Top 7 Strategies How Serverless Can Reduce Costs

Serverless, an event-driven, pay-per-use approach, is naturally easy on the wallet. However, if you're wondering, "How can serverless save my money?" you're in the perfect spot. With over ten years in the business, our team is about to share some proven savings strategies.

Why bother optimizing costs in an inherently cost-effective serverless infrastructure? The answer is as simple as that: to avoid overpaying for services you don’t actively use and maximize your setup’s efficiency. Having completed over 220 serverless projects and consulted numerous clients on cost optimization, our team can ensure every cent you spend matches the value you get from your infrastructure.

Learn more about cost saving with serverless, including pricing structures and expense-cutting tips, in our guide. Explore the most common pitfalls that can increase your cloud bill and get ready to turn your serverless setup budget-friendly.

One of the core appeals of serverless architecture is its unique cost model, different from traditional infrastructure setups. Understanding this model will help you leverage cost savings with serverless.

Key Characteristics of Serverless Cost Model

• Pay-as-you-go. This model means that you only pay for the resources and computing power consumed during your application's execution. It means you're not charged for idle resources. It makes serverless highly cost-efficient for applications with varying workloads.
• No pre-provisioning required. Unlike traditional server-based setups, where resources must be pre-provisioned to handle peak loads, serverless platforms automatically scale resources up or down on demand. This eliminates the need for upfront provisioning, saving costs associated with over-provisioning.
• Operational cost savings. Serverless computing shifts many operational responsibilities to the cloud provider, such as server management, scaling, and maintenance. It reduces organizations' operational overhead, resulting in significant cost savings in terms of personnel, time, and resources.
• Granular billing. Serverless platforms typically offer granular billing, charging you based on the exact resources consumed and the duration of their usage. It provides better cost visibility and control. This granularity allows organizations to optimize spending by identifying resource-intensive components. 
• Cost-effective for sporadic traffic patterns. Serverless computing offers cost advantages for applications with intermittent or unpredictable traffic patterns. Since you only pay for actual usage, you're not charged for idle resources during periods of low activity. It makes serverless a cost-effective solution for fluctuating workloads.
• Potential for increased costs with scale. While serverless computing is cost-effective for moderate workloads, consider possible cost escalations as your applications expand. Rapid growth or unforeseen spikes in traffic can result in higher costs. You need efficient management and optimization strategies to curb expenses.

Knowing the key characteristics of the serverless cost model enables organizations to optimize cloud expenses while effectively managing potential cost escalations.

Before you get into the serverless cost optimization strategies, discover what makes up your setup’s total price. Generally, there are several cost components:

• Compute and request costs: You’re charged following the number of function requests and the execution duration of functions. For example, longer-running functions result in higher expenses. 
• Storage costs: Data storage requires your money, too. The final price depends on the data volume and chosen storage solution.
• Data transfer costs: Transferring data between serverless components brings in additional charges.
• Networking costs: You pay for the network services used to host your application.
• API request costs: This component can make up a significant portion of your overall expenses. You’re charged based on the frequency and volume of API requests.

How does pricing work in serverless? You may either pay based on the following:

• The number of function invocations.
• The amount of allocated resources.
• The amount of event-triggering functions.

Consider this when choosing a suitable pricing model.

Having learned about the expenses you’ll have to deal with, look at the ways to reduce serverless costs. Here are the most effective strategies:

1. Pick the Relevant Service Provider

Choosing the right cloud service provider and a suitable pricing model is crucial in shaping your serverless costs. Consider platforms like AWS, Azure, or Google Cloud, and assess how well their offers match your needs.

Alternatively, leverage other cloud services and managed solutions more cost-effective than serverless functions. For small startups, it makes sense to consider some less popular cloud providers, such as taking a database from PlanetScale, storing and managing users in Firebase, etc. Consider integrating with existing cloud services for tasks like message queues, data storage, and analytics.

2. Monitor Resource Usage

Regular resource usage monitoring is a perfect way for serverless cost optimization. Leverage monitoring and alerting tools to identify usage patterns, track function performance, and find areas for efficient resource allocation. Set up notifications when usage surpasses a specific threshold. Consider using free tiers and commitment discounts from cloud providers for potential savings.

3. Optimize Code and Functions

When using serverless functions, you’re charged based on their execution time. Write lean, efficient code to reduce this time as well as resource usage. To lower costs, you can also minimize dependencies and function package sizes, embrace stateless design and event-driven architecture, cache data, and set appropriate function timeouts.

On top of that, allocate the right amount of memory to match the function’s requirements accurately. Schedule functions through cron jobs and use conditional execution to run them only when needed.

4. Leverage Reserved Instances

Many cloud providers offer reserved instances, letting you secure specific resources for a fixed term at a discounted rate. Consider this strategy if your workloads are stable and predictable.

