Does SaaS Have to be Multi-Tenant? | Gaining Altitude in the Cloud

Posted On December 17, 2013

We’ve been engaged in a lot of discussions recently around whether or not SaaS has to be multi-tenant. In trying to answer that query, we started with another question: What would a private SaaS look like?

Typically when we think of Saas, we think of the multi-tenant platforms such as Salesforce, NetSuite, Ariba, etc. They have several things in common:

  • They bundle hosting and software IP and sell those components as a service, not as components.
  • They typically sell it on some kind of consumption basis, typically at the service level, not at the component level.
  • The software is loosely coupled with other technologies. SaaS providers create robust APIs that enable this loosely coupled environment, which then allows the SaaS providers to drive their own innovation trajectory.

These aspects make SaaS a very powerful vehicle. Customer benefits are consumption-based pricing, loosely coupled technologies, and simplicity of management. The customer focuses on how to use the service rather than how to manage the components of the service. The net result is lower cost, because the customer manages its consumption and focuses on how to use the technology instead of focusing on the technology itself.

But here’s what you need to realize —  

The market seems to want to claim that these benefits only come from a multi-tenant environment. That simply isn’t true. You can achieve the same goals in a private SaaS environment. There can be public and private versions of the same model.

So what if a provider were to provide those benefits in a private world where companies could have their own environment? A customer could enjoy all the benefits I already describe plus avoid the negative aspects of a multi-tenant environment — inflexibility to change the environment and having to make do with only what is available in the SaaS. Would that private world still be SaaS? As the saying goes, if a creature quacks like a duck and walks like a duck, is it a duck?

My claim is that, yes, you can have a private SaaS environment. So … where would you find such a creature?

Recently we explored ERP in the cloud. SAP and Oracle, for example, provide these offer sets as a SaaS product but without the multi-tenant component. They bundle the hosting, the service, the IP, sell it to you on a consumption basis and provide robust APIs so the customer benefits from the software vendor’s innovation trajectory. Notably, this model also allows the customer to have meaningful customization.

Other than NetSuite, at the large enterprise level we’re not aware of any multi-tenant ERP SAP or Oracle offering. While it’s true that SAP is multi-tenant at the fringes, you can actually run its core ERP system by the component parts as a private SaaS. That way you get to enjoy the benefits of consuming the service on a consumption basis and loosely coupling your innovation trajectory to allow it to evolve on its own separate from other technology innovations.

If you look at the many offerings in the marketplace, there are actually as many or more offerings that give customers a private SaaS environment as there are multi-tenant public SaaS environments.

I think we need to free ourselves from believing that SaaS only can be public (multi-tenant). Otherwise, we deny ourselves the possibility of real benefit from software services that are yet to go multi-tenant and perhaps never will.

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