SQL Server named instances: Why? Why not?

SQL Server can have one server instance per computer which is the default instance as well as multiple named instances with isolated databases and connections in the same server from SQL Server 2000 onwards. You can access named instances by server name\instance name (Ex: Galle\I01)

Why we need to have multiple named instances other than having one default instances per machine?

• Maximum hardware utilization: Ex: If SQL your server version is designed to use only maximum 2GB RAM and your hardware supports 4GB RAM, you can optimize RAM usage by having two instances in the same server.
• Isolation of databases which have no dependency over each other.
• Better security seperation

Why we should not use them?

So the drawbacks of this approach are performance issues, difficulty to write cross database queries, using different ports for each instance , resource contention on memory and CPU.