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Chuck Ask The CRM Expert

 
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Multi-Tenant Versus Single-Tenant SaaS CRM Architectures


Guest alan sifferman
  Do crm software apps have to be multi-tenant to be software as a service? It's unclear to me if this multi-tenant thing is important or a distraction.
  Chuck Chuck Schaeffer
    The short answer is No, however, this question deserves a longer answer.

There is a long standing debate about the merits, advantages, benefits and differences between multi-tenant and isolated tenant software as a service (SaaS) architectures.

Multi-tenant SaaS CRM vendors such as Salesforce.com embrace and promote the multi-tenant shared architectural services model and claim that it provides efficiencies in terms of IT management, cost savings and scale, and that such operational and cost benefits are extended to their customer relationships. This argument is in large part true.

Isolated tenancy (also called single tenancy) SaaS CRM vendors such as Oracle (Siebel) or SugarCRM claim that only when every customer operates within their own autonomous database is performance, security, privacy and integration flexibility truly maximized. Also a valid point.

So which is better? It depends on who you ask. Or perhaps more importantly, it depends upon your company's business objectives and IT requirements.

In reality, a large proportion of companies adopting SaaS CRM systems do so in order to rid themselves of the IT management and maintenance with customer relationship management software systems; and frankly don't care about SaaS delivery architectures. In fact this argument seems to have been created and fueled by SaaS vendors looking for competitive advantages. It's been my experience that almost all SMBs (small and midsize businesses) don't care whether their CRM app is single-tenant or multi-tenant — they are far more concerned about the apps ability to achieve their business objectives, business processes and user preferences. As long as the CRM app achieves their business goals, is constantly available and secure, most SMBs have no concern whatsoever about the theoretical or practical differences of various SaaS technology architectures.

I have noticed a difference, albeit minimal, with enterprise organizations interest in tenancy. Some IT managers at larger organizations take a more purist view of SaaS and prefer multi-tenancy as they believe it better leverages the application and the delivery platform. This is a valid point as multi-tenancy achieves more IT management and economic efficiencies as the entire stack, including hardware, operating system, database and application operate in a shared services model. From a software manufacturer perspective, I think there can be no doubt that a multi-tenant application is more efficient and economical, however, whether those economies and cost savings get passed to customers in the form of lower subscription fees or superior services is quite unclear.

Other IT managers and enterprise companies take a more practical view and give preference to an isolated tenancy model as they believe increased physical segregation provides increased information security, data privacy, integration flexibility and software customization. It should be understood that the isolated tenancy model does not mean that every customer is operating with individual hardware. In fact, most isolated tenancy CRM systems leverage a shared infrastructure model for hardware (using database clusters and web server farms) and simply provision an independent database or database instance for each CRM customer. I have clearly noticed a preference by some (not all) organizations such as federal government bureaus, financial services companies and other information security sensitive organizations for the isolated tenancy model.

While the majority of SaaS CRM systems are multi-tenant, it's possible that environmental factors may influence the growth of one model over the other going forward. If cost pressures elevate, the multi-tenant model may become increasingly popular. If compliance issues such as SOX, privacy issues such as HIPAA or information security move even further to the forefront, the isolated tenancy model may take precedence for many organizations. The bottom line is that there is no one best answer that serves all interests. Varying architectural strategies and opinions will favor one model over the other based upon technology philosophy, personal bias, perceived security and/or vendor marketing. End


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Comments (16) — Comments for this page are closed —

Guest Gene Perelli
  Forget about the philosophical differences and benefits to the SAAS vendors, are there other benefits or drawbacks between isolated tenancy and multi-tenancy for customers?
  Chuck Chuck Schaeffer
    There are other differences they may be relevant and beneficial depending upon your circumstances. Multi-tenant vendors claim they can innovate and advance their products at a faster pace as every customer is on the same platform and can be upgraded with new features or capabilities in mass. Again, this is theoretically valid, however, whether this has actually occurred is debatable. In reality, almost all SaaS CRM vendors upgrade their customer relationship management systems several times per year. The value and significance of each vendors upgrades is a matter of debate and varies by customer.

