SugarCRM announced Sugar 5.0 which has multi-instance on-demand architecture. This is opposite to multi-tenancy model where many customers, if not all, share single instance. Both models have their pros and cons and adding flexibility for an on-premise option complicate the equation a lot. But the fact is that many customers may not necessarily care what on-demand architecture the products are being offered at and any model can be given a marketing spin to meet customers’ needs.
The multi-instance model resonates well with the customers that are concerned with the privacy of their data. This model is very close to an on-premise model but the instance is managed by a vendor. This model has all the upgrade and maintenance issues as any on-premise model but a vendor can manage the slot more efficiently than a customer and can also use utility hardware model and data center virtualization to certain extent. The customizations are easy to preserve for this kind of deployment, but there is a support downside due to each instance being unique.
Multi-tenant architecture has benefits of easy upgrade and maintenance since there is only one logical instance that needs to be maintained. This instance is deployed using clusters at the database and mid-tier levels for load balancing and high availability purposes. As you can imagine, it is critical that architecture supports "hot upgrade". You take the instance down for scheduled or unscheduled downtime and all your customers are affected. The database vendors still struggle to provide a good high available solution to support hot upgrades. This also puts pressure on application architects to minimize the upgrade or maintenance time.
And, this is just a tip of an iceberg. As you dig more into the deployment options, you are basically opening a can of worms.