Is There a Clear Architectural Leader Between Multi-Tenant and Isolated Tenancy hosted CRM systems?

Multi-Tenancy versus Isolated Tenancy CRM Software Executive Summary

Cloud CRM software manufacturer Salesforce.com is clearly the poster-child for the software as a service (SaaS) industry (at least in the CRM space) and has boasted its multi-tenant architecture as the undeniable standard for hosted software delivery. However, SAP has entered the CRM SaaS industry with its Business ByDesign solution and trumpeted its isolated tenancy hosted delivery model as one of the most overarching advantages when compared to Salesforce.com.

The debates between multi-tenant and isolated tenant hosted delivery platforms are nothing new, however, the topic has transcended from a quiet conversation among industry pundits to a full scale debate among SaaS buyers and influencers.

The multi-tenant hosting model claims to deliver the following advantages over isolated tenancy:

1. First and foremost - dependability and reliability. By mandating every customer operate on the same database, operating environment and software version, the hosting manufacturer is able to deliver greater standardization, operate with fewer variables and ensure a more reliable information system.

2. Material cost savings. When all customers reside within a single database, there are material economies of scale related to both software procurement costs and IT (Information Technology) administration (including provisioning, maintenance, tuning, trouble-shooting, evolution and systems management).

3. Faster life cycle evolutions. By not supporting individual client applications and multiple software versions, resources can be more tightly focused.

Not to be over-shadowed, isolated-tenancy advocates point to their hosted software architectural advantages:

1. Software versioning. Whereas multi-tenant CRM software solutions require all customers to share the same application version and all customers are upgraded in mass (whether they desire the upgrade or not), isolated tenancy CRM systems generally support multiple versions of their software (usually the current version and the last one or two versions) and permit clients to accept or defer new version releases. Isolated tenant and multiple version support often appeal to those clients who have incurred system integration or software customization and want the opportunity to evaluate the ramifications of a new version release before being forced to the new version. Isolated tenancy applications also appeal to those clients who would like to defer a new version release for a period of time (often until the first point release is issued).

2. Increased flexibility for access to information and system integration. Because isolated-tenancy CRM applications devote a dedicated and unique database to each customer installation, greater access to data with third party query tools, report writers and integration tools is permitted.

3. No limits customization. Unlike multi-tenant applications which include constraints which cannot be violated due to the shared database approach, isolated tenancy applications offer a 'no limits' software customization which generally implies both more flexible and lower cost customization.

Conclusion

The survey results were initially extremely mixed. However, once we removed the vendor employee responses (guys, did you think we would really count your responses?), some trends began to appear.

• Hosed CRM and ERP (Enterprise Resource Planning) buyers show increased awareness in the multi-tenant versus isolated tenancy trade off. Over one-third of the respondents indicated that the tenancy model is or was included in their software selection evaluation.

• The smaller the customer, the more likely they gave less importance to this issue.

• The larger the client, the more likely they preferred or even demanded isolated tenancy. As one Fortune 500 respondent commented, "I find it audacious and presumptuous that a CRM company is going to tell me that I'm sharing a database with thousands of other companies as well as tell me that they are upgrading my system without my advance notice, input or approval. Do they not recognize that a system upgrade may wreck havoc with other related systems?"

• Security conscience organizations such as health care, financial services and federal government seemed to show strong preference for isolated tenancy, however, the population of respondents was not sufficient to draw a firm conclusion.

Due to the increasing awareness of this issue, we will likely update and repeat this survey in the next calendar year.