Friday, October 24, 2008

Multi-Tenancy vs. Isolated Tenancy CRM

Hosted CRM manufacturer is clearly the poster-child for the software as a service (SaaS) industry and has boasted its multi-tenant architecture as the undeniable standard for hosted software delivery. However, SAP has entered the 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

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. In a new survey conducted by CRM Landmark, 89% of respondents were already using at least some CRM functionality in a hosted environment, though several of these respondents were just in the implementation process. Of those already using hosted CRM, 82% were doing so in a multi-tenant architecture, 9% were using isolated tenancy, and 9% were unsure.

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

--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.

--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 administration (including provisioning, maintenance, tuning, trouble-shooting, evolution and systems management).

--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:

--Software versioning. Whereas multi-tenant CRM software solutions require all customers to share the same application version and all customers are upgraded en masse, 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.

--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.

--No-limits customization. Unlike multi-tenant applications that include constraints that 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.

Though the survey results were initially extremely mixed, some trends began to appear.

--Hosted CRM and ERP 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.

--Security-conscious organizations such as health care, financial services and federal government seemed to show strong preference for isolated tenancy.
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