Maximizing Startup Success: The Serverless Revolution

Even though the pandemic was largely perceived in a negative light, it led to the emergence of many groundbreaking tech startups. As layoffs, furloughs, and business shutdowns became commonplace, individuals turned to entrepreneurship, launching a multitude of small businesses.

Data from the US Census Bureau indicates an impressive 24.3% surge in new business applications between 2019 and 2020, totaling 4.5 million by the end of 2020.

Thanks to the convergence of readily available technology, extended periods at home, and abundant free time, the tech startup landscape reached unprecedented competitive heights. Ideas flourished everywhere, with companies vying to be the first to bring their innovations to market.

However, launching a Minimum Viable Product (MVP) in the market is challenging, especially for those new to the tech sector. There’s significant operational overhead involved, like purchasing and overseeing servers. While Cloud Computing offers a solution to alleviate some of these burdens and expenses, one could argue that the pricing structures of some traditional services from Cloud Service Providers (CSPs) are not particularly conducive to startups, especially those with limited or no funding.

Setting up a development environment in the cloud can already be expensive. The costs escalate even further when you factor in establishing a separate environment for production workloads.

Startups often face uncertainty regarding user behavior and data traffic until their products are in active use. This unpredictability can lead to over-provisioning, where the computational resources they’ve acquired (whether cloud-based or on-premises) far exceed their actual needs. On the flip side, under-provisioning can be just as detrimental, with infrastructure struggling to meet demand, resulting in server timeouts and sluggish response times, which negatively impact user experience. To address these challenges, startups may rush to augment their resources by buying additional servers. Yet, this can sometimes swing the pendulum the other way: from being under-resourced, they may suddenly find themselves with excess capacity, making it challenging to achieve the perfect balance between cost and performance.

External variables like fluctuating workloads can further complicate matters. Infrastructure might be over-provisioned one day and under-provisioned the next because of erratic and inconsistent demands. Given the lean operations of many startups, especially in their early stages, achieving and maintaining infrastructure elasticity can be a daunting task, especially when working with limited funds.

Tech startups prefer to concentrate on enhancing their offerings and delivering business value rather than getting bogged down with infrastructure complexities, which often remain invisible to the end user. Wouldn’t it be great if there were a solution tailored for fluctuating workloads that offers high elasticity while minimizing operational overhead? A solution that lets startups zero in on amplifying business value and refining their product? Indeed, such a solution exists: Welcome to the world of Serverless Computing.

What is Serverless Computing?

Despite its name, serverless computing does indeed utilize servers, but they’re abstracted away from the end user. Major CSPs like AWS, GCP, and Azure offer this execution model, freeing customers from the responsibilities of server management. This allows them to focus on coding, data management, and application integration without the distractions of infrastructure management.

In traditional hosting models, whether you rent a Virtual Machine (VM) in the cloud or purchase a physical server for on-premises use, you’re saddled with significant operational responsibilities. For instance, when setting up a web server, one must meticulously configure server compute capacity, select an operating system, manage networking, and more. Additionally, ensuring elasticity often requires provisioning multiple VMs.

Serverless computing simplifies this entire process. The brunt of operational tasks is shouldered by the CSP. Users no longer grapple with operating system intricacies, networking becomes largely hands-off, and scaling compute capacity in response to demand is automated. The focus shifts from infrastructure management to delivering business value.

This is the Shared Responsibility Model from AWS:

At the extreme end of the shared responsibility spectrum, we find AWS’s managed or serverless services. These offerings provide valuable resources, such as computational power with AWS Lambda, object storage via Amazon S3, and databases through DynamoDB, among others.

The unifying feature of these serverless services is clear: there’s no need for server provisioning.

Economical Benefits of Serverless Computing

Traditional cloud hosting models typically charge users for the uptime of their services. Whether or not your application is actively being used, you’re billed by the hour. This means you pay the same amount during high-traffic times as you do during periods of little to no activity.

In contrast, serverless computing adopts a genuine pay-as-you-go billing approach. Your costs are directly tied to the actual traffic or data processed by your infrastructure. Serverless shines in its adeptness at handling erratic workloads, a common scenario for startups. The cost structure aligns with actual usage, so if no one is using your service, you aren’t incurring charges.