5. Implement Auto-Scaling

Auto-scaling adjusts your infrastructure following workload demands. Configure auto-scaling rules to scale your resources up or down, ultimately optimizing costs in serverless.  Exercise caution with auto-scaling by setting an upper scaling limit whenever possible.

6. Minimize Compute Usage

Use computing resources only when necessary. Besides, leverage services that can work without this feature. For example, you can handle AWS cloud cost optimization by utilizing step functions that can call Amazon APIs without Lambda.

7. Track Cost KPIs

Establish and monitor KPIs related to serverless expenses. In a perfect scenario, your costs should stay the same or slightly increase as the number of your customers grows.

Supplement your strategy with the following best practices to reduce expenses with serverless:

• Size resources properly: Match resource sizes to your application’s actual requirements. Avoid over-provisioning by regularly evaluating resource usage and adjusting accordingly.
• Use cost-aware design patterns: Implement architecture design principles that value cost-effectiveness. Leverage event-driven models and caching as well as minimize task coordination.
• Monitor and optimize your architecture: Constantly track your resource usage, performance metrics, and other cost-related data. Analyze these factors to improve your serverless setup.
• Optimize your logging practices: Consider logging level, output, and retention to make sure they meet your system’s needs. For AWS logs, enabling a retention period prevents storing endless irrelevant logs, like deleting them after two weeks. Also, "advanced" logging tools like X-Ray may not always be necessary. Avoid excessive logging and data retention and keep the essential minimum levels required for infrastructure operation.
• Implement efficient cold start strategies: Address cold starts by optimizing function execution times. Use warm-up requests and increase memory limits to tackle this issue.

Now that you know how to make your serverless architecture cost-efficient, explore the common mistakes to avoid. There are a few of them:

1. Ignoring the logging and monitoring costs: Monitoring and logging require additional expenses. Consider those when going serverless and implement efficient logging and data retention policies.
2. Skipping the documentation: Neglecting the cloud service documentation and pricing models can lead to undesirable surprises in billing. Always study the terms and conditions policies to avoid potential cost inefficiencies.
3. Failing to set up billing alarms: Without billing notifications, you cannot monitor and manage your expenses effectively. Establish those to receive timely alarms as costs approach or exceed predefined thresholds.
4. Neglecting caching: If you don’t have caching strategies in place, you risk using resources inefficiently. Integrate caching to reduce API and Lambda function requests and reach cost and performance optimization.
5. Over-provisioning: Allocating more resources than necessary can lead to increased expenses. Assess function resource needs, deploy auto-scaling, and provision the precise amount of resources.
6. Designing your architecture poorly: If you assemble a serverless architecture without cost-efficient practices in mind, you may face extra expenses. Create a well-architected framework using proven serverless design patterns.

You may also be interested in learning about the pros and cons of serverless for business.

Monitoring and managing your expenses is another task on your way to serverless cost savings. You can use the following tools to help you with that:

• AWS CloudWatch: Leverage this tool to monitor your entire stack. Get insights into resource usage, app performance, and respective expenses. Use alerting and logging capabilities.
• Azure Monitor: Analyze your costs and track your budget with this tool. Collect and study data on your cloud environment.
• Datadog: Use this third-party monitoring platform to track cloud servers’ resource usage and performance.
• Serverless Framework: Leverage Serverless Framework and its built-in dashboard to monitor serverless functions.
• Serverless Application Model: Use SAM’s built-in features to monitor resource utilization and optimize it accordingly.
• Thundra: This tool offers advanced monitoring and observability features. Leverage Thundra to track AWS Lambda functions.

Our team at Serverless does everything to optimize serverless cost of our clients. We highlight code reusability and develop performant functions that take little execution time. Our experts adhere to this principle in all projects, totaling over 220 successful deliverables.

For more than ten years in the serverless niche, we have understood the value of providing long-term, future-proof solutions to our clients. Our team remains flexible, continually iterating and adapting serverless setups for the utmost cost-effectiveness. We also take serverless security seriously, implementing robust measures to protect our clients’ data.

Cloud Cost Reduction for DemandHelm

DemandHelm, an ad-tech company, needed our assistance in web platform development. Serverless experts had to create a solution that would simplify ad report analysis and comprise multiple data sources like Amazon Advertising, Target, and others. We introduced efficient data processing techniques, auto-scaling, and a frontend app. As a result, our client reduced cloud costs by 34% and effectively leveraged serverless resources.

Explore more case studies on cost reduction in our comprehensive portfolio.

Cost-effective serverless architecture can become even friendlier to your budget with the right cost optimization strategies in place. Consider resource usage monitoring, function execution time reduction, auto-scaling, and strategic tool integration.

Looking to streamline your infrastructure’s expenses but hesitant about the process? Count on our experienced specialists at Serverless, who can guide you through the complexities of serverless cost optimization. Contact us today to reach expert assistance and future-proof solutions.