I've been working at a Software as a Service company in Hawaii now for the past year. The concept is pretty simple, instead of hosting software applications in your own data center over your local network; we host them on our servers and you access your software via the internet through a browser.
For many of us, accessing software over the internet has become second nature. We get email from Yahoo, maps from Google, share photos on Flickr, connect on Facebook. For the first time, consumer applications such as these has led the way in IT. Business applications such as hosted Microsoft Project have been stuck in the corporate data center for the last 30 years since the client-server architecture became popular in the early 80s.
The famous Moore's Law which says that computer processing power doubles every two years. Grove's Law says that bandwidth doubles every 100 years. So even though the computers and servers have been powerful enough for a while to serve business software online, the pipes haven't been fat enough. Ever since the fiber optic buildout of the late 90s, that barrier has broken down and all kinds of interesting possibilities are emerging.
A great book on this topic is The Big Switch by David Carr. David talks about all the possibilities that are opening up in the fields of Software as a Service and cloud computing. But even better, he traces the history of computing, and draws some striking parallels between the early days of another grid-based service: electricity. The slides below are from a talk I gave last week at the University of Hawaii's CyberPizza. Its just an outline of the speech, but draw heavily from this book.