Alok Misra of the Navatar Group had a great article on the importance of multi-tenant architecture in the cloud. Multi-tenant architecture is when the tenants (customers) share the application, servers and databases in the cloud. We believe multi-tenant is the only way to go in the SaaS world and there are a lot of advantages for multi-tenancy. Alok discuss a number of solid points:
I sit firmly in the multi-tenancy camp. A multi-tenant architecture is when customers share an app in the cloud, while a single-tenant cloud app is similar, if not identical, to the old hosted model. But compare two subscription-based cloud apps side by side–with the only difference being that one is multi-tenant and the other is single-tenant–and the multi-tenant option will lower a customer’s costs and offer significantly more value over time. In fact, the higher the degree of multi-tenancy (meaning the more a cloud provider’s infrastructure and resources are shared), the lower the costs for customers.
At the end of the day, its the customer who benefits from lowering the service delivery costs – either through subscription fee reduction or value increase (and hopefully both):
The economies of scale get even better as the provider adds customers, and customers benefit from this scaling up. As the cloud app provider’s costs decrease, it has more room to innovate and grow, thus delivering more value. Even if customers’ costs don’t drop, over time they should expect to see more value, such as increased functionality.
Lastly, a great comment on why some people are still against multi-tenancy. I think the other part of the story is that some vendors have a vesting interest in their single-tenant (“hosting”) architecture and can not evolve into a full multi-tenant architecture:
So, what’s the debate about? Those who say multitenancy isn’t necessary to making the cloud model work are typically companies that have long made money from on-premise software and don’t want to cannibalize their existing revenues. They might offer a subscription for their single-tenant application, but this could simply be the software license, maintenance, and hosting fees divided into monthly payments which almost certainly would be much higher than a comparable multi-tenant application.
What’s even more interesting is the “unsure” camp in this debate. These are typically the traditional on-premise vendors that decided to give the cloud a try. They often try to save money by using all or some of their existing on-premise infrastructure and practice for their cloud apps, by avoiding the investment in a new technology infrastructure that supports multitenancy. However, the high cost of replicating and maintaining instances for each single tenant (or customer) eventually catches up with them. They are forced to try approaches where they can share some of the infrastructure, but their fundamental affinity to the old on-premise model usually proves to be a stubborn barrier to changing their software, infrastructure and culture to fully support a shared model. And if they keep on this single-tenant path as they scale up customers, their margins get lower as each new customer sucks up more resources.