CIOs who are considering SaaS hear all sorts of things from ERP software vendors hoping to tap into the momentum of cloud computing. Among the most common is that multi-tenancy is a "techie" thing that doesn't need to be part of the conversation. Here's another common one: "Multi-tenant? Sure, we can do multi-tenant, single-tenant, whatever you need!" In either unfortunate case, the term "multi-tenant" might mean anything the vendor chooses it to mean, including nothing at all.

1. Why Multi-tenant SaaS is the Best Alternative to
ERP Software
April 25, 2011 by Steven John
CIOs who are considering SaaS hear all sorts of things from ERP software
vendors hoping to tap into the momentum of cloud computing. Among the
most common is that multi-tenancy is a "techie" thing that doesn't need to be
part of the conversation. Here's another common one: "Multi-tenant? Sure,
we can do multi-tenant, single-tenant, whatever you need!" In either
unfortunate case, the term "multi-tenant" might mean anything the vendor
chooses it to mean, including nothing at all.
The fact is, multi-tenancy is the core foundation of modern Software-as-a-
Service and shouldn't be brushed aside, generalized, or massaged into
something that suits a vendor's self-serving interpretation of SaaS. Having
experienced first-hand the true benefits of multi-tenant SaaS, I can't conceptualize how SaaS would
have delivered those benefits if it wasn't multi-tenant. SaaS that isn't truly multi-tenant is likely just
hosted ERP software applications, no matter how much the vendor tries to dress it up as something
else.
Furthermore, it's just common sense to closely scrutinize claims of multi-tenant software from
traditional software companies. Modern SaaS companies (Workday, Salesforce.com, Xactly, Kenexa,
and others) were developed from the ground up to support multi-tenancy. From a technical
standpoint, these are proven multi-tenant solutions, having years of market maturity and customer
feedback and involvement. The underlying foundation of multi-tenant SaaS is applications built for
multi-tenancy. Otherwise, a lot of backward engineering may be required to make a traditional
software stack support multi-tenancy.
From a business model standpoint, original multi-tenant SaaS providers don't have to explain to
shareholders how they're going to replace high-profit-margin, upfront software licensing and
maintenance fees—unquestionably the bread-and-butter of the traditional software companies—with
subscription-based recurring revenues. Multi-tenancy SaaS companies are the real deal, not weak
imitations.
So why is multi-tenancy so important? Because it's the root system from which all the benefits of
SaaS grow and flourish. Innovation, community, collaboration, lower costs, and vendor-managed
updates are just some of the more important extensions of multi-tenancy. Let's go through them one
by one:
*Faster Innovations. The multi-tenancy concept derives from the same idea as people living in a
condominium building—the building management provides services to all tenants, and as it improves
services all tenants benefit. Multi-tenancy ensures that every customer is on the same version of the
software, so no customer is left behind when the software is updated to include new features and

2. innovations. What's more, SaaS companies can deliver market innovations more quickly because
they're not dealing with that disruptive practice of upgrading ERP systems every several years. This is
especially important now, with users' increased expectations in the areas of mobility, consumer-like
features, social media-type functionality, and more.
*Stronger Communities and Collaboration. A single software version also creates an
unprecedented sense of community where customers and partners share knowledge, resources, and
learning. A Workday user conference is an entirely different experience than a traditional software
conference because the community for sharing is limitless as everyone is on the same version. Even
better, your time is spent talking about new functionality that can drive business productivity and
innovation, rather than sharing tips on how to avoid a high-cost software upgrade.
*Lower-Cost Model. A multi-tenant SaaS provider's resources are focused on maintaining a single,
current version of the application, rather than spread out in an attempt to support multiple software
versions for customers. How can a SaaS provider host thousands of single-tenant versions of the
software while keeping its costs in line? It can't. Guess who'll end up paying for those costs?
*Vendor-Managed Updates. Multi-tenancy makes it possible for the provider to update a single
version of the software, often several times a year, for all customers. And these updates should be
provided at no additional charge. The customer is relieved from IT upgrade projects, while the vendor
can focus on what it does best, which is maintain its own software.
Those are the top benefits of multi-tenancy, but in fact, multi-tenancy is interwoven into many aspects
and benefits of real SaaS. To gain a broader picture of what true SaaS is comprised of, read my blog
"10 Critical Requirements for Cloud Applications."
- Steven
Steven John, Workday's Strategic Chief Information Officer, works with customer CIOs and IT groups
to help them realize the full benefits of Workday and cloud computing. Steven was most recently the
CIO at H. B. Fuller Company, a specialty chemical manufacturer and early Workday customer.
Steven was selected by Computerworld magazine as one of its Premier 100 IT Leaders in 2006, and
received the CIO Executive Council Leadership award in 2009. He can be reached at
steven.john@workday.com.