Enterprise System Spectator blog: ERP and enterprise system vendor evaluation, selection, and implementation.

The Enterprise System Spectator

Wednesday, June 18, 2008

SaaS: degrees of multi-tenancy

Phil Wainewright has a good discussion on the various architectures underlying today's software-as-a-service (SaaS) products, such as Salesforce.com.

I've commented in the past regarding the superiority of a multi-tenant architecture (many customers supported on a single hosted system instance) versus the tradition single-tenant architecture (a separate hosted system instance for each customer). Salesforce.com is an example of a SaaS provider building on a multi-tenant architecture, whereas Oracle's On-Demand offering of its E-Business Suite is an example of a single-tenant architecture. The economics of the multi-tenant architecture are so much more attractive in that each new customer involves minimal marginal cost to the provider, allowing the provider to offer attractive pricing.

Except for protestations by the single-tenant providers, there is little debate about the superiority of the multi-tenant model. Wainewright, however, points out that there are in fact different flavors of the multi-tenant architecture. He lists three main variations:
  • First-degree multi-tenancy (e.g. Salesforce.com). Here, "all customers are served from a single infrastructure in which every component is shared, all the way down to the tables in the database" This purist approach is often called "shared schema multi-tenancy because the database structure is defined by the schema and if everyone’s data is stored inside that structure then by definition, everyone is sharing the same schema."
  • Second-degree multi-tenancy (e.g. Intacct, a financial systems SaaS provider). This approach is similar to first-degree, but it "uses replication much more broadly than Salesforce.com to distribute its shared-schema instances across large numbers of server clusters." A key advantage of this approach is that it can use low-cost hardware (e.g. Linux on Intel) rather than large Unix or Linux servers with massive databases. It also allows customers to operate on different versions of the system, based on which cluster thay reside upon, giving some flexibility on when they upgrade to newer versions.
  • Lesser-degree multi-tenancy (e.g. Oracle, and others). There are many variations of this type, with the shared services primarily involving shared server infrastructure. Each customer has a separate database instance. This approach provides maximum flexibility to the customer but gives up much of the scalability and economic advantages of multi-tenancy. It appears that SAP's greenfield SaaS offering for small business, Business ByDesign, is taking this approach.
Debates about the advantages and disadvantages of the first versus second degree multi-tenancy approach are a bit too much "inside baseball" for most buyers. Selection of an architecture, in my opinion, should be driven by the requirements of the application. I can see where a high volume, small footprint, departmental application might benefit from the first-degree approach, where the economies of scale drive down the price per user, allowing the app to reach a larger number of users. I can also see where a larger, more complex application might be deployed more cost effectively, and with greater flexibility, using the second-degree approach. And applications requiring the greatest flexibility for the customer might be driven to the third category, though, as I pointed out, this approach loses much of the economic rationale of the first two.

Read Wainewright's entire post for a fuller discussion.

Update: Wainewright has a follow-up post where he refines his definitions and provides additional insights on Intacct's architecture. If SaaS platform decisions are important to you, you should read Wainewright's follow-up post.

Related posts
Workday: evidence of SaaS adoption by large firms
Cloud computing: can Microsoft turn from servers to services?
All not sweet with NetSuite
Computer Economics: The Business Case for Software as a Service
Dell acquires SaaS platform Everdream

by Frank Scavo, 6/18/2008 12:52:00 PM | permalink | e-mail this!

 Reader Comments:

One of the things Phil misses in his post is that multi-tenancy allows for more rapid development and deployment of new features and functions. Rather than having to upgrade hundreds (thousands?) of installations of the software, as required in single tenancy, updating a single instance on a single architecture is markedly more simple task. This means that companies using the multi-tenancy model do faster development (less testing), and in the long run, the product gets better faster - and customers are happier with the faster release cycle for requested features.
Post a Comment

Links to this post:


Powered by Blogger

(c) 2002-2018, Frank Scavo.

