What is Multi-tenancy? Pros, Cons & Best Practices

Back in the day, before the Internet really took off and long before the cloud became a household name, companies used to get their software directly from vendors and install it on their own computers and servers. This setup meant that each company had its own separate version of the software.

Fast forward to the last 10-15 years, and you'll see a massive shift. Thanks to the rise of cloud computing and SaaS (Software as a Service), businesses are moving away from managing bulky, costly data centers and are instead opting for software that's managed by vendors and shared across multiple companies. 

Today, this cloud-based, shared approach, known as multi-tenancy, is the go-to for most SaaS businesses and their customers.

What is multi-tenancy?

In software, especially in B2B/enterprise software and SaaS, multi-tenancy is an architectural pattern in which a single software application or infrastructure serves multiple tenants (users or customer groups), each isolated from the other yet sharing the core computing resources. 

This doesn't imply that tenants share data, though; it just means that they share underlying application resources like servers, CPU, and memory.

Multi-tenancy vs. single-tenancy

The multi-tenant architecture is in direct contrast to a single-tenant architecture, where each tenant's data lives in its own independent instance of the application, possibly on completely separate hardware. No resources are shared between tenants. 

The choice between single-tenancy and multi-tenancy depends largely on your specific needs including:

• Cost sensitivity: For startups looking to minimize upfront costs, multi-tenancy is usually more appropriate.
• Security and compliance requirements: For industries that are heavily regulated or where data privacy is a top priority, single-tenancy might be the better choice.
• Scalability requirements: If you’re expecting rapid growth you might prefer the scalability of multi-tenant solutions.
• Customization needs: If your customers require extensive customization, you might find single-tenancy more suitable due to its inherent flexibility. 

Advantages of multi-tenancy

There are quite a few benefits to multi-tenant architecture, for both users and SaaS vendors. Here are just a few pros for the vendors:

Lower raw infrastructure cost (especially as you scale)

Multi-tenant applications are generally cheaper to build and maintain over the long run. It's much cheaper to scale out one set of infrastructure (i.e., database, app servers, etc.) to efficiently support all of your customers, versus having to deploy a separate stack (with dedicated hardware) for each of your customers.

Less time spent on maintenance and upgrades

Aside from lower hardware and infrastructure costs, multi-tenant applications are easier to upgrade and patch since all your customers use the same version of your app. This means fewer hours spent upgrading and supporting individual customer instances, which in turn means a lot less money spent on expensive support and maintenance.

Easier to control features and functionality by tenant

In multi-tenant applications, every user (tenant) gets updates and new features at the same time because everyone is on the same release schedule. This makes it easier to release new updates for everyone at once.

And even in cases where there’s a new feature that shouldn’t go to everyone just yet, you can use feature flags to easily control who gets access via software rather than tweaking the underlying infrastructure.

Simplified marketing and customer acquisition

With a one-to-many service model, you can focus your marketing efforts more broadly. It's also easier to onboard new customers, who can quickly adapt to the existing infrastructure without needing customized setups.

Here's how the benefits of multi-tenancy break down for customers:

Cost efficiency

Since the infrastructure costs are spread across multiple tenants, each user pays less for access compared to what they would pay for a dedicated setup.

Simplified management

Users do not need to worry about the underlying software maintenance or updates. This is handled by the vendor, which reduces the burden on your customers’ IT staff and allows them to focus on their core business operations.

Scalability

Multi-tenant applications are designed to handle increasing loads and additional users efficiently. This scalability means that users can expand their use of the application without needing to make significant investments in new infrastructure.

Disadvantages of multi-tenancy

As with any other architectural choice, multi-tenancy doesn't come without its share of trade offs:

Security becomes an application concern

In single-tenant applications, each customer has their own dedicated instance of the software, which naturally isolates their data from other customers. This architecture eliminates the risk of the app accidentally exposing data among customers, as there is no shared database. As a result, the application layer is free from the burden of having to validate access or 'contextualize' its database queries to a respective tenant's data. 

However, in a multi-tenant architecture, the risk of introducing a bad db query that exposes data across tenants is very real since all data resides in the same database. This means that security becomes an application-level concern which you must be very conscious of when writing and testing your app’s code.

Single point of failure

While having all customers on the same application instance makes for easy upgrades and patches, it also introduces a critical vulnerability: The infrastructure becomes a single point of failure.

Unlike single-tenant applications where a server crash might inconvenience one user, a similar failure in a multi-tenant setup could knock everyone offline. That's why it's very important to have strong backup systems and safeguards in place with multi-tenant architecture, to avoid major outages.

