Function-as-a-Service Market

Market Overview

The global function-as-a-service market size was valued at USD 3.25 billion in 2022. It is estimated to reach USD 34.94 billion by 2031, growing at a CAGR of 30.2% during the forecast period (2023–2031). An increasing number of businesses and developers who work for them are adopting serverless computing, which is a major factor in expanding the function-as-a-service industry.

Function as a Service, or FaaS, is a type of cloud computing that eliminates the need for managing application infrastructure, enabling software developers to operate their enterprises more successfully. A platform that offers infrastructure as a service (FaaS) to application developers constructs, manages, and runs application packages on the developers' behalf. Several causes fuel the industry's growth, including the growing tendency away from development operations (DevOps) and toward serverless computing, agility, scalability, and the maturing of hosted services. The tendency among enterprises toward the optimization of microservices and the administration of various platforms is another factor that is projected to support the market's expansion.

Since the introduction of FaaS, the programmable cloud's capacity to host application installations has grown rapidly. According to Oracle, the amount of sensitive data shared on the cloud will increase 600 times over the next few years. Many cloud service providers, such as AWS Lambda, Azure Functions, and many others, offer FaaS. From the designers' standpoint, these models' purpose is to offer benefits, including simple installations, reduced operational efforts, and pay-as-you-go pricing.

Market Dynamics

Global Function-as-a-Service Market Drivers

Increase in the App Development Market

The rise in consumer interest in practical applications designed for various operating systems, including Android and iOS, has presented app developers with new commercial options. In addition, a major boost in demand for app development technologies has been brought about by a rise in the number of smartphones, an increase in the adoption of BYOD policies, and a surge in the number of applications. It is expected that one of the best ways to make build, test, and release cycles intrinsically agile is to use function-as-a-service, which boosts the productivity of software developers.

In addition, developers can construct massively scalable and event-driven apps by using the serverless approach. This is possible because the serverless approach eliminates the need for them to manage underlying infrastructure issues such as servers, storage systems, networking, and others. Due to the advantages discussed above, an increasing number of businesses and developers who work for them are adopting serverless computing, which is a major factor in expanding the function-as-a-service industry.

Rise in Need to Eliminate Server Management Challenges

IT managers and administrators must deal with ongoing management responsibilities because of the ongoing expansion of the data landscape and the growing need for additional servers. Even if they use a variety of technologies, such as Microsoft System Center Configuration Manager, it cannot meet all of the requirements. They are faced with various issues concerning server management, including server deployment, changes to system configuration, management of Windows patches, application packaging, change testing, application deployment, and change administration, amongst others. As the vendor manages the servers, this technology helps developers tackle problems linked to servers and their management. This reduces the amount of money invested in DevOps, which in turn results in cost savings.

Global Function-as-a-Service Market Restraint

Issues Associated with Third-Party APIs

Several issues, such as vendor control, vendor lock-in, multitenancy problems, and security and compliance concerns, are associated with serverless computing due to third-party APIs and hampers the function-as-a-service market. The absence of system control during the implementation of APIs has several consequences, such as system downtime, loss of functionality, forced API upgrades, unexpected limits, and cost changes.

In addition, multitenancy problems have been found in several cloud computing frameworks, as function-as-a-service can have problems with security, robustness, and performance. Moreover, the dependency of developers on vendors for debugging and monitoring tools is considered a pitfall with serverless computing, as debugging distributed systems is difficult and requires significant access to several relevant metrics to identify the root problem.

Global Function-as-a-Service Market Opportunities

The Emergence of Function-as-a-Service Applications Within the Expanding IOT Ecosystem

Various business sectors have shifted to a data-driven paradigm due to the rapid growth and innovation of new technologies, creating many opportunities. Firms transforming their businesses by employing this technology for device integration and administration to increase their productivity and cost-effectiveness are also driving a significant increase in IoT adoption.

In the swiftly expanding Internet of Things (IoT) landscape, serverless computing has found multiple applications, including data processing. By executing bulk processing, accessing external APIs, and routing data via HTTP request from the user's device, serverless computing can alleviate pressure on hardware. These applications are considered future significant market opportunities for offering functions as a service.

Regional Analysis

Based on region, the global function-as-a-service market is bifurcated into North America, Europe, Asia-Pacific, Latin America, and the Middle East and Africa.

North America Dominates the Global Market

North America is the most significant global function-as-a-service market shareholder and is estimated to exhibit a CAGR of 27.0% over the forecast period. Approximately sixty percent of businesses in North America are utilizing public cloud services at present, and the pace of adoption is quickly increasing. In addition, function-as-a-service makes it possible for faster and more widespread economic development, making it feasible for enterprises to innovate more quickly. It is the most important component contributing to the market growth in this part of the world.

Additionally, prominent industry companies, including Google, Amazon, and Microsoft, are increasing their serverless solution offerings in this area, which is also one of the significant reasons fueling the market growth in North America. This is a significant factor contributing to the expansion of the market in North America. The expansion of this region's market is also being fueled by the rising need for scalable and cost-efficient computing solutions, another factor playing a role in this expansion.

Europe is anticipated to exhibit a CAGR of 30.1% over the forecast period. The adoption of function-as-a-service in European countries is largely driven by the growing security concerns prevalent among enterprises in these countries. In addition, businesses in this region are working to accelerate the deployment of applications and services to boost the overall business agility among enterprises. This development is expected to lead to an increase in the use of services that are provided in the "function as a service" model. In addition, increasing investments in data solutions by companies based in Europe are also anticipated to contribute to the anticipated growth of the market in this region.

