Buy software? How passé.

Business applications are moving online, albeit more slowly.

Salesforce, a company based in San Francisco, sells subscriptions to online databases for managing customer relations. With the data standardized and residing on Salesforce's computers, clients using the system can share information like leads in ways similar to friends on MySpace or Facebook. Some of the giants in the business software industry, like SAP, have recently announced similar moves online.

The biggest battle is shaping up between Microsoft and Google. Microsoft made a fortune selling software to individuals for their personal computers.

Now, Google is offering free online versions of similar software, such as wordprocessing and spreadsheet programs. The advantage? The online versions allow easy collaboration over the Internet.

These moves have forced Microsoft to develop easy online-sharing options for its traditional Office programs, such as Word. Meanwhile, under a deal announced Wednesday, the company edged out other suitors like Google to invest $240 million for a 1.6 percent stake in Facebook. Facebook represents not just an important advertising space, but also perhaps a platform for software. The applications on Facebook raise the intriguing possibility that one day people may treat their Facebook page much like their current desktop.

To be sure, the idea of running software and storing files on a series of faraway computers – or "clouds" – raises privacy and security concerns. And few experts say that the online model will push the traditional one into extinction.

"I find it unlikely that everybody is going to sit inside Facebook and do all their computing," says Carr. "But they certainly might access some of the applications they use through there."

But Microsoft has tremendous resources to buy out competitors or transform itself should it need to. Some analysts doubt the company really faces such a serious threat.

"Think about the number of times that your network just doesn't work, period," says Michael Gartenberg, an analyst with Jupiter Research. Consumers aren't going to move away completely from working off hard drives, he adds, nor do they need to since many offline applications can comfortably incorporate online components, he says.

No one foresees the demise of the hard drive and the mass adoption of "dumb" laptops minimally configured for Internet access. But hard drives may be used less for storage and more as a cache – a place to preload information that a user is likely to request.

Such tricks could be important as more and more heavy programming tasks are completed over the Internet. That Adobe could even propose turning a memory-intensive program like Photoshop into an online service speaks volumes about the capacity of computer clusters to challenge the speed of software running on personal computers.

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