Despite the current hype, it will be at least five years until application service providers (ASPs) become common place, according to a senior Microsoft executive.
John Connors, vice president of Microsoft's worldwide enterprise group, said the ASP principle was "more complicated than it appears on the surface", and users should give the practice due consideration before hosting their applications.
"A lot of US venture capitalists are putting money into it," Connors said.
"But technology that's good in-house may not be so good when it's hosted," he warned.
"It's quite a simplistic approach to think they [users] can click on a browser and it's all there.
"Customers need to think through their IT architecture and know how much data they want to have off-site," he said.
Connors said there would "a number of opportunities for small businesses" to use ASPs in 12 to 18 months, "but not in a big volume".
"In five years, it will be a sizeable business," he said.
Connors says the "dot-com" phenomenon has changed the way business makers look at technology including applications and devices.
"The number of connected devices is going to proliferate," he predicted. Connors says the real growth is in non-PC devices, such as mobile phones, personal digital assistants (PDAs) and WebTV.
"Anything where people live and work will have an IP-enabled device," he said.
Meanwhile, Microsoft has "bet the ranch" on Windows 2000, which Connors said was "rock solid" and addresses the "real and perceived reliability issues in Windows NT".
Despite warnings from analysts such as Gartner Group, Connors said the Win2K early adopters were "wildly enthusiastic" about the new operating system.