How to design a hosted web application?

How would you design a hosted web application? I'm looking at applications like Basecamp, Campaign Monitor, Freshbooks, etc... where users can sign up online and the application is hosted for them.

1. Would you use 1 big database to store all your customer's data or would you handle data differently? Would you use more than 1 database? Would you make a database for each customer?
2. Would you duplicate your code base for each signup/customer or would you use 1 codebase to handle all customers?
3. Are there other design elements I should think about?
4. Any web sites or books out there that talk about this?

Edit: I found an MSDN article that discussed multi-tenant Data Architecture: http://msdn.microsoft.com/en-us/library/aa479086.aspx#mlttntda_topic4

Refer to 37signals -- they are experts in this field and have a lot of articles where they answer community questions (many like yours should come up).

High Scalability = 37signals Architecture

Ask 37signals: How do you process credit cards?

In regards to number of databases, from David Heinemeier Hansson in What do you want to know?

Some technical answers…

Lance, all our scheduled billing operations are automated. Anything sort of that would drive us insane. It’s especially important to make sure that contingency handling is in place for failing credit cards. Last I looked, I believe 5% of our charges bounced thanks to credit cards that were expired, over the limit, or closed. Be sure to handle that gracefully.

We just use Authorize.net and a separate credit card application (tiny app developed in Rails and used by the other apps on the internal network through REST ) that keeps numbers secure.

Warren, we run free and pay accounts on the same database. It’s one database per application. One database per account is normally a really, really bad idea. Usually the data is fairly normalized, but we’re definitely not religious about it. I generally value my source code over my schema. So if I can get better/prettier source code by bending a schema, I’ll typically do that. But start from normalized and denormalize as performance or code structure demands it.

Jason, we use email for sms. All US carriers have a phone@carrier-gateway.com gateway.

Jake Good, ahh, the good ol’ “but does it scale” question. I answered that on a couple of years back. Nothing has changed for us since then. We manage millions and millions of dynamic requests every day without even resorting to much caching (most screens in most of our applications are different on a per-user basis, so traditional caching schemes are harder to apply).

There are many other Rails applications out there managing tens of millions of daily requests. All follow more or less the same Shared Nothing approach. All the techniques for scaling high and tall are out there. It’s hardly a turn-key solution, but anything that promises to be that is usually just full of it.