I am sitting in Workday’s 2010 Technology Summit hearing the pitch about the supremacy of multi-tenancy, and despite their best efforts, Workday’s rationales about this key piece of SaaS orthodoxy are coming down solidly on the vendor side of the equation, not the user side. While the benefits that multi-tenancy can provide are manifold for the vendor, these rationales don’t hold water on the user side.
That is not to say that customers can’t benefit from multi-tenancy. They can, but the effects of multi-tenancy for users are side-benefits, subordinate to the vendors’ benefits. This means, IMO, that a customer that looks at multi-tenancy as a key criteria for acquiring a new piece of functionality is basing their decision on factors that are not directly relevant to their TCO, all other factors being equal.
The “other factors” issue needs explaining. The reason vendors think multi-tenancy is so important is that it is the best way to guarantee a low cost platform for customers – today. The problem is that perspective is based on an early adopter view of the SaaS market that has depended on the initial successes of relatively few companies in a very nascent market.
Multi-tenancy promises to age gracelessly as this market matures – there’s a tremendous amount of innovation that is being thrown at the SaaS platform cost problem, from virtualization to in-memory databases to huge advances in hardware that guarantees that multi-tenancy will not stand the test of time as the sole guarantor of cost-effectiveness in SaaS platforms.
This is why I believe, from a customer standpoint, this multi-tenancy technological choice issue is secondary to the real question that customers should be thinking about: is the total package offered by SaaS vendor X – functionality, cost, TCO, lots of happy customers, etc. – competitive with the total package offered by SaaS vendor Y. Full stop.
While multi-tenancy might be one way in which vendor X competes, it’s an “Intel-inside” factor that is irrelevant to the customer’s ultimate decision. If vendor X can outcompete vendor Y without relying on multi-tenancy, then vendor X deserves to win. How the issue of tenancy works for the vendor should be of little nor no importance to the buyer – to me it’s like worrying about the quality of the rubber in my car’s tires. If I were driving a high-performance car on a closed race circuit, I might want to worry about the rubber in tires. Otherwise, the chemical composition of the tire is irrelevant compared to its cost and functionality.
This is the basis of my argument with Workday about the competitive differentiation they offer on the technology side, and it mirrors my problems with Netsuite’s positioning as well. Most of the main benefits of multi-tenancy – every customer is on the same version and is updated simultaneously, in particular – are vendor benefits that don’t intrinsically benefit customers directly. What benefits customers is the ability to have a low TCO and a painless upgrade process, none of which is the unique domain of multi-tenancy. It’s definitely possible for a single tenancy vendor and an applications hosting company to both offer low TCO and painless upgrades while eschewing multi-tenancy, assuming their technology and business models are up to it.
That latter point isn’t meant as a throw-away, and any company not offering multi-tenancy will have to prove that they are up to the competitive task. But nothing in multi-tenancy gives its proponents an unbeatable position, it’s merely one of many technological directions that were important in the early stages of the market but less and less important as the market matures.
Customers want predictable pricing, elastic infrastructures, and, of course, an IT department-free implementation. Multi-tenancy is just one way to do that, but it’s hardly the only way today. And tomorrow, if the history of innovation is any indication of where the SaaS market is headed, multi-tenancy will be an also-ran, and we’ll be arguing about the new orthodoxy. Whatever that may turn out to be.
(Cross-posted @ Enterprise Matters)
Great post. I definitely see your point and I think you are right by default most of the time. It is very difficult for many customers to differentiate between SaaS or merely faux-SaaS models anyway. If a vendor’s leading message is “we’re multi-tenant” they’re going to loose the interest of all but the geekiest of buyers quickly.
But the buyers have much to gain by fully understanding the real value multi-tenancy brings to the table. Geek speak aside, I view multi-tenancy giving the customer the power of community. A community that exponentially increases transparency – transparency of functionality, reliability, cost, security, and support. Now we stand together, while traditionally we have stood apart. We worked together towards common goals in forums and support blogs but our environments, our worlds, were very isolated (figuratively and literally). Multi-tenancy provides more than just economies of scale to the vendor, it provides economies of transparency to the customer. For one basic example, look to a Gmail outage. A minor disruption in service, an hour or two, leads to global coverage of the event. This level of transparency in reliability is new. It is extremely valuable for customers. It is multi-tenancy. It is extremely valuable in commodity solutions like email and even more so for more complex platforms like Workday.
Josh
Great post!. Agree with your analysis on Multi-tenancy being one of the ways to implement success SaaS technologies but not the only way. Definitely should not be for a big consideration for the customer. In fact, currently it is being routinely listed as one of the risks customer assumes i.e, that of co-mingling of data with that of their competition.