Focusing on AWS, many of their services come with an introductory free tier that lets newcomers dip their toes into the world of cloud computing. But the looming question for many is: what happens post-free tier? With serverless, the financial apprehension linked to the expiration of the free tier is largely alleviated. This is attributed to the serverless pricing structure: you’re billed based on your product’s actual consumption, not just on what you’ve set up for potential use.

Moreover, the pricing schemes of serverless services are so accommodating that costs remain negligible until your user base swells to several thousand. For instance, AWS Lambda’s pricing stands at $0.20 for every 1 million requests and a mere $0.0000166667 per GB-second for the initial 6 billion GB-seconds each month.

The real financial impact of infrastructure costs only becomes significant when a startup boasts a substantial active user base. By this stage, a startup should be generating enough revenue to easily cover these expenses, ensuring that serverless costs don’t strain the company’s finances.

Operational Advantages of Embracing Serverless Architectures

Adopting a serverless architecture offers startups a myriad of operational advantages:

• Rapid Deployment & Enhanced Efficiency
  • • Serverless gives startups a quicker route to market. Rather than deploying complex infrastructure, they simply deploy functions.
    • It significantly boosts developer productivity by allowing teams to concentrate on writing code rather than managing servers.
• Adaptive Flexibility & Seamless Scalability
  • • Scaling is automatic and tailored to demand. The onus of scaling lies with the CSPs, enabling developers to refine the startup’s MVP without distraction.
    • Predicting traffic becomes unnecessary. Serverless excels when faced with fluctuating workloads, effortlessly managing traffic surges without manual adjustments.
• Inherent Reliability & Robust Redundancy
  • • Serverless ensures that your infrastructure benefits from high availability and fault tolerance. While achieving fault tolerance is typically costly and operationally demanding in conventional infrastructures, serverless technologies come with built-in failover mechanisms.
• Concentration on Core Strengths
  • • Startups can channel their energy into perfecting their unique offerings.
    • The overhead of maintaining a dedicated infrastructure team is nearly eliminated, further streamlining operations.

Final Remarks

The tech startup landscape is arguably among the most competitive arenas worldwide, demanding extensive knowledge and often accompanied by significant expenses. Tragically, over 90% of startups don’t survive. The reasons for their demise vary, with many succumbing to financial exhaustion, market misalignment, or insufficient research. While the latter two challenges can potentially be addressed through deeper investigation and strategic networking, depleting funds is a tangible crisis.

Two primary expenses weigh heavily on a tech startup’s burn rate: hiring the right talent and investing in the appropriate infrastructure. Some startups exhaust their resources even before their market debut.

The sting of failure due to financial reasons is particularly acute, more so than faltering from market misalignment or inadequate research. The latter issues can potentially be rectified with strategic shifts as long as the business remains operational.

Enter serverless computing, a game-changer in the tech startup sphere. It promises quicker market entry and slashes the exorbitant costs associated with traditional computing. While transitioning to serverless doesn’t guarantee startup success (after all, product development is just one facet of a multifaceted business and arguably the most straightforward), it significantly diminishes the dread of financial collapse.

Serverless computing’s economic proposition aligns perfectly with startup needs. Its variable costing structure opens the door to much wider profit margins.

While the road to success for startups is fraught with challenges, serverless computing provides a lifeline, especially in the financial realm. It’s a beacon of hope for many fledgling tech businesses, ensuring that they have a fighting chance in a fiercely competitive market. By reducing infrastructure costs and operational complexities, startups can reallocate resources to other critical areas, increasing their chances of survival and eventual success.

References:

https://aws.amazon.com/blogs/industries/applying-the-aws-shared-responsibility-model-to-your-gxp-solution/

https://eig.org/the-startup-surge-business-formation-trends-in-2020/

https://aws.amazon.com/serverless/

https://aws.amazon.com/lambda/pricing/

https://www.investopedia.com/articles/personal-finance/040915/how-many-startups-fail-and-why.asp