What is the diagram implying? First of all, for lots of reasons, there  is no sense in keeping your data on your PC. It’s a much better for it to live in the cloud, if it can be kept there safely, which it generally can. Once this realization hits you, it becomes obvious that the legacy PC apps that hold data locally are going to fade away.

That leaves us with either Rich Internet Applications that run locally but contact the Internet when needed (like iTunes, for example) or apps that run in the browser. You can think of these as thin apps like most freemail apps.

But the browser (in its current form) doesn’t deserve to exist (see The Cloud Client: Why Google Chrome Will Dominate.) It will be replaced by a cloud client that works roughly the way that Google Chrome does.

This paints the following scenario:

1. The Mac/PC client device will be a caching device with cached applications and (gradually) cached data. (Right now caching large volumes of data is an unacceptable expense for media apps.)
2. Local execution will (usually) be possible whether connected or not. The user will never know what is executing where. That will be an automated engineering decision based on the available client and server resources. The architecture will naturally move towards interface code executing on the client, everything else on the server.
3. Data and executables (i.e. programs) will synchronize regularly (rather than just executables as happens now).

All apps will gradually move to RIA as a matter of vendor self interest. (They’d be mad not to, it prevents theft entirely.) Most traditional PC applications are of exactly the right profile to run within a massively scalable architecture when you build rich interfaces for them. Mostly they work fine even when you don’t.

Currently the most arduous task for a PC/Mac is rendering. This is not only best done with local graphics, it has to be done with local graphics. 400 milliseconds is too slow for graphics. It has to be below 100 milliseconds. (Btw this is one advantage that the Mac has over the PC, it has better media capabilities.)

So the coming architecture is: local rendering, remote data with local cache and a variable middle executable layer depending on client device.

Nearly all client-side apps will end up straddling the client and the cloud. The arrangement offers the lowest cost profile, coupled with superior profitability and customer control for the vendor. It’s just economics. There will be a migration period – which has already begun.

You may also be interested in these articles:

What is Cloud Computing? 10 Defining Points

What Is Cloud Computing Exactly?

How Open Source Will Prosper in the Cloud

The Cloud: Massively Scaled SaaS and PC App Migration

Why Corporate Computing is Destined for the Cloud

Microsoft: Following Google Into The Cloud

Serena: Taking the Cloud Seriously

The Cloud Client: Why Google Chrome Will Dominate

Everything as a Service: The Growth of Cloud Computing