I'm amazed at how often I still hear people recommending SaaS vendors should offer certain customers the option of dedicated, private instances of their application. Apart from a tiny minority of niche customer segments and applications, the economies of scale of running all customers on the same shared infrastructure (aka public cloud) should make the notion of spinning up private instances unthinkable. Any SaaS provider that finds the idea palatable is not doing enough to properly exploit the cloud environment.
If your application is really architected to take maximum advantage of cloud platforms (for a discussion of this see Re-architecting Enterprise Applications for the Cloud), then offering a privately installed stack means maintaining not just two code bases but also two completely distinct architectures. A business application stack with a completely shared infrastructure all the way into the database has such huge economies of scale compared to single instance alternatives that the premium you'd have to charge for offering a private instance would seem grossly extortionate.
For customers to insist on a private SaaS instance dedicated just for their own use is exactly the same as going to deposit your money in a bank but insisting the bank never lends it out to anyone else. Banks have a service for customers who make that demand: it's called the safe-deposit box. It has exactly the same disadvantages of a private instance of SaaS:
- It costs significantly more. Instead of paying the customer interest, the bank levies a steep charge.
- The infrastructure is static. You get no benefit from upgrades to the general bank account infrastructure, such as enhanced online security, additional services and deposit guarantees.
- It's less convenient. To access your money and valuables, you have to physically visit the bank. There's no electronic, on-demand access.
- It's at your risk. The bank leaves you in charge of controlling access to the safe-deposit box and arranging back-up and insurance in case of unauthorized access or theft.
In summary, safe-deposit banking may give you an extra sense of security, but it denies you most of the benefits of using the public banking model. Safe-deposit SaaS is exactly the same. Customers who stipulate their own private instances of a SaaS or cloud application don't understand the SaaS model. I fear that providers who give into it don't understand or practice it as well as they should.