Enterprises and regulations might prohibit it

Despite the recent rise of SaaS and cloud-based enterprise software, some industries, particularly those under tight regulations (eg. financial, national security, utilities), are unable to use multi-tenant applications, primarily due to concerns like:

• Data leakage between tenants: Even with strong isolation measures, there’s still the risk that one tenant could access another’s data. 
• Compliance issues: Certain industries have strict rules on how to handle and store data. Multi-tenant systems may not always meet these requirements. 
• Resource contention: In a multi-tenant setup, everyone shares the same resources, like processing power and storage. High demand from one user can affect the performance of others.
• System downtime: Because everyone shares the same infrastructure in a multi-tenant application, if something goes wrong, it can affect all users at once. This can be a big problem for industries that need their systems to be available all the time, like healthcare or utilities.

If you’re working with these types of companies in tightly regulated industries, you will often end up having to deploy separate, single-tenant versions of your applications specifically for these customers. 

You could also offer "virtual private" or "isolated" multi-tenant environments that aim to combine the benefits of multi-tenancy with the security and control of single-tenant solutions.

When should you implement multi-tenancy? 

Always build with multi-tenancy in mind. It's much easier to deploy a multi-tenant-aware application into a single-tenant environment than it is to make an existing single-tenant application multi-tenant. 

As such, you should build your app as multi-tenant by default. This means ensuring that your application and all entities within your data model are 'tenant-aware'.

Implementation best practices

Here are a few recommended best practices for implementing multi-tenancy: 

Treat multi-tenancy as an authz/access control concern

In addition to being 'tenant-aware', your application should enforce proper access controls to ensure that tenants can only read and write their own data. 

The best and easiest way to do this is to handle tenancy at the highest level and scope the entire application by tenant, disallowing any cross-tenant reads or writes throughout your stack. 

Be prepared to run multiple multi-tenant instances

Sounds like an oxymoron, right? But it isn't. Modern data residency laws like GDPR require data to be partitioned by locale. In practice, this can mean that you may need separate instances of your already multi-tenant application. 

For example, you might need one cluster or instance for European customers and another instance for everyone else. Making sure your application design allows for this upfront will save a lot of time and effort in the future.

Build to scale

In a multi-tenant environment, varying workloads and user activities can create fluctuating demands on the system. 

By building the system with scalability in mind, it can automatically increase resources during peak times to maintain performance and decrease them during low usage periods to reduce unnecessary costs. This dynamic scaling prevents the system from being overloaded during high-demand periods and from wasting resources when demand is low.

Use feature flags

Implement feature flags to enable or disable features for specific tenants. This can help in gradually rolling out new features and managing tenant-specific functionalities.

For example, in business management software, you can enable the analytics module only for customers who opt-in or purchase this additional service. You can also use feature flags to conduct A/B testing among different tenant groups to evaluate how the new feature impacts user engagement and satisfaction before a full rollout.

Get tenant onboarding right

A smooth onboarding process ensures that new tenants can quickly set up and start using the application with minimal hassle. This involves automating setup processes like tenant registration, initial configuration, and data migration where necessary. 

If possible, allow your customers to customize and configure the application to meet their specific needs from the outset. Providing customers with guided configuration options, templates, or default settings relevant to their use case can make a significant difference.

Implementing multi-tenancy with WorkOS

In a multi-tenant SaaS application, managing who gets to access what is really important — the last thing you want is a tenant gaining access to another tenant’s data. 

WorkOS offers a fully-fledged user management platform with solutions that make sure everyone has the right access based on their roles and permissions. With WorkOS, you can implement:

• User authentication: Authentication methods like email/password with password strength validation and leaked password protection, social logins, enterprise SSO, magic links, and multi-factor authentication.
• Automatic user provisioning: With Directory Sync (SCIM), you can integrate your app with user directory systems like Microsoft Active Directory or Google Workspace. This keeps user roles and permissions automatically synced with the organization's HR or IT directory, ensuring access levels are always current without manual updates.
• Roles: With WorkOS, developers can implement role-based access control, which allows them to define roles within their applications and assign permissions based on these roles. 
• Audit logs: WorkOS provides auditing capabilities to track and log all user activities within your application. This helps in monitoring access patterns and detecting any irregular or unauthorized access attempts.

To integrate WorkOS into your app, you have two options:

• Use AuthKit: This is the quick and easy route. Set up the authentication strategies you want to use from the WorkOS dashboard, add a bit of code to your site, and you’re good to go. AuthKit handles the heavy lifting for authentication.
• Use user management APIs: If you need more control over how things work, go with the Authentication APIs.

Regardless of the options you get, you get a single integration point that your app can use for your enterprise authentication and user management needs.

Explore the WorkOS User Management Platform.