Single-Tenant vs. Multi-Tenant CRM

What’s the difference between single-tenant and multi-tenant CRM? Why should this difference matter to you as a CRM buyer?

Multi-Tenant vs. Single Tenant CRM

The difference between these two CRM architectures is tightly tied to an ongoing debate over the definition of cloud computing. Some people are passionate about single-tenant CRM, while others think that anything but multi-tenant CRM is 1990s computing.

Several years ago, during his presentations at customer and partner conferences, Marc Benioff, CEO of salesforce.com, told the salesforce.com faithful to “beware of the false cloud” — read: “beware Oracle’s false cloud.”

The “false cloud” referred to the fact that provisioning, say an Oracle Exadata server in a data center and then giving a customer access to that computing resource does not adhere to the true definition of cloud computing.

The implication was that Oracle’s version of cloud computing, one form of which involved separate physical boxes for each customer, was not real cloud computing.

By association, any CRM solution that runs on its own physical or virtual server in a data center and calls itself Cloud CRM would also qualify as “the false cloud” by Benioff’s standards.

Definition of Multi-Tenant CRM

Multi-tenant CRM, as its name implies, is a pooled computing resource shared among many different organizations (tenants).  Multi-tenant CRM goes beyond a group of companies sharing the same data center. A large number of customers actually share the same database. Here’s a technical explanation of multi-tenant CRM (PDF).

Remember that almost any online subscription service you sign up for today fits Marc Benioff’s definition of cloud computing and multi-tenancy.

Whether you’re signing up for online banking, Google Workspace, Dropbox, Twitter, or Facebook—name an application—you’re in one large pooled environment and database with thousands or even millions of your closest friends.

Benefits of Multi-Tenant CRM

There are several benefits to multi-tenant CRM. From a CRM end-user’s perspective, these differences aren’t necessarily evident in day-to-day usage of the application, but they can come into play in other ways, such as cost, performance, and reliability.

Hardware and Power Economy – A significant benefit to multi-tenant CRM is on the cost side. With resource pooling, there are considerable savings in hardware and power. With single tenancy, a separate physical or virtual machine must be “spun up” for each customer. As Salesforce approached the 100,000 customer mark, it boasted that it served its entire customer base on only 3,000 servers.

Elasticity – Imagine a scenario in which a company starts with a ten-user, one-thousand-record pilot of a CRM system.  If the pilot works out well, the plan is for the company to add 20,000 users and five million records.

Since a multi-tenant environment is elastic, all these users and records can be added without first calculating what resources must be added to a machine, at what cost, and over what timeframe. 

In a single-tenant environment, the customer’s physical or virtual server must be individually provisioned with extra processor power, memory, and hard disk space to accommodate this leap in users and storage.

Effort to Upgrade – If there are a thousand customers on a thousand separate CRM instances and all of the instances need to be upgraded, that’s a thousand upgrades.  If a thousand customers are on a single, multi-tenant CRM instance, that’s one upgrade.  Multi-tenancy has made upgrades seamless, as upgrades can’t require any level of per-customer intervention when thousands of customers are upgraded simultaneously.

Backups and Redundancy – Peter Coffee once said of salesforce.com’s redundant, U.S.-based data centers that it would take two simultaneous meteor strikes to disrupt service to its customers. Creating that level of redundancy would be a lot more technically challenging if tens of thousands of customers each had their own virtual server in each of the two data centers.

Degrees of Multi-Tenancy

Even multi-tenancy has scalability limits. Salesforce’s multi-tenant architecture is segmented into almost 200 instances and periodically needs to create new instances as current ones reach capacity.

Microsoft’s online CRM solution is multi-tenant on the application instances, but each customer has their own SQL Server database since Microsoft’s underlying database technology was not designed for a large-scale, public cloud. The same applies to Sugar with its single-tenant MySQL databases.

On the other hand, Google has an apparent single instance for all Google Apps users. When there’s a new update, all customers get the update simultaneously.

Limitations to Multi-Tenancy

Multi-tenancy does have several inherent limitations, which can be overcome to varying degrees.

One limitation is that there have to be API governors in place – limits to the number of API calls by each customer over a defined time period. As a multi-tenant vendor, you can’t have a given customer on a multi-tenant CRM instance make millions of API calls per minute, as this can affect the performance of other customers on the same instance.  Single-tenant CRM proponents will tell you that API limits do not exist with their solution.

Oracle’s Larry Ellison once called Salesforce the “roach motel of clouds.” While getting your data out of a multi-tenant CRM solution like Salesforce is possible, it may not be a SQL Server or Oracle backup file that can easily be transferred to another environment. Instead, it’s likely to be a collection of CSV files that need to be migrated into another system.

Undoubtedly, the debate over the merits of single-tenant vs. multi-tenant CRM and cloud computing will continue.

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