Many Application Service Provider (ASP) offer either the Classic Hosted Model or the new Multi-Tenant Architecture (MTA).
Examples of the Classic Model are companies like Oracle who claim that the advantage is to allow unique and more extensive customizations. Proponents of a Multi Tenant Architecture are companies like SalesForce reaping the benefits of the "one instance" low overhead. For both options, the ASP is responsible for operations - but when it comes to upgrades to new versions, the classic hosted model requires the same effort as on-premise implementations.
The biggest advantage of a MTA for a user is that there is little maintenance effort on the user side - as version upgrades are supposed to have no impact on the use of the application.
How does Compiere stack up? Compiere fully supports both options and even supports traditional on-premise implementations - with the ease of operation & maintenance advantages of a Multi-Tenant Architecture.
The MTA approach is limited to support "planned" customizations (i.e. if a certain customization/functionality is not supported, there is no way to provide this in that environment). The main benefit of the MTA is that the cost of system maintenance can be shared by all tenants/users - resulting in dramatically reduced costs.
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