cost it offered. The idea of paying just $0.20 for a million function executions seemed too good to be true. Businesses were drawn to the prospect of immense scalability and reduced management overhead, thinking they could finally divert all attention to enhancing their applications rather than managing servers.

 

The Reality of Scaling with Serverless

As businesses grow, so does their user base and, correspondingly, their backend demands.

Let’s consider a medium-sized web application experiencing significant traffic:

User Base: 10 million users

Concurrent Utilization: 1% (100,000 concurrent users)

User Interaction: Each user interacts with the app 20 times during an average session length of 5 minutes, generating 60 API requests per session.

This usage translates into approximately 20,000 requests per second, or a staggering 52.5 billion requests per month. Even with the low cost per million executions, the scale of operations quickly pushes the cost boundaries primarily due to the GB-second billing, which charges for the compute time and memory used by each function execution.

Cost Breakdown for Serverless

API Transaction Fees: $10,500

Usage Fees (based on function requiring 515MB RAM and 250ms to execute): $109,062

Total Monthly Spend: Approximately $120,000, which annualizes to $1.44 million.

 

Comparative Cost Analysis: EC2 Self-hosting vs. Serverless

When shifting to a self-hosted solution on EC2:

Capacity Requirement: Managing a load of 20,000 requests per second

Compute Resource: Each vCPU handles 8 requests per second, necessitating around 625 C5.xLarge instances.

Cost for EC2 Instances: Monthly spend of $77,600, resulting in annual savings and more predictable costing at $930,000, a 35% reduction compared to serverless.

While there is a significant savings to convert over, you will still have a large serverless conversion bill to get to that point. This conversion expense will vary by project and how many resources you have to take this on within your company.

If you outsource the conversion, on the low end you could spend $50,000 for small projects. For large projects you could easily spend over $500,000 on conversion work before you start seeing any savings. 

Serverless Cost Comparison. Save On Cloud Costs can save you 60% compared to serverless which includes the conversion costs.

Incorporating Spot Instances for Greater Savings

At SaveOnCloudCosts (SOCC), we have proprietary technology that enables us to build high availability services using Spot instances. 

By leveraging this technology to optimize a blend of Spot and On-Demand instances, we can create incredible savings combinations. When working with us, you don’t need to worry about an upfront conversion bill because we will only charge you monthly once you start realizing savings (with a minimum cloud spend of $35,000).

That’s a $50,000- $500,000 value (depending on project size) that we provide upfront. 

Cost to Convert Serverless Workload: No Upfront fees, included in our monthly fee.

Compute Costs with Spot Instances: $38,300 monthly

SOCC Fee (30% of the $81,700 monthly savings from serverless): $24,510

Total Cost including SOCC fees: $62,810 per month ($753,720 annually), culminating in a 47.65% overall cost reduction.

Lego cloud bridges

Exploring Multi-Cloud Spot Instance Strategies

Further optimization using a multi-cloud deployment approach can significantly drive down costs. We can easily help you with the conversion process. We work at what we do best, freeing up your teams to work on what they do best.

Compute Costs with Multi-Cloud Spot Instances: $16,800 monthly

Cost to Convert Serverless Workload: No Upfront fees, included in our monthly fee.

SOCC Fee (30% of the $103,200 monthly savings from serverless): $30,960

Total Cost including SOCC fees: $47,760 per month ($573,120 annually), achieving a 60% overall cost reduction.

 

 

Conclusion

For enterprises scaling up, transitioning from serverless to managed cloud solutions like EC2 or multi-cloud can significantly reduce costs and optimize budget efficiency.

Contact us today, we offer no upfront fees (minimum $35K monthly cloud spend) to convert your technology over from serverless.

Free up your time and money to get ahead of your competition while we help you easily transition to rock bottom cloud pricing.