What is Multi-Tenancy in Software?

Data Engineering
May 25, 2024
What is Multi-Tenancy in Software?

If you’re as old as the author of this text, you may remember purchasing (or pirating) CDs with software a few decades ago. One CD = one copy of that software on one computer. Nowadays, SaaS tools allow thousands of users to access one app at the same time, using something called multi-tenancy.

Today, we explain what multi-tenancy is and why modern software could not function without it.

What is a multi-tenant architecture?

In cloud computing, a tenant is a user who has access to an app's hardware resources. Imagine a hotel with hundreds of different rooms. All the guests in the hotel (app users) have access to the same infrastructure (reception, restaurant, gym, etc.) but have their individual rooms to stay in.


Some providers that rely on multi-tenancy to offer public cloud services include Amazon Web Services (AWS), Microsoft Azure, Google Cloud and others.

In multi-tenant architecture, vendors use virtual machines to create multiple instances of the same hardware on one server. This allows software providers to have virtually unlimited users working on different versions of the same app at once. And each version is private and secure, keeping each tenant’s data safe.

For example, Slack is probably the most popular business messaging application today. Thanks to multi-tenant architecture, there are thousands of companies out there that can access their private versions of Slack and exchange messages with their teams, without anyone else having access to their workspace.

The benefits of multi-tenancy

Many service providers today run their apps with a multi-tenant architecture. Besides significant cost savings that can be passed down to the end user, there are other significant benefits of this schema.

Cost efficiency 

Since multiple tenants share the same infrastructure (servers, network resources, databases), providers can reduce the costs of hardware and software, maintenance and upgrades. On top of that, adding new tenants is cheaper because of efficient scaling, which means you can easily grow your user base.

Resource optimization

In a single-tenant setup with a private cloud, all of the resources go to a single tenant, which is often a waste. Multi-tenant setups mean that you can optimize resources based on which tenant needs the most at a given point in time. For example, if someone needs to create 20 visualizations at once and another user does not need any at that time, you can pool the resources effectively to the tenant that needs them.

Simplified maintenance

If you’re updating an app, you can do it centrally for every tenant. The same goes for bug fixes, new feature launches, UI and UX changes and just about anything else that affects the end-user.

Besides time efficiency, this ensures that every tenant is running the exact same version of the app.

Improved user experience and user interface

Each of the virtual machines (VMs) is updated at the same time, as mentioned above. But this virtualization also means that no user is left behind and running an outdated, buggy version of the software. 

As the service provider, this means that you can operate more quickly and launch new features, benefiting each of your end-users at once.

Analytics and insights

While each tenant has access control over their virtual machine, you have an overview of the app analytics as the software vendor. This means that you can get aggregated data from multiple (or all) of your users at once, helping you make more informed decisions.

For example, you can get an overview of your most used features, a breakdown of your top users in terms of storage capacity, and much more. While you won’t get access to every single database and personal data of your users, you can get a high-level overview of all your app users without revealing any sensitive information.

Challenges of the multi-tenant environment

Multi-tenancy in SaaS applications has a wide range of benefits, but it’s important to be aware of its shortcomings and challenges.

Data isolation and security

The first concern is data leakage - in multi-tenant applications, you could have data from one user leaking to someone else, potentially revealing sensitive information. Therefore, it’s important to always review data security processes and trust symbols when buying a new software product.

The second problem is data security. If each tenant has a different security policy, ensuring that they are all enforced for every single account can be very difficult.

Resource allocation

Ensuring that every user in the cloud environment gets their fair share of resources can be challenging. For example, you may have one user who takes up significant computing resources, while an entire group of users does not take up 10% of that usage. Balancing this out and offering the same quality of cloud service is key to a reliable SaaS product.

On top of that, excessive use from a single account can cause downtime for the entire platform if you’re not careful.

Scalability is another issue, as you need to be able to offer upgrades without sacrificing the performance of the multi-tenant database. For example, if someone wants to add an extra 20 users to their account in a software application, they should be able to do that without sacrificing the quality and the speed of service provided.

The worst case scenario is that not just one account but many get affected by a sudden influx of new tenants, even causing app downtime, but more on that in a second.

Customization and configuration

In the ideal scenario, different tenants should be able to create custom environments for their version of the application. Workflows, interfaces, data fields, permissions, separate databases and more.

The shared infrastructure also means version control and management for each tenant. This is especially important if they have different databases, workflows and interfaces.

Maintenance and upgrades

In a single-tenant architecture, doing maintenance and updates is relatively easy because you’re updating the software architecture for one account. But if you need to do maintenance and upgrades for multiple tenants at once, you need to ensure that none of their setups break, which can be difficult if they all operate under different setups.

Downtime becomes another worry because you need to explain to multiple tenants why your web services are not working properly.

Monitoring and troubleshooting

Although all users are using the same platform based on a single version of code, they may have their own custom configurations set up. And that makes troubleshooting much more complicated. Each user is going to have a different set of problems, and you need capable customer service and customer success teams that can help them out.

It can be tedious to sort through all your product logs to find out what’s causing the problem, and which other users might be impacted. But it’s essential for a well-functioning multi-tenant platform.

Cost management

Arguably the most important aspect for many SaaS businesses is the cost of multitenancy – and as a result, how much you’ll charge users for it. Each tenant will have different operational costs because they’ll use different storage space, computing power, and other resources.

Determining how much each instance of an application costs you to run can be difficult in the multi-tenant model. If you don’t do this part right, you could end up driving your costs through the roof in cases with unpredictable resource usage.

User management

Some cloud providers have situations where every different user has their own set of rules and permissions. This requires authentication and authorization setups for every instance of the software, to ensure that the shared environment is put separate from areas that only some users can access.

Multi-tenant vs. single-tenant architecture

If you’re considering the choice between single- and multi-tenant architecture, you’re essentially choosing between on-premise and cloud computing.


In the past, enterprise-size companies preferred a  single-tenant architecture because of superior data security and access given to just one set of users. It’s a common myth that cloud computing  is a sacrifice for security, but in many ways, it’s much safer than on-premise solutions.

  1. Advanced security measures like data encryption and firewalls protect multi-tenant platforms from security breaches.
  2. On multi-tenant apps, every tenant gets the latest security patches and updates without having to do anything themselves, as opposed to on-premise solutions.
  3. Multi-tenant apps keep robust backups to protect against hardware failure and data loss.
  4. Multi-factor authentication and role-based access ensure the highest standard of data security between tenants.

If you have a SaaS app and want to run a forward-thinking business, multi-tenancy is the only way to go.

Wrapping up

Multi-tenancy is the way of the future and as a SaaS provider, it makes no sense to look at any other alternatives. While it has some downsides, it’s by far the cheapest, most effective way to provide great service to a large number of users in a secure way.

At Luzmo, we take multi-tenancy seriously and we can help you add embedded analytics dashboards to your app, with all the best features of a multi-tenant setup. Easy maintenance, roles and permissions, secure cloud storage and all of that in a package that is easy to embed and customize. And as a bonus, it plugs right into your existing authentication mechanisms and authorization methods!

Grab a free demo with our team so we can show you how to set up a secure embedded dashboard in days, not weeks.

Mile Zivkovic

Mile Zivkovic

Senior Content Writer

Mile Zivkovic is a content marketer specializing in SaaS. Since 2016, he’s worked on content strategy, creation and promotion for software vendors in verticals such as BI, project management, time tracking, HR and many others.

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