I often come across the debate of Multi-tenancy vs Single-tenancy and I feel both have their place and have their own advantages and disadvantages but when it comes to SaaS, I feel that SaaS should mean multi-tenancy;or else it is not SaaS, may be ASP but not SaaS. The whole reason why ASP failed in the past and why now SaaS model is being proclaimed as the best bet in the future for software delivery model is the because of its ability to provide multi tenancy. A SaaS offering without multi-tenancy is no different from traditional ASP i.e multi tenancy is the differentiating factor for SaaS when compared to ASP. A multi tenant architecture allows all users and applications to share a single common infrastructure (Database, application etc..) that can be maintained centrally. For me the biggest advantage of multi-tenancy is the single codebase that eliminates the maintanance nightmare.
Of course the technical challenges of implementing Multi-tenant architecture is complex (partitions, security etc..) compared to Single tenant architecture but I feel the tradeoff here is beneficial in the long run.
UPDATE:
Just after posting this, I found this nice presentation which talks about the business case of multi tenancy in SaaS. Very informative.
