Would you share your hotel room with a complete stranger? What if the hotel offered you 10% off? This is exactly what cloud providers are cleverly doing in attempt to decrease costs and maximize profits. One server, one software application, multiple users. This is multi-tenancy in a nutshell.

Each customer running on the same server utilizing the same software or application is called a tenant. Thus the term multi-tenant. These tenants are often not aware that they are sharing the same server as their data is logically separated.

Multi-tenant theoretically benefits from economies of scale. Multiple tenants sharing one server would decrease the operating and hardware costs. In reality, customers only receive slight decreases in costs. The majority of the savings are enjoyed by the vendor providing the cloud servers. Vendors are able to charge multiple times for the same piece of hardware.

There are a number of downsides to Multi-tenant, most of which the customer must bear.

Customization

The significant drawback of multi-tenant is the inability to customize software. Each tenant may have the ability to modify the user interface and business rules but cannot customize the actual software code. Without ability to modify code, entities requiring specific functionality must create programs external to their ERP system. This adds unnecessary complexity and decreases effectiveness of ERP systems.

Security Risks

Not everyone has the same security concerns. In the end it comes down to trust. Trust that the other tenants are as security conscious. Trust that the provider has implemented appropriate security to be able to handle multiple tenants on the same server. Gartner found that 60% of virtualized servers will be less secure than the physical servers they have replaced.

Performance

As multiple tenants share the resources on the same server, scalability may become an issue. Scaling up and down of hardware requirements on a multi-tenant server requires advance management software. As a single tenant on a server, it is a simple process to scale up the hardware when necessary. The data center will simply dedicate additional servers to meet the requirements of the tenant. It is a much slower process for multi-tenant as the management software must shuffle tenants from server to server in order to address increased/decreased requirements.

Control

The loss of control over your data is another risk. At any point in time it may be difficult to determine exactly where your data is residing. As the resources of the server are shared amongst multiple tenants, the question can be asked, where exactly is my data? In theory there is a risk that one of the other tenants could even monitor what the other tenants are doing as they could by-pass the security at the software level.

Multi-tenancy has its advantages, specifically for the vendor providing the service. The efficiency of hardware utilization increases the gross profit exponentially as the costs associate with adding new customers is next to nothing. The customer, or tenant, therefore bears the risks. For corporations specifically concerned with security these risks are especially high.