Isolated tenancy vendors claim that forcing all (multi-tenant) customers to upgrade in mass at a vendor designated time, whether customers want those upgrades or not, takes control from the customer and may cause problems with system integration, software customization or simply delivering a new interface or functionality to users without advanced training. Some analysts have referred to the multi-tenant upgrade process as 'throwing the Frankenstein switch.' Most isolated tenant vendors offer some level of control for the customer to choose when to accept a new software upgrade.


Guest Howard Berns
  It seems obvious to me that if you need to customise your CRM software the isolated tenancy would be better.
  Chuck Chuck Schaeffer
    Possibly, but not necessarily. The standalone nature (at the database level) of isolated tenancy does generally support more freedom or fewer constraints for software customization, however, most multi-tenant providers have coupled their CRM applications with platform as a service (PaaS) toolkits that leverage layers of abstraction or metadata structures for significant changes or CRM software customization. Salesforce.com's Force.com or Netsuite's SuiteTalk and SuiteBuilder are examples of PaaS tools.

Guest alan sifferman
  I certainly cannot take what the CRM vendors say is the best, how do other industry experts or analysts sound off on this issue?
  Chuck Chuck Schaeffer
    The most recent analyst research I've read on this topic comes from Gartner in a report dated June 4, 2010 and titled 'Public Cloud Infrastructure Helps SaaS Vendor Economics'. That report suggests that single-tenant apps can achieve many of the multi-tenant advantages by moving their application delivery to a public cloud (such as Microsoft Azure or Amazon EC2). While this research report does not downplay the efficiencies of multi-tenancy, it does state that single tenant SaaS apps running on a public cloud may be advantageous to customers with more complex customization requirements or for customers that want more control and flexibility in the software's upgrade process.While the report notes the undisputed efficiencies of a completely shared infrastructure, it also states clearly that some organizations have operational requirements, such as increased flexibility for their upgrade windows or more advanced disaster recovery commitments, that a multitenant model will be unable to support.

Guest sanjay k
  Isolated tenancy is bad for the saas industry. It consumes more resources and is less efficient.
  Chuck Chuck Schaeffer
    Your point has some merit on a technology basis, however, software as a service is far less about technology and far more about changing the procurement, delivery, consumption and management of business applications for customers. If you ask customers whether they prefer their own autonomous environment or a shared environment, most will take their own dedicated space — which begs the question, how can giving customers what they want be bad for the SaaS industry?

Guest anonymous
  Do any CRM vendors offer both isolated tenancy and multi-tenancy?
  Chuck Chuck Schaeffer
    None of the SaaS CRM market share leaders (i.e. Salesforce.com, Oracle OnDemand, RightNow, NetSuite, etc.) offer both as it would simply defeat the efficiency advantages of their multi-tenant models.

Guest seamea
  If multi-tenancy results in greater vendor efficiency, which should then result in increased cost savings to customers, why does salesforce.com cost between $65 and $199 per month while Oracle OnDemand cost $65 per month?
  Chuck Chuck Schaeffer
    The Salesforce.com Professional Edition is priced at approximately $65 per user per month, Enterprise Edition approximately $125 and Unlimited Edition approximately $199 per user per month. Your point may be valid, however, the software scope for each product must be compared in order to make an apples to apples price comparison.

Guest Howard Berns
  Are there multiple types of multi-tenancy?
  Chuck Chuck Schaeffer
    Good question, yes there are. Multi-tenancy simply means sharing computing resources among tenants. Because there are multiple computing resources and services — hardware, operating system, database, application and even network components — to be potentially shared in varying combinations, there are varying degrees of multi-tenancy. Gartner defines five levels of multitenant architectures as Shared-Nothing, Shared Hardware, Shared Processing, Shared Database and Shared Everything.

Guest Len Warren
  Salesforce.com says if you're not multi-tenant you're not software as a service. The sales guy emphasizes this point like its all important but I don't really care. Am I missing something?
  Chuck Chuck Schaeffer
    Hard to say. To be sure you should understand the differences and determine whether any of them are relevant to your operating requirements or business objectives. Again, for most software buyers, this is a technology argument that takes a distant back seat to other more pressing software selection criteria. I think like many deep seated technology arguments, whether single tenant versus multi tenant, Java versus .NET or Oracle versus SQL Server, there is no one best answer for all, there are advocates for each side and more often than not personal bias comes into play.

 

 

 

 

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