What is Multi-Tenancy?

Multi-tenancy is a software architecture that allows a single instance of a software application to serve multiple users or user groups, known as tenants. This means several subscribers, team members, or departments can access the same platform how they’d like without needing separate installations or hardware resources.

Each user shares a single database (i.e., a platform or subscription), but their data remains separate and secure from other tenants. Tenants can personalize certain aspects of the application, like themes, user interfaces, and business rules. They cannot, however, customize its code.

Examples of multi-tenant software include:

  • Atlassian
  • ClickUp
  • Dropbox
  • G Suite
  • Github
  • HubSpot
  • Netflix
  • Salesforce
  • Slack

In a multi-tenant architecture, each individual instance functions in a shared environment. Each tenant is physically integrated but logically isolated from other tenants, meaning they have dedicated resources and data but still use the same application infrastructure.

This is a critical aspect of multi-tenant solutions because it means multiple users can access the same platform without worrying about their data and processes being compromised. When we send emails unsing Gmail, save files with Dropbox, and stream Netflix series, millions of others are sound so simultaneously. Yet, we can’t see their activity. That’s multi-tenancy in action.


  • Software multi-tenancy
  • SaaS multi-tenancy
  • Multi-tenant architecture

Why Multi-Tenancy is Important in Cloud Computing and SaaS

In traditional single-tenant systems, each customer has a separate instance of the software. This requires separate computing resources and licenses for each tenant, making managing it more expensive and time-consuming. Multi-tenancy is monumental for SaaS and cloud computing because it maximizes resource utilization and reduces operational costs by enabling multiple customers to share infrastructure.

Lower Costs

When the cost of the application environment is shared across multiple users, the SaaS vendor passes those savings onto the customer. This is most commonly seen in usage-based pricing models, where customers pay a monthly or yearly base price for the service and a small additional cost to add new users.

With a multi-tenant environment, SaaS and cloud services customers of all sizes share the same infrastructure and the associated costs. Multi-tenancy is remarkably economical, especially compared to fully managed solutions and on-premises hosting.


Multi-tenant solutions are highly configurable, allowing businesses to customize the application to their needs. Since tenants are using the same infrastructure, it is much easier to upgrade and scale multi-tenant applications.

From a user standpoint, multi-tenancy also allows SaaS companies to easily accommodate customer growth by adding new users to their shared environment without needing additional resources. At the same time, they can support enterprise users who need to access the virtually limitless compute resources the cloud offers.

For customers with fluctuating demands (e.g., seasonal businesses), multi-tenant applications’ scalability makes it easier for them to adjust their service levels as needed.

Maximizes Resources

The multi-tenant environment makes the most of software resources by sharing them across multiple tenants. Each tenant is allocated a specific amount of storage, processing power, and other resources based on their needs. This simplifies workload management for businesses, eliminating the need for costly investments in extra hardware or software licenses.

Consistent User Experience

In a multi-tenant system, the software and its infrastructure serve multiple customers. Each customer shares the application and a common database. The data of each tenant is isolated and inaccessible to others. So, while major UI elements remain the same, each tenant gets a personalized and secure virtual environment.

Tenant Privacy and Role-Based Permissions

Every tenant has exclusive access to a dedicated area to use the platform (e.g., for data analysis and dashboard viewing). The application automatically isolates this area from others’ or makes certain parts of it accessible to an authorized user group. The analytics environment is effectively managed by each tenant within the limits of their assigned role and specific permissions.

This is an especially valuable attribute for B2B SaaS customers. When using a sales CRM, for example, the sales manager needs full access to their team members’ data and activities, but wouldn’t want other departments or team members to share the same access. If they could, privacy concerns would arise and employees might accidentally delete critical data.

Disadvantages of Multi-Tenancy

Although there are clear benefits of multi-tenant software, single-tenant architecture works better when:

  • Data security is crucial
  • Each tenant has unique customization needs that can’t be met within a shared environment
  • There’s a need for complete control over the software and its infrastructure

Particularly for enterprise software and database management solutions, there comes a time where multi-tenant software’s limitations simply can’t be ignored.

Security Risks

Multi-tenant solutions are hosted on a public cloud, meaning data is stored off-site and accessible through the internet. While there are stringent security protocols in place, some businesses might still prefer to have full control over their data’s physical location.

For example:

  • Healthcare industry businesses need to comply with HIPAA regulations and may not be comfortable storing sensitive data on a shared environment.
  • Government agencies have strict security requirements and policies that could conflict with multi-tenant storage.

Poor implementation also poses internal security threats. Unauthorized access to sensitive documents and data misuse (whether accidental or on purpose) creates serious problems for a company using a multi-tenant cloud solution.