Asia-Pacific is an emerging market expected to occupy a major market share in upcoming years. China, India, and Japan are some of the major countries driving the function-as-a-service market in this region. The growing adoption of cloud technology trends in Asia-Pacific countries is the major factor fueling the market growth in this region. Security is a key factor driving the adoption of serverless computing in major countries such as India. In addition, reduction in operational cost, efficiency in management, and flexibility are the major factors fueling the market growth in this region. Furthermore, the growing presence of major market players and the expansion of existing players in Asian countries is expected to drive market growth in this region.

In the LAMEA region, both the use of cloud computing and investments in technology are on the rise. The significant increase in the double digits that the cloud IT infrastructure market in Africa is seeing is a direct result of the rapidly escalating demand for public and hybrid cloud infrastructure, both expanding faster. Additionally, this demand is anticipated to be a significant driver of market expansion in this region.

Segmental Analysis

The global function-as-a-service market is bifurcated into user type, deployment model, organization size, and end-user.

Based on the user type, the global market is bifurcated into Developer-Centric and Operator-Centric.

The developer-centric segment dominates the global market and is projected to exhibit a CAGR of 28.5% over the forecast period. FaaS is a developer-centric architecture that enables cloud functions to create and deploy services at the level of a single function. Developer-centric applications are those in which the developer is placed at the center of the application development process. It also provides a layer of connective logic that allows developers to write code to integrate and extend cloud services. In addition, numerous advantages developer-centric users provide, such as no server management, flexible scalability, cost optimization, and automated high availability, fuel the market's growth.

In addition, developer-centric user interfaces offer greater flexibility, increased scalability, and a quicker response time to release software code, all at a lower price. In addition, developer-centric users reduce the cost of serverless computing and allow developers to construct and expand their applications without being limited by server capacity. It allows developers to reduce their time-to-market costs and construct rapidly updatable, flexible, lightweight applications. These are some of the factors that afford this market segment a lucrative opportunity. In addition, developers are finding greater value in function-as-a-service (FaaS) for easier scripting and development compared to other monolithic architectures, creating many market opportunities.

Based on the deployment model, the global function-as-a-service market is segmented into hybrid cloud, public cloud, and private cloud. 

The public cloud segment dominates the global market and is predicted to exhibit a CAGR of 28.2% during the forecast period. In the modern technological environment, software developers can find assistance in streamlining programs through serverless computing, which is provided by function-as-a-service. For example, it enables programmers to build back-end programs, design various event-handling algorithms, and analyze data even if they do not have the original computational resources. As a result, these factors drive the market expansion in this area.

In the past few years, public cloud services have significantly increased; nevertheless, function-as-a-service is becoming more popular than other services, such as the Internet of Things and machine learning. The primary element that drives the market growth in this segment is that function-as-a-service in public clouds can improve functionality while enhancing the whole development process. Take Netflix as an example; they are one of the big companies that have adopted the public serverless computing model.

Based on organization size, the global market is bifurcated into large enterprises and SMEs.

The large enterprises segment owns the highest function-as-a-service market share and is predicted to exhibit a CAGR of 27.9% over the forecast period. Multiple data centers and high-level data security concerns necessitate function-as-a-service in large enterprises with multiple data centers. Large enterprises benefit from function-as-a-service because it eliminates the need to manage servers on-site. Large businesses want to reduce their operational and maintenance costs, and by implementing serverless computing, they can do so. This is the primary factor driving market growth. Large organizations such as Major League Baseball, The Seattle Times, and Coca-Cola have already employed function-as-a-service to achieve the necessary scale without the burden of managing and operating a fleet of servers.

In addition, a growing number of large enterprises are turning to hybrid and serverless models to maximize the efficacy of their cloud computing and reduce costs, driving market growth. In addition, the adoption of serverless computing to establish a well-managed computing environment is anticipated to increase due to complex IT infrastructure and security concerns in large businesses. This is anticipated to create future growth opportunities for the function-as-a-service market.

Based on end-users, the global market is divided into BFSI, public sector, retail, healthcare, it and telecom, energy and utilities, manufacturing, and others. 

The BFSI segment is the most significant contributor to the market and is estimated to exhibit a CAGR of 26.6% over the forecast period. Banking modernization efforts rely heavily on serverless computing and its related technologies. A function-as-a-service facilitates a better customer experience and a more accurate match between bank IT costs and customer demand by assisting banks in scaling their computing capacity in response to peak demand, such as payday.

FinTech industries are compelling banks to increase transparency to provide consumers with the most effective services possible. As industry competition increases, banks adopt cutting-edge technologies to become more adaptable and expand their digital strategies and reach. In addition, numerous banks and financial institutions are implementing function-as-a-service technology to provide customers with more efficient transactions. In addition, adopting serverless computing will enhance banks' ability to access and mine data from various sources. In addition, function-as-a-service supports real-time applications and offers a scalable and secure platform for delivering real-time information as required by the BFSI industry vertical.

Recent Developments

• December 2022- To optimize economic value for cloud-powered organizations worldwide, Tech Mahindra, a leading provider of digital transformation, consultancy, and business re-engineering services and solutions, launched Cloud BlazeTech, an integrated, industry-neutral platform.
• November 2022- For more than two decades, Hewlett Packard Enterprise and VMware Inc., have been at the leading edge of driving digital transformations, working with more than 200,000 mutual customers.