Why Multi-tenant SaaS is the Best Alternative to ERP Software


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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.

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Why Multi-tenant SaaS is the Best Alternative to ERP Software

  1. 1. Why Multi-tenant SaaS is the Best Alternative toERP SoftwareApril 25, 2011 by Steven JohnCIOs who are considering SaaS hear all sorts of things from ERP softwarevendors hoping to tap into the momentum of cloud computing. Among themost common is that multi-tenancy is a "techie" thing that doesnt need to bepart of the conversation. Heres another common one: "Multi-tenant? Sure,we can do multi-tenant, single-tenant, whatever you need!" In eitherunfortunate case, the term "multi-tenant" might mean anything the vendorchooses it to mean, including nothing at all.The fact is, multi-tenancy is the core foundation of modern Software-as-a-Service and shouldnt be brushed aside, generalized, or massaged intosomething that suits a vendors self-serving interpretation of SaaS. Havingexperienced first-hand the true benefits of multi-tenant SaaS, I cant conceptualize how SaaS wouldhave delivered those benefits if it wasnt multi-tenant. SaaS that isnt truly multi-tenant is likely justhosted ERP software applications, no matter how much the vendor tries to dress it up as somethingelse.Furthermore, its just common sense to closely scrutinize claims of multi-tenant software fromtraditional software companies. Modern SaaS companies (Workday, Salesforce.com, Xactly, Kenexa,and others) were developed from the ground up to support multi-tenancy. From a technicalstandpoint, these are proven multi-tenant solutions, having years of market maturity and customerfeedback and involvement. The underlying foundation of multi-tenant SaaS is applications built formulti-tenancy. Otherwise, a lot of backward engineering may be required to make a traditionalsoftware stack support multi-tenancy.From a business model standpoint, original multi-tenant SaaS providers dont have to explain toshareholders how theyre going to replace high-profit-margin, upfront software licensing andmaintenance fees—unquestionably the bread-and-butter of the traditional software companies—withsubscription-based recurring revenues. Multi-tenancy SaaS companies are the real deal, not weakimitations.So why is multi-tenancy so important? Because its the root system from which all the benefits ofSaaS grow and flourish. Innovation, community, collaboration, lower costs, and vendor-managedupdates are just some of the more important extensions of multi-tenancy. Lets go through them oneby one:*Faster Innovations. The multi-tenancy concept derives from the same idea as people living in acondominium building—the building management provides services to all tenants, and as it improvesservices all tenants benefit. Multi-tenancy ensures that every customer is on the same version of thesoftware, so no customer is left behind when the software is updated to include new features and
  2. 2. innovations. Whats more, SaaS companies can deliver market innovations more quickly becausetheyre not dealing with that disruptive practice of upgrading ERP systems every several years. This isespecially important now, with users increased expectations in the areas of mobility, consumer-likefeatures, social media-type functionality, and more.*Stronger Communities and Collaboration. A single software version also creates anunprecedented sense of community where customers and partners share knowledge, resources, andlearning. A Workday user conference is an entirely different experience than a traditional softwareconference because the community for sharing is limitless as everyone is on the same version. Evenbetter, your time is spent talking about new functionality that can drive business productivity andinnovation, rather than sharing tips on how to avoid a high-cost software upgrade.*Lower-Cost Model. A multi-tenant SaaS providers resources are focused on maintaining a single,current version of the application, rather than spread out in an attempt to support multiple softwareversions for customers. How can a SaaS provider host thousands of single-tenant versions of thesoftware while keeping its costs in line? It cant. Guess wholl end up paying for those costs?*Vendor-Managed Updates. Multi-tenancy makes it possible for the provider to update a singleversion of the software, often several times a year, for all customers. And these updates should beprovided at no additional charge. The customer is relieved from IT upgrade projects, while the vendorcan 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 aspectsand 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."- StevenSteven John, Workdays Strategic Chief Information Officer, works with customer CIOs and IT groupsto help them realize the full benefits of Workday and cloud computing. Steven was most recently theCIO 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, andreceived the CIO Executive Council Leadership award in 2009. He can be reached atsteven.john@workday.com.