In the first post on Saas Tenancy Models, I introduced the two idealized models – Single and Multi-Tenant.  Many SaaS companies start off as Single Tenant by default, rather than strategy, and migrate towards increasingly multi-tenant models under the influence of 4 main factors – complexity, security, scalability, and consistent performance.

After publishing, I realized that I left out an important fifth factor, synergy.

Synergy

In the context of this series, synergy is the increased value to the client as a result of mixing the client’s data with other clients.  A SaaS may even become a platform if the synergies become more valuable to the clients than the original service.  

Another aspect of synergy is that the clients only gain the extra value so long as they remain customers of the SaaS.  When clients churn, the SaaS usually retains the extra value, even after deleting the client’s data.  This organically strengthens client lock in and increases the SaaS value over time.  The existing data set becomes ever more valuable, making it increasingly difficult for clients to leave.

Some types of businesses, like retargeting ad buyers, create a lot of value for their clients by mixing client data.  Ad buyers increase effectiveness of their ad purchases by building larger consumer profiles.  This makes the ad purchases more effective for all clients.

On the other hand, a traditional CRM, or a codeless service like Zapier, would be very hard pressed to increase client value by mixing client data.  Having the same physical person in multiple client instances in a CRM doesn’t open a lot of avenues; what could you offer – track which clients a contact responds to?  No code services may mix client data as part of bulk operations, but that doesn’t add value to the clients.

Sometimes there might be potential synergy, like in Healthcare and Education, but it would be unethical and illegal to mix the data.

Not All Factors Are Client Facing

Two of the factors, complexity and scalability, are generally invisible to clients.  When complexity and scalability are noticed, it is negative:

• Why do new features take so long to develop?  
• Why are bugs so difficult to resolve?  
• Why does the client experience get worse as usage grows?

A SaaS never wants a client asking these questions.

Security, Consistent Performance and Synergy are discussion points with clients.

Many SaaS companies can adjust Security concerns and Consistent Performance through configuration isolation.

Synergy is a highly marketable service differentiator and generally not negotiable.

Simplified Drawings

As much as possible I’m going to treat and draw things as 2-tier systems rather than N-tier.  As long as the principles are similar, I’ll default to simplified 2-tier diagrams over N-tier or microservice diagrams.

Next Time

Coming up I’ll be breaking down single to multi-tenant transformations.

Why a SaaS would want the transformation, what are the tradeoffs, and what are the potential pitfalls.

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