The confluence of several factors—near-ubiquitous broadband connections, and better technology for running huge data centers, brought forth a new generation of software vendors that do not—technically at least—sell software. Rather, they rent the software or the software-enabled service to customers on a pay-as-they-go subscription model. SaaS poster boys include Salesforce.com, Webex (now part of Cisco) and NetSuite. Now "legacy" on-premise software players—from IBM to Oracle to Microsoft—are scrambling to keep up with the new kids.

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