Cloud-hosted collaboration: multi-tenant or dedicated?

We just had another of our regular cloud research meetings at Forrester. In these meetings, we cut across our research organization to examine cloud computing from every angle.

Compared with even just a year ago, it's amazing how important and pervasive cloud computing analysis (as opposed to cloud computing guesswork) has become in our research calendar.

You can see the existing cloud/SaaS research here and our planned research here. As the meeting host, I mostly listen, probe, and take notes, but ocassionally I get to jump in with a thought.

To wit: We are often asked about whether cloud-based collaboration (email, team sites, instant messaging, Web conferencing, social computing, etc.) works best on multi-tenant, dedicated solutions, or both. The answer is both, but trending towards multi-tenant. Our clients are interested in both multi-tenant and single-tenant or dedicated cloud solutions -- as long as the price is right.

The future of cloud-based collaboration is clearly multi-tenant for two economic reasons:

1. Multi-tenant enables the fundamental economic benefits of a shared resource. We can see this in the price war going on in email right now -- a 50% price cut in the last 12 months with multi-tenant cloud email. The floor on email cost keeps dropping, fueled by the better economics of multi-tenant solutions and high capacity utilization.

2. Multi-tenant is a much faster way to deploy improvements. With multi-tenant, Gmail can add features overnight; Exchange only once every three years. Multi-tenant Cisco WebEx gets a quarterly update; IBM Lotus Sametime can't (though LotusLive.com can). Because there is a single instance of the code in a multi-tenant cloud solution, the innovation is continuous, incremental, and globally available.

Multi-tenant is also the path that every major cloud collaboration vendor is on. Microsoft, for example, is running Exchange Online for $5/mailbox/month in a multi-tenant solution that now scales past 25,000 seats. Salesforce.com and Google have always been multi-tenant. And Cisco WebEx Mail and IBM LotusLive.com are also multi-tenant from their core.

So when does a dedicated (single-tenant; servers dedicated to you) solution make sense?

1. If you aren't yet comfortable with the security assurances of a multi-tenant solution. This is what keeps most companies away from the cloud at all. It's the number one concern in our surveys of IT decision-makers around the world.

It's also what led Google to build a dedicated data center for government workloads. At least there, the government data won't mix with the data of the hoi pollois. But this is mostly about getting the security assurances nailed down. I view it as a short-term limitation.

2. If your content & collaboration application must be highly customized and integrated tightly with other applications. This doesn't apply to most collaboration solutions today. But for SharePoint or Notes applications it does. And while it has kept SharePoint off of Microsoft's solution so far, even SharePoint will go multi-tenant in 2010 with a sandbox to keep your custom application walled off from other apps. We also expect some Lotus Notes and Connections features to show up on the multi-tenant LotusLive.com in 2010.

3. If you workload won't run in a virtual machine. Okay, so this is a bit down in the technical weeds. But applications do run on silicon. And limitations around memory, buffer space, processing speed, and the like define what kinds of things you can actually run in a virtual machine, hence in a multi-tenant cloud. For more on this, see Frank Gillett's report on scale-out workloads.

Disagree? Agree? Have other thoughts? Please share.