I think the "local maximum" we've gotten stuck at for application hosting is having a docker container as the canonical environment/deliverable, and injecting secrets when needed. That makes it easy to run and test locally, but still provides most of the benefits I think (infrastructure-as-code setups, reproducibility, etc). Serverless goes a little too far for most applications (in my opinion), but I have to admit some apps work really well under that model. There's a nearly endless number of simple/trivial utilities which wouldn't really gain anything from having their own infrastructure and would work just fine in a shared or on-demand hosting environment, and a massively scaled stateless service would thrive under a serverless environment much more than it would on a traditional server.
That's not to say that I think serverless is somehow only for simple or trivial use cases though, only that there's an impedance mismatch between the "classic web app" model, and what these platforms provide.
That's not to say that I think serverless is somehow only for simple or trivial use cases though, only that there's an impedance mismatch between the "classic web app" model, and what these platforms provide.