Multitenancy is a software architecture where different clients can sign-up to the same installation of your software, but have separated their data.
I have listed from a simple authorisation concept towards multitenancy, hoping that will clarify what it is.
A basic application has 1 login for all members who needs to access member areas and sometimes more, but they are all given the same rights. This is the simplest form of an authorised application.
A bit more complex is it when the different users can be assigned different roles. Let user A have access to create and manage other users, but user B can only view other users but not create or manage. This is an authorised application with roles.
Then there's a multitenancy, where it's the same as concept B but different clients are attached to the same software, meaning they are on the same installation but in a sort of virtual environment, where they can't access other clients data. User A can still manage and create users, so can User C but it's within a different tenancy and A and C therefor can't see the data from each other. A SaaS application is a typical multitenancy concept.
The reason to use multitenancy can often be found in either of 2 cases:
- Reduced server cost
- Large scale application
The cost reduction is achieved since your clients will share physical resources (servers, etc) across. It's a similar concept to a cloud environment where you buy a part of a larger resource.
For large scale applications it's a necessity to scale that you don't have increasing operating costs per client you make. If you want to sell a product for $10 each to 1,000 clients, it would be a shame if you had to manage 1,000 servers and installations instead of 1.
Reason 2 is the most applicable since cloud servers today are cheap.
If you don't think your application is going to sell to a lot of clients or there's no reason to share the running costs, then multitenancy might not be relevant as it is without doubt a huge increase in the complexity of your application.