Our team is currently brainstorming a product idea that's been on the tip of our tongues for a couple of years now.
It'll most probably be an ASP.NET MVC web application hosted on the WISC stack (Windows, IIS, SQL Server, C#)...
Ideally we'd love to follow a similar route to the guys at fog-creek did with fogbugz offering both hosted and "run on your server" style solutions.
Naturally we want to keep the code and database schema practically identical (for maintenance purposes) so we can compile for both in one go.
So having "one big database for all users" seems like it'd add developer overhead maintaining the difference in schema etc..
I remember listening to the stack overflow podcast from back in 2008 where joel spolskey mentioned that his instance of SQL Server had thousands of databases on as they provide each user with a dedicated database, but had scaling issues with SQL server 2000 managing that many databases.
So my question is:
I think SQL Server 2008 would not have any specific issue with this approach.
Anyway if you look for high availability, reliability and scalable solution you should consider having multiple Web Servers and multiple database servers. Just to make sure that in case one machine fails, not everything for your thousand users/customers gets unavailable at once.
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