To avoid these risks, organizational leaders need to manage end users’ access meticulously. Apps like Azure Active Directory and Okta can help secure multi-tenant SaaS applications by automatically handling authorization, authentication, and identity management.

Compliance Issues

Because of the inherent security risks, multi-tenant solutions aren’t always suitable for highly regulated industries. Organizations in the financial, healthcare, and public sectors must ensure strict privacy laws are being followed.

  • Financial institutions must comply with PCI DSS standards.
  • Healthcare organizations must adhere to HIPAA regulations.
  • Public sector organizations must abide by laws such as SOX and FISMA.

While multi-tenant software providers might offer increased data security measures and undergo rigorous compliance audits, it’s sometimes impossible for them to meet all industry-specific regulations (though there are specialist applications that can).

In cases where the vendor can’t provide this, single-tenant solutions (either on-premises or in a private cloud) offer greater control over data management and compliance. However, this comes at the cost of higher expenses for infrastructure and maintenance.

Competition for Shared Resources

Since they’re hosted on a private cloud or on-premises, single-tenant solutions give each user exclusive access to the entire cloud’s computing power. This isn’t the case for multi-tenant solutions, which can sometimes cause “noisy neighbor” syndrome — i.e., other users take up significant portions of the shared resources and negatively impact your own application’s performance.

In some cases, this might just mean slightly longer wait times for data processing or increased latency. But when an app’s speed is critical (such as in financial trading), competition for cloud resources can be a deal-breaker for customers. This is why many SaaS providers offering “business-critical” software still opt for single-tenant environments.

System Outages

For multi-tenant applications, the application provider is life-or-death when it comes to maintenance and upgrades. Vendor-side technical issues often have a widespread impact, affecting all tenants in terms of service availability, system upgrades, and localized/global processes.

Multi-tenancy may also pose challenges when it comes to maintenance and updates. In single-tenant systems, updates can be made per customer, but in multi-tenant environments, updates must be applied to all tenants simultaneously. This can cause disruptions and delays in service if not managed effectively.

To address challenges, most providers build applications using a microservices architecture. They deploy microservices on platforms like Kubernetes, an open-source tool that streamlines the process of deploying, scaling, and managing containerized applications.

How Multi-Tenancy Works

In a multi-tenant architecture, there’s one instance of the application running on a server that serves multiple tenants. Each tenant is isolated from each other using logical as well as physical data segregation.

  • Logical segregation involves isolating tenants through the application’s code logic. Depending on user login, the app knows which data is theirs and executes queries accordingly.
  • Physical segregation means that each tenant’s data is physically partitioned and assigned to specific tables within a shared database.

The application is designed to handle different tenants’ requests and return the appropriate responses based on the requested tenant’s context — i.e., returning only their data or portions of it based on permissions. Segregation is also how vendors control access and privileges on a per-customer basis.

Multi-tenant environments are distinct and isolated, but remain within one physical infrastructure. This could be either a virtual machine (VM), server, or cloud environment.

  • Virtual machines are created using virtualization software and involve running multiple operating systems on one physical server (for example, running Windows on a MacBook computer).
  • Servers are dedicated computer machines used to run applications and serve data.
  • Cloud environments typically refer to public or private cloud services, where computing resources are provided on-demand over the internet.

In all cases, the application provider manages and maintains the physical infrastructure. Tenants have access to specific features and customization options within their own virtual environments, but they do not have control over the underlying infrastructure.

It helps to think of multi-tenancy as a large apartment complex where each tenant has their own private unit (logical segregation), but the building’s infrastructure (physical segregation) is shared and maintained by the property owner. This allows for cost savings and efficiency while still providing individual tenants with their own personalized living space. By comparison, single-tenancy is like owning a home — you have complete control over the property, but are responsible for all maintenance and upkeep costs.

Types of Multi-Tenant Databases

The above description of how multi-tenancy works is how every SaaS platform runs. Every tenant is a customer with their own data and settings, all sharing the same application code.

But when it comes to databases, there are three distinct types.

1. Shared Database, Shared Schema

This is the simplest type of multi-tenant database. Tenants share multiple schemas through the same database. Each tenant’s data is kept separate through a unique identifier (such as a customer ID) assigned to their data in the shared tables.

This type of setup requires minimal resource allocation and maintenance, making it an attractive option for small businesses or startups with limited budgets. But, there is the least flexibility in terms of customization.

2. Shared Database, Multiple Schemas

Another way to approach multi-tenancy is by sharing a single database with separate database schemas. The advantage here is a business can divide multiple datasets into sub-databases without having to create multiple databases.

This approach allows for more flexibility in terms of customization and data management, as well as better performance since each tenant’s data is isolated. While it does require more resources and maintenance than a shared database/shared schema setup, it’s ideal for applying rules to specific types of data with respect to data privacy laws.

