Our PHP web application is designed for businesses, and each company that signs up will have multiple users using the application.
My design methodology is to create a new database for every company that signs up. This way everything is sand-boxed, modular, and small. My coworker's philosophy is to put everyone into one database. His argument is that if we have 1000+ companies sign up, we wind up with 1000+ databases to deal with. Not to mention the mess that doing Business Intelligence becomes.
Assume that the application is an order entry system. With separate databases, table size can remain manageable even if each company is doing 100+ orders a day. In a single-bucket application, tables can get very big very quickly.
What is best practice, with justification?
I talked to the database architect from wordpress.com, the hosting service for WordPress. He said that they started out with one database, hosting all customers together. The content of a single blog site really isn't that much, after all. It stands to reason that a single database is more manageable.
This did work well for them until they got hundreds and thousands of customers, they realized that they needed to scale out, running multiple physical servers and hosting a subset of their customers on each server. When they add a server, it would be easy to migrate individual customers to the new server, but harder to separate data within a single database that belongs to an individual customer's blog.
As customers come and go, and some customers' blogs have high-volume activity while others go stale, the rebalancing over multiple servers becomes an even more complex maintenance job. Monitoring size and activity per individual database is easier too.
Likewise doing a database backup or restore of a single database containing terrabytes of data, versus individual database backups and restores of a few megabytes each, is an important factor. Consider: a customer calls and says their data got SNAFU'd due to some bad data entry, and could you please restore the data from yesterday's backup? How would you restore one customer's data if all your customers share a single database?
Eventually they decided that splitting into a separate database per customer, though complex to manage, offered them greater flexibility and they re-architected their hosting service to this model.
So, while from a data modeling perspective it seems like the right thing to do to keep everything in a single database, some database administration tasks become easier as you pass a certain breakpoint of data volume.