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If you haven't heard all the hype yet about Web-based software offerings, brace yourself--because you're going to be hearing a lot about them in coming months. Numerous companies have recently cropped up offering Web-based programs, which they tout as the successors to traditional shrink-wrapped software.

A Web-based application is a program--such as an accounting package or a virus-scanning utility--that you use over the Internet, in many cases from inside your browser. (Companies that provide such programs are called application service providers, or ASPs.) A company hosts one or more Web-based applications online, and you access them for a monthly or yearly fee or for free.

Using a Web-based program has advantages: You can usually access the application and your files (which are backed up continuously) from any Net-connected PC. The price is generally cheaper than a boxed program (most fee-based Web apps cost less than $20 per month per person, and some are free). You don't have to pay for software upgrades (they come with the service). And Web-based apps are great for collaboration projects, because they allow multiple users in different locations to access a project simultaneously.

But there are downsides to relying on Web-based programs. The combined per-person monthly fees can exceed the cost of a shrink-wrapped program if a lot of people use the application; you are locked into paying a fee indefinitely to use the program; and if the ASP's server goes down, you'll lose access to the program and your data.

What's more, most of these services won't let you run their programs unless your PC is connected to the Net--a big issue if you have a dial-up modem that slows the program's performance. And entrusting your data to any company--especially a start-up--can be a gamble. If the company files for bankruptcy or if you have a dispute with it over a bill, your data could be held hostage. And though most sites provide exhaustive reassurances about their privacy and security measures, you're still putting your trust in a remote server.

Save the Boxes

Considering all these issues, is it feasible for Web-based applications to replace shrink-wrapped software? In most cases, the answer is, Not quite yet. We looked at Web-based office suites, utilities, accounting applications, and a project-management program to see how they compare with their offline counterparts. We found that most of them do fine as an alternative to shrink-wrapped programs when you don't have access to those applications, and we even found a couple of applications that we liked as much as the shrink-wraps. But your freedom to access information anywhere with these online programs may be offset in many cases by performance glitches and by the absence of key features that boxed programs offer.

The bottom line: Web-based programs are still in their infancy, and they'll need a few more rounds of development before we'll be willing to throw out the shrink-wraps.