3. Multiple Databases, Multiple Schemas

The most complex and expensive multi-tenant database setup is one where each tenant has their own dedicated database with multiple schemas. This approach provides complete data isolation, making it the most secure option for sensitive data.

An example of this would be a healthcare SaaS platform where each tenant represents a different hospital or medical clinic. The high level of customization and security comes at a cost, making this option most suitable for larger enterprises with strict compliance requirements.

For each client, the host would need to install the application individually on their database. This introduces complexity to managing, maintaining, and scaling this type of multi-tenancy deployment (in addition to increasing costs).

Types of Multi-Tenant Architecture

There are three main types of multi-tenant architecture: isolated, shared, and hybrid tenancy.

1. Isolated Tenancy

With isolated tenancy, each user’s data and resources are completely separated from other users. This includes individual databases, servers, and application instances.

Think of it like an individual home you’d rent in a neighborhood. Each individual house has its own backyard, lawn, utilities, and amenities with no shared infrastructure or responsibilities.

Web hosting providers like GoDaddy and BlueHost are solid examples of isolated tenancy. Each customer receives their own server with their allocated resources and applications, even though the servers themselves are physically at the same data center. The end result is high levels of performance and security.

2. Shared Tenancy

Shared tenancy is where multiple tenants use the same resources and application infrastructure but with logical segregation. This is where we start to see multi-tenant databases and environments.

An example of this would be a shared office space where different organzations share the same building. Each one has its own workspace within the building, but they all share common areas such as a lobby or break room (as well as amenities like an elevator to reach their floor).

Slack is the perfect example of shared tenancy. One workspace’s users can’t access anyone else’s, even though they’re using the same communication tool.

3. Hybrid Tenancy

As the name suggests, hybrid tenancy combines shared and isolated tenancy. It’s quite similar to a townhouse, where each person has their own home, but they share some common amenities like a swimming pool (and maybe a wall).

Amazon Web Services (AWS) is a classic example of hybrid tenancy. Within their own Virtual Private Cloud (VPC), users can create their own isolated virtual network with its own IP addresses, subnets, and security settings. Each VPC can also be connected to a shared internet gateway, allowing them to communicate with other instances or services within AWS.

Hybrid tenancy is also used in situations where there are multiple levels of users, such as with reseller or distributor models. For example, a software platform built for wholesalers could have one level for the brand owners and another for their customers. Each customer would have their own dedicated resources and data, while all users under the brand owner would share common infrastructure.

Multi-Tenancy Best Practices

Now that we’ve covered the different types of multi-tenant databases and architectures, let’s touch on a few best practices to keep in mind when implementing a multi-tenant system.

1. Isolate and Secure Data

Data isolation is crucial for maintaining data privacy and security in a multi-tenant environment. Each tenant’s data should be completely separate from others, with no cross-over or risk of leakage. You can achieve this through logical segregation (such as with shared databases/multiple schemas), physical isolation (with separate databases), or both.

2. Plan for Scalability

A multi-tenant system should be able to handle an increasing number of tenants and their data without sacrificing performance. Use a modular approach when designing your system, so you can easily add or remove resources as needed. Also use a microservices architecture, where you can scale specific components independently and auto-scaling features.

3. Customization and Flexibility

One of the key benefits of multi-tenancy is the ability to customize features and functionality for different tenants. Build flexibility into your system where it matters (and avoid adding too many customizable features for performance/usability purposes). You might include customizable dashboards, branding options, or the ability to add custom fields. Just make sure to properly test and document these features for easy management.

4. Keep an Eye on Costs

Multi-tenant systems can be more cost-effective than single-tenant ones, but that doesn’t mean expenses won’t add up. Consider potential costs such as hosting, maintenance, and customer support when deciding on your tenancy model. Isolated tenancy will typically be the most expensive, but you’ll also have more control over resources and security. Shared database, shared schema can help reduce costs, but it may come with performance limitations.

People Also Ask

What is the difference between multi-tenancy and virtualization?

In multi-tenancy, multiple users share the same application and interface. In virtualization, an application runs on its own virtual machine with its own operating system. This allows for complete isolation and control over resources — for example, when running MacOS on a Windows computer.

What is an example of a multi-tenant?

Salesforce is an example of a multi-tenant application. Each customer has their own dedicated resources and data within the Salesforce platform, but every Salesforce customer uses the same underlying code and operates in the same user interface.

What is the difference between a single-tenant and a multi-tenant database?

A single-tenant database is dedicated to one specific user or organization, meaning they have full control and access to all of their data. A multi-tenant database serves multiple users, but segregates their data to ensure data privacy and security. This allows for cost savings and scalability but may come with limitations in customization and resource control compared to a single-tenant database.