Independent analysis of issues and trends in enterprise applications software and the strengths, weaknesses, advantages, and disadvantages of the vendors that provide them.

About the Enterprise System Spectator.

Frank Scavo Send tips, rumors, gossip, and feedback to Frank Scavo, at .

I'm interested in hearing about best practices, lessons learned, horror stories, and case studies of success or failure.

Selecting a new enterprise system can be a difficult decision. My consulting firm, Strativa, offers assistance that is independent and unbiased. For information on how we can help your organization make and carry out these decisions, write to me.

My IT research firm, Computer Economics provides metrics for IT management, such as IT spending and staffing benchmarks, technology adoption and investment trends, IT management best practices, IT salaries, outsourcing statistics, and more.

Go to latest postings

Search the Spectator!
Join over 1,700 subscribers on the Spectator email list!
Max. 1-2 times/month.
Easy one-click to unsubscribe anytime.

Follow me on Twitter
My RSS feed RSS News Feed

Computer Economics
Outsourcing Statistics
IT Spending and Staffing Benchmarks
IT Staffing Ratios
IT Management Best Practices
Worldwide Technology Trends
IT Salary Report


2014 Best Independent ERP Blog - Winner 2013 Best ERP Writer - Winner Constant Contact 2010 All Star Technobabble Top 100 Analyst Blogs

Key References
Strativa: Business strategy consulting, strategic planning
Strativa: IT strategy consulting
Strativa: Business process improvement, process mapping, consultants
Strativa: IT due diligence
Strativa: ERP software selection consulting and vendor evaluation
Strativa: CRM software selection consulting and vendor evaluation
Strativa: Project management consulting, change management
StreetWolf: Digital creative studio specializing in web, mobile and social applications
Enterprise IT News: diginomica

Spectator Archives
May 2002
June 2002
July 2002
August 2002
September 2002
October 2002
November 2002
December 2002
January 2003
February 2003
March 2003
April 2003
May 2003
June 2003
July 2003
August 2003
September 2003
October 2003
November 2003
December 2003
January 2004
February 2004
March 2004
April 2004
May 2004
June 2004
July 2004
August 2004
September 2004
October 2004
November 2004
December 2004
January 2005
February 2005
March 2005
April 2005
May 2005
June 2005
July 2005
August 2005
September 2005
October 2005
November 2005
December 2005
January 2006
February 2006
March 2006
April 2006
May 2006
June 2006
July 2006
August 2006
September 2006
October 2006
November 2006
December 2006
January 2007
February 2007
March 2007
April 2007
May 2007
June 2007
July 2007
August 2007
September 2007
October 2007
November 2007
December 2007
January 2008
February 2008
March 2008
April 2008
May 2008
June 2008
July 2008
August 2008
September 2008
October 2008
November 2008
December 2008
January 2009
February 2009
March 2009
April 2009
May 2009
June 2009
July 2009
August 2009
September 2009
October 2009
November 2009
December 2009
January 2010
February 2010
March 2010
April 2010
June 2010
July 2010
August 2010
September 2010
October 2010
November 2010
December 2010
January 2011
February 2011
March 2011
April 2011
May 2011
July 2011
August 2011
September 2011
October 2011
November 2011
December 2011
January 2012
February 2012
March 2012
April 2012
May 2012
June 2012
July 2012
September 2012
October 2012
December 2012
January 2013
February 2013
March 2013
May 2013
June 2013
July 2013
September 2013
October 2013
December 2013
January 2014
February 2014
March 2014
April 2014
May 2014
June 2014
July 2014
August 2014
September 2014
October 2014
November 2014
December 2014
February 2015
March 2015
April 2015
May 2015
June 2015
July 2015
September 2015
October 2015
November 2015
February 2016
May 2016
June 2016
July 2016
August 2016
September 2016
October 2016
January 2017
February 2017
May 2017
June 2017
October 2017
January 2018
April 2018
May 2018
Latest postings