In the near future, there's only one way to go for SMBs when it comes to purchasing business software -- and that's out of house. Whether it's full-on SaaS (software as a service), where users access all facets of the application through a browser, or a hosted product (including hosted Exchange, where only the server component is off-site and users employ a standard desktop client such as Outlook), either model is simply too cost-effective for SMBs to ignore.

The only variable unaccounted for in this model is that of the Internet itself. Many SMBs simply don't trust the Internet as a mission-critical delivery model. But that's changing. The number of business-disrupting Internet outages reported in most U.S. metro areas has dropped precipitously over the last five years, and those stats are only going to get better. Additionally, Internet backup services are offering more options for SMBs at increasingly reasonable rates.

Anyway, a little redundancy comes cheap these days. Whether it's T1 service backed up by DSL or DSL backed up by business cable, it's pretty darn inexpensive to keep two Internet connections running -- especially when you subtract the salary for a full-time IT person to maintain in-house apps because you've opted for a full suite of equivalent SaaS apps run entirely by off-site providers. While this may not be possible for businesses that need specialized software, those able to run on mostly standard packages can do so with lower installation and TCO numbers, no permanent on-site administration staff, and a more in-depth feature set than they'd likely be able to set up themselves. And they can do that today.

With the growing popularity of Web 2.0 technologies and application frameworks being built on top of existing online hosting services, such as those from Salesforce.com, even SMBs with specialized software needs will soon be able to meet those requirements online. Large enterprises may have different concerns, but for lean, mean SMBs looking for maximum features and flexibility with a minimum overall cost, SaaS and hosted software simply have nowhere to go but up.

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