Cloud computing leads to complicated software market

Cloud computing is not only changing how users access software applications, it's also upending the pricing model for software products. Fading fast are the days when software packages were sold in boxes with a one-time, perpetual software license fee. Instead, consumers and businesses are increasingly turning to subscription models and are buying only those applications they need for particular tasks rather than broad, general-purpose suites.

Meanwhile, software giants, which traditionally have relied on the boxed approach, are trying to keep up with disruptive distribution and pricing models that may threaten their lucrative way of doing business. Microsoft already offers subscription versions of its software under its Azure cloud-computing brand, and in June, the company launched Office 365, an online version of its Office software suite.

Adobe has plans to offer Photoshop and the other applications in its Creative Suite by subscription through its Creative Cloud. Last month, Oracle announced plans to buy RightNow Technologies, which makes customer-service software delivered online, for $1.5 billion.

Cloud computing is a broad term that refers to technology being delivered as a service over the Internet. Consumers don't actually install the applications on their own computers. Instead, the software is hosted elsewhere, accessed through a Web

browser and is typically rented under a subscription model. Cloud computing became popular for customer-service applications through Salesforce.com, which launched in 1999, but it now extends into a number of other areas. Instead of maintaining data centers and servers, for example, companies can rent Amazon.com's computing infrastructure for pennies an hour -- similar to a utility.

Forrester Research estimates that 31 percent of companies are now getting their software delivered as a service. According to research firm Gartner, the cloud-computing market delivered revenue of $74.3 billion in 2010 but will swell to $176.8 billion by 2015 and is expected to deliver a compound annual growth rate of 18.9 percent.