There are two types of people who play with themed Lego sets: those who build precisely what they see on the box, and those who immediately throw away the instructions to build a completely new structure. Many people forego themed Lego sets entirely, choosing rather to embrace the architectural flexibility that comes with mixing and matching an assortment of pieces.
Microservices are like these individual assortments of Lego bricks. They are singular services that are independent and contain their own business logic, but work together to enable larger applications by breaking down a software application into smaller independent pieces. Each microservice “brick” can be mixed and matched to build a completely new application. Microservices are portable which allows for much more flexible infrastructure architectures. They are also becoming increasingly popular.
According to an April 2020 TechRepublic survey, 73% of respondents have already integrated microservices into their application development process. With this popularity comes a whole host of opportunities, but to truly understand these opportunities, you need to understand the proximal technologies that enable microservices and the inflection points between them that Volition Capital sees as areas of growth.
Microservices, Containerization, and APIs
Containers and microservices often go hand in hand. A container “contains” a single microservice including all of the business logic needed for that service to run properly and independently of all other services. They solve a key problem: applications behave differently across infrastructure environments and operating systems. Like a ship in the harbor where the dock is one IT environment and the ship is another, applications need a standardized system to port services between environments, and containers are that system.
Application Programming Interfaces (APIs) are the “messengers” that help different microservices and containers to communicate and integrate with one another. They allow data to speak across environments, facilitating information requests from one microservice to another.
Enabling Agile IT Transformation
These tools are key building blocks of a business’s transformation to more agile, flexible infrastructure environments. They move organizations away from the traditional approach of building back-office monolithic applications – which are complex, hard to scale, and not very agile. Tech-first companies now treat IT infrastructure as a business-led function, as we’ve highlighted in a blog post on Business-Led IT, and as a result, organizations want infrastructure that gives them greater flexibility and speed.
Microservices enable businesses to develop applications that provide a seamless user experience across devices and platforms. Small and legacy businesses without the infrastructure or resources to support massive data centers used to be at a disadvantage next to the big tech companies, but thanks to microservices, organizations of any size can build flexible architecture using Amazon’s or Google’s APIs to leverage their data assets.
Despite the effects of the pandemic, IT spend is expected to grow dramatically over the next five years. According to the Grandview Digital Transformation Report, spend related to transforming legacy IT infrastructure is expected to more than double by 2025. Microservices are a key piece of that agile transformation, and we see a host of interesting areas for potential investment in the years ahead.
Six Areas of Opportunity Around Microservices
- Container Management and Orchestration: though Docker and Kubernetes are the two most popular container tools on the market, there is a growing ecosystem of platforms that help organize, add, replace, and orchestrate containers and microservices across an infrastructure. The prevalence of open source solutions such as Kubernetes also highlights the possibility for more focused commercial solutions to grab market share.
- APIs and API Toolkits: As microservices become more popular, APIs are already becoming the standard means of communication that enable flexible architecture. Platforms that provide building blocks and API design capabilities will be important moving forward as more organizations embrace APIs to allow their microservices to communicate with each other.
- Service Mesh: A service mesh monitors API communications between microservices and provides dashboards for engineering and development teams to help them better understand how their microservices are communicating. This is still an early market, but, again, a prevalence of open source solutions like Istio and Envoy leaves open the possibility for more focused solutions to grab market share.
- Application Performance Monitoring (APM): As organizations begin deploying hundreds of microservices, it can be harder to troubleshoot issues. Similar to a service mesh, APMs allow businesses to monitor whether their overall applications meet performance standards, identify bugs and potential issues, and provide flawless user experiences via close monitoring of IT resources.
- Serverless Computing: Serverless computing is a new take on cloud computing that provides services on a usage basis. This market is expected to reach $7.7B in 2021, up from $2B in 2018. While it’s still early in its lifecycle, serverless computing has the potential to see rapid adoption from organizations deploying microservices that don’t necessarily want to pre-purchase units of server capacity.
- Container Security: Finally, as microservices and containers rapidly increase, the surface area of potential attacks will skyrocket. There is and will continue to be a need for robust security platforms to help protect containers and the API communications between microservices.
Where the Future of Microservices May Lead
Like the architectural flexibility that comes with Legos, microservices enable organizations to build agile IT infrastructure. However, their popularity does not mean they are without their difficulties. According to a 2018 report, 99% of those surveyed report challenges in using microservices, 87% of those in production report microservices generate more application data, and 56% report that each additional microservice increases operational challenges.
As Volition Capital considers the future of this space, we anticipate that tools that further enable and solve pain points for microservice architecture such as the ones highlighted above will see robust growth. We continue to uncover interesting companies that play in this space, and we intend to dive even deeper into this ecosystem of technologies in the months and years ahead.
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Meet the Author:
Mark joined Volition Capital in the summer of 2019 as an Analyst. He is responsible for sourcing new investment opportunities within software and tech-enabled service businesses.
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