One of the key drivers for SaaS vendors to go with Multi-Tenancy, besides economies of scale/TCO, is the potential pot of gold that gets accumulated with aggregate data across tenants. Conventional thought has been the data resides in a single db across tenant-owned-slices you could aggregate them and roll them up to create analytical models. Generating patterns, identifying trends and insights to drive high value analytics (descriptive & predictive) is going to be the future of Information Management. But that is now possible with massively parallel NoSQL technologies (Hadoop, MapReduce) even if data were to reside in multiple datastores.
Multi-tenancy has advantages wherever you need a “cross tenant” view and involve participants in the application who serve many people “like you.” In a single tenant deployment you can’t do certain things such as:
Transportation Management Systems: N new user of a multi-tenant solution has instant connectivity to 5000 or more carriers who are already on boarded and serving other customers.
Global Trade where carriers, shipping lines, brokers and agents all need to be looking at the same data – but for many different customers.
Retailer supplier communities: register once and communicate with many retailers. Retailers can also find new suppliers rapidly and they are already connected. This model would work well for Drop Ship.
Consumable Purchases from “catalog” based vendors if the vendors and their catalogs are already on boarded I don’t have to do much more to engage (think Ariba).
Automotive tier 1 and 2 suppliers delivering JIT to a highly flexible production schedule.
All of which involve process and communications in a B2B environment. And I don;t know of a business that does buy from or sell to another business or service provider.
Josh,
Thanks posting this great point about multi-tenancy. I couldn’t agree more and am surprised that I have never heard any position like yours before…
If SaaS is an extended outsourcing model then, effectively, whatever “they” do to deliver the service at the agreed cost is their problem as much as you don’t manage the HR side of an outsourced department.
I believe that this story about multi-tenancy superiority was born from some vendors having invested loads of money in it and using it as a key market differentiator several years ago… It’s a shame because I think that SaaS doesn’t need *BS* to strengthen its proposal.
I like the name though, “multi-tenancy” sounds cool.
Cheers,
Fabrice
Multi-tenancy answers questions about long term sustainability and scalability for any SaaS provider. These are not side benefits but are at the core of the SaaS model.
Josh, I wrote about the importance of multitenancy to the SaaS model and it resulted in similar commentary about this being a vendor benefit and not a customer benefit:
http://cloudintegration.wordpress.com/2009/11/06/if-its-not-multitenant-its-not-really-saas/
While I have experienced first hand the challenges of a single-tenant SaaS solution from a vendor perspective (I’ll save that for another post), I believe that the main benefit of multitenancy is the pace of innovation. I would break it down this way:
1) Single code line. With all customers on the same version of the software, the vendor is able to deliver new features faster, but more importantly, customers are able to see enhancement requests become new features in weeks or months, not years. A lot has been written about the easy metadata customizations and seamless upgrade benefits of multitenancy, but freeing up the vendor from having to support multiple versions of the software helps accelerate the pace of innovation.
2) Usage transparency. Talk to any product manager who works on a multitenant SaaS application or platform. You’re able to see how the service is actually being used, when and by whom. The customer relationship with the ISV fundamentally changes and the quality of software also improves when you know what’s critical and what’s not.
3) Community. I like how Joe put it above: “multi-tenancy provides more than just economies of scale to the vendor, it provides economies of transparency to the customer.”
Darren
Unfortunately, I don’t agree at all that multi-tenancy is only a vendor-side issue. It is a VERY strong customer-side issue – the problem is, it is not ARTICULATED properly. Multi-tenancy is what gives SaaS solutions 24/7 uptime, since there’s no way for a vendor to provide access to one customer and NOT to another in a multi-tenant environment. If something goes bump, EVERYONE is down; now, that’s serious incentive for the vendor to ensure continuous access via clustering, hot-standby, whatever. So when customers are evaluating vendors, I think it is critical to ensure that multi-tenancy is at the core of the offering; else, their specific “instance” may be down and the vendor is not that concerned, since other customers are still up and running.
Now, I will admit that my own explanation above is not well-articulated enough, but that does not take away from the fact, IMHO, that multi-tenancy is the only way (today) to ensure 24/7 uptime. Likening it to the “Intel inside” idea, it’s like comparing a diesel engine with a petrol engine – one is cheaper than the other, but if you want to go from 0 to 60 in 3 seconds, aren’t you going to look under the hood?
It is unfortunate that some (most?!) vendors focus on the tech side of things – we’ll all learn, soon enough!
I’ve blogged about this earlier here, if that’s of interest: http://blog.impelcrm.in/?p=132