We tend to think of the software business as high tech and ascribe a certain mysticism to the wizards in the industry. As with any growing sector, we expect the companies in it to return us fast growth and high margins.

But an announcement last month that Siebel Systems, the biggest software firm you won't have heard of, was launching a web-based version of its sales management tools is the latest evidence that the software business is consolidating and getting more competitive and less profitable. Siebel is only 10 years old but posted sales of $1.7bn (£1bn) last year and, historically, has enjoyed net profit margins of 15%.

Siebel installations typically cost between $1m to $5m and take anything from six months to a couple of years to get running. Its products have helped firms keep track of prospective customers, which salesperson was dealing with which customer and how well they were selling.

Siebel's new offering, known in industry jargon as an application service provider (ASP), will be available from just $70 (£41) per person per month. What's going on?

Siebel is responding to its most dangerous rival, Salesforce.com, a three-year-old start-up, which has offered sales management software over the web from only $50 (£30) per month. Siebel had derided Salesforce.com, claiming that there was little demand from big firms for applications on tap, that instead they preferred large IT departments to run these complex applications in house.

But in the past couple of years, firms of all sizes have looked hard at their IT spending and how well their technology performs. The results were mixed and, unsurprisingly, even large firms have wondered if they can do better.

Companies have been voting with their chequebooks. They prefer to rent software and do away with the upfront costs and management headaches of running their own applications in house.

This isn't the first time firms have moved from running their own technology to piping it in from outside. Until the early part of the 20th century, most firms produced their own electricity in house, from their own generators. Today, except for a handful of very specialist businesses, we all take our power from a commoditised electrical grid.

This is all part of a wider trend. Firms, who spend more on software than anyone else, have been paying through the nose for technologies that are increasingly stable and undifferentiated.

The growing appeal of applications rented over the web demonstrates that the enterprise software business that we knew but rarely loved is coming to an end. The business is no spring chicken: it's 30 years old. It is becoming mature and more widely understood. This means commoditisation and falling prices. Siebel's decision to follow the lead of Salesforce.com and rent its applications demonstrates that the sea change is well underway.