I was asked recently by a software company what has changed in the market over the last few years; what was making online application services more of an interest to their customers.  It wasn't very difficult to come up with the answers, because we've been watching (and participating in) this evolution for over 10 years now. 

Here are the main reasons why I believe the demand for online application services is growing, and why it is no longer a question of "if", but "when" your clients will want to operate online with their businesses.
 
Broadband is plentiful.  This wasn't the case a short while ago, but it is now.  With wireless IP access available with most phones, and Satellite or cable deliveries to home and business - almost everybody has broadband Internet access, and they can get it just about anywhere.  Just visit your neighborhood Starbucks (there are probably at least 2 near by).

Networks are complex.  Once upon a time, there was just the big refrigerator-looking computer in the corner and everyone used green-screen terminals.  Then PCs entered the picture and users became "empowered" with their own desktop computers, software, and error messages.  Network them together, and you build on the problem exponentially.  Small businesses have been offered far too much in the way of complex technology to deal with - database servers, file and print servers, web servers, email servers, etc.  And dealing with this complexity has come at a high cost (which has certainly helped to build a huge computer security software and is fueling the managed services industry as we speak).

Businesses demand functionality.  This is why there is a vast array of highly functional business software available on the market.  Unfortunately, most of this great software has also become far too complex under the hood for the average business to effectively manage.  Even Intuit's QuickBooks, one of the "standards" for small businesses, introduced a new database and networking method that caused tremendous technical problems for their users.  While the changes may have addressed issues of scalability or performance, they significantly impacted the ease of implementation and ongoing management of the application, and not in a good way.

Competition isn't local, it's global.  The Internet has allowed businesses to access and reach into markets they could not reach previously, allowing virtually any business to compete in the global marketplace.  The same technology, however, also allows consumers to access the global marketplace and go beyond local suppliers for their goods and services.  While the increased exposure in new markets may be good for small businesses, the loss of the captive local market may not be.  Businesses are pressured more and more to participate online in order to serve not only remote markets, but to compete in their own local markets as well.

It's a whole new generation.  They've grown up with the iPOD, Xbox, TiVO and other funny-sounding devices that keep them continuously plugged-in, hooked-up, and connected.  They hang out in places like MySpace, they use free email like Gmail (because it's free and comes with a HUGE mailbox), and they know what they want and they want it now - or at least in two clicks or less.  They are used to instant gratification - like with online banking.  Better yet - online banking on your phone!

No more secrets.  It's all about community, interacting with your peers and teammates, connectedness.  The individual demands to be empowered, and thus the enterprise must have the power to give.  If your business can't compete and deliver what your employees, team members, customers or partners need - everyone will know it.  Isn't community great?
 

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