In the ‘80s and ‘90s, what we know today as legacy systems were the cutting-edge of the technology world, bringing new opportunities for leveraging software and digital resources for the financial services sector.

For organizations struggling to keep up with their investment operations, the technology that came about during this time likely felt like a modern-day miracle.

Yet, the tech wave was just beginning in the financial space.

Today, asset management technology has far surpassed traditional legacy systems thanks to many key pieces of software ingenuity, with one of the most notable being the multi-tenant architecture.

What is Multi-Tenant Software Architecture?

Multi-tenant is a software architecture that uses a single instance to serve multiple clients (“tenants”). 

This architecture offers a unique deployment method that enables all clients to benefit from software updates while maintaining the customization needed for each client’s specific purposes. 

Traditionally, single-tenant architectures have been used to perform deployments and software updates. In a single-tenant architecture, each client is given a private software instance used by no other clients. 

Compared to the single-tenant architecture, the multi-tenant architecture offers several key benefits to both the software providers and their clients. 

For instance, when a software-as-a-service (SaaS) provider — such as FundGuard — uses a multi-tenant architecture, it can greatly streamline computation costs and requirements, making it much simpler for a SaaS provider to carry out updates and deployments efficiently for their clients. 

Why is Multi-Tenant Architecture Advantageous for Investment Accounting?

Investment accounting can be a particularly tricky area of business for asset managers to handle independently, leading many to work with various partners to handle their investment accounting needs.

From the perspective of a client receiving an investment accounting solution from a third-party provider, multi-tenant can be a key missing puzzle piece to putting together a highly effective digital platform that can operate in real time with the most up-to-date data and resources. 

When using a multi-tenant architecture, it is possible to make all of your operational efforts much more highly focused. This can include everything from maintaining the environment and deploying new code to monitoring accounting activities and improving SLA. 

Overall, multi-tenant makes it possible to focus company energy on a single instance rather than several different instances for each client. 

Though these advantages are still fairly directly related to the provider of the multi-tenant architecture, there is a substantial trickle-down effect that can impact end-users as well.

For example, when a SaaS provider leverages multi-tenant to streamline its deployment process, this provider’s attention is no longer split between several clients but instead focused on a single deployment that serves all clients across the board. This can reduce overhead for the provider, leading to lower end-point costs for the organizations partnered with the provider. 

Multi-tenant architecture ultimately provides a win-win scenario where back-end providers can reduce costs and boost efficiency, while fund managers and other organizations can gain new opportunities for growth and optimization through the shared instance within the architecture. 

How Does the Multi-Tenant Model Build Value for All Clients?

When talking about the new opportunities that a multi-tenant architecture can provide to custodian organizations, it all comes down to the availability of features and capabilities. 

Multi-tenant allows for all clients within an instance to gain access to new updates and features as they occur. For example, if a large organization were to ask for a specific customization, once deployed, that customization option would become available to all clients within the instance.

This is an incredible advantage for all organizations but especially for those operating on a smaller scale. Where single-tenant architectures may deprive smaller enterprise clients of the chance to access the same features and applications of a large company, multi-tenant provides all clients with access to those exact customization options as soon as they are ready for deployment. 

In a way, this lacks the exclusivity that legacy systems offered. However, what you gain in return is a tremendous amount of new business value by way of software that can optimize your digital platform while also simplifying investment accounting and other administrative tasks. 

What Happens to Customization in a Multi-Tenant Environment?

Multi-tenant does not inherently inhibit customization for end-users. Although everyone within a multi-tenant instance has access to the same deployments, not all deployments are well-suited to each individual client’s use case. As such, clients have the ability to opt out of any deployments or updates that they do not feel are beneficial to their business specifically. 

However, even if a particular deployment is not of great use to certain clients, those clients can still use that deployment as a jumping-off point for determining what types of future deployments and improvements they would like to receive.

Keeping clients within the same instance enables the multi-tenant provider to stay focused on finding innovative solutions to specific client feedback. With deployments available to all within an instance, this feedback is transformed into high-value information that can produce an update or newly created capability that has benefits to offer to everyone. 

Additionally, when you have access to such a wide range of capabilities, it is exceedingly rare to encounter two clients with identical deployments. Instead, what you end up with is an array of different deployment configurations that reflect the distinctness of each client. 

Is a Cloud-Native Infrastructure Necessary for Multi-Tenant? 

Multi-tenant architecture was born out of advancements in technology that have allowed software professionals to slowly but surely migrate away from legacy systems.

Cloud technology is without a doubt at the forefront of today’s technological advancements, with a cloud-native infrastructure providing many benefits that even cloud-enabled businesses cannot. 

On a broad level, a multi-tenant architecture does not require a cloud-native environment to operate. 

However, cloud-native environments can greatly enhance the operational efficiencies provided by the multi-tenant architecture, making the two an exceptional pairing within an organization’s tech stack. 

One major example of this is the robust access controls and data encryption capabilities that a cloud-native environment can provide. Cloud-native technology can work closely with artificial intelligence (AI) and machine learning (ML) to create a secure environment that leverages real-time data to keep all records, reports, and regulatory requirements up-to-date on the most current data. 

At the end of the day, a cloud-native infrastructure is not a necessity for adopting a multi-tenant architecture. The key to remember is that both of these technologies are centered around custom digital experiences that are seamless as they are efficient. In turn, this makes them highly compatible with one another in a way that legacy technologies simply cannot hold a torch to.