Over the past 12-18 months, Cloud computing has been increasingly shifted from the ether to ground level and become a powerful - yet practical - computing alternative for organizations across all sectors. And while much of the cloud computing buzz to date has revolved around Software-as-a-Service (SaaS), Hewlett-Packard’s announced $13.9 billion acquisition of EDS (headquartered in Plano, TX but with a significant presence in Northern Virginia) may in fact be a nod to HP’s hardware as a service aspirations.

HP confirmed it is buying EDS at $25 a share, a 32.5 per cent premium to EDS’s Monday closing price of $18.86. With EDS, HP will more than double its services revenue and create a new business group: EDS - an HP company, which will still be based at the Plano executive offices.

HP CEO Mark Hurd remarked that “The combination of HP and EDS will create a leading force in global IT services.” The cloud infrastructure services approach will get a boost from EDS’ 100 global data centers, and follows HP’s November 2007 acquisition of EYP Mission Critical Facilities, Inc.

EDS ranks No. 10 on Washington Technology’s 2008 Top 100 list of the largest federal contractors. When it comes to beefing up its Federal IT and infrastructure outsourcing offering, it appears that the third time might be the charm for HP. After earlier failed attempts to purchase CSC and PWC Consulting, HP is finally poised to offer a fresh challenge to IBM in the government outsourcing arena.

After today’s announcement, EDS might have to change his mantra from “ordinary people, extraordinary achievements,” to “ordinary people, extraordinarily larger transactions.” Either way, ExecutiveBiz “New At The Top” executive Dennis Stolkey, who took over as Vice President and General Manager, U.S. Government at EDS less than one year ago, will certainly have a unique new challenge in front of him.

Even Conference organizers charged with assembling provocative panel discussions and speakers can end up pleasantly surprised when one topic strikes a noticeable chord with attendees. That was certainly the case with the ExecutiveBiz The New New Internet Conference afternoon panel discussion - Software as a Service: Benefits Beyond Delivery.

As I exited one conference room two attendees approached separately and told me to rush over and poke my head into the SaaS panel because I’d be surprised how packed it was. I devolved into the awkward walk-run hybrid and busted through the doors.

Inside, I found Reed Overfelt, Partner and COO at Mural Ventures Corporation, Johy Daly, VP, Global Architecture Services at Keane, Mike McDermott, CEO at Freshbooks, and IceWeb Chairman & CEO John R. Signorello addressing an energetic, packed conference room of entrepreneurs, executives and IT professionals who embodied the momentum behind SaaS within both the public and private sector.

Ironically, it was during a separate armchair discussion on Web 2.0 that Peter Coffee, Director of Platform Research at Salesforce.com, summed up how ingrained SaaS has become in how we work. In talking about the ubiquity of SaaS and Platform-as-a-Service (PaaS), Coffee queried “when was the last time you told someone how excited you were to order software, receive a CD in the mail, load the CD, download the software from the CD and finally run the application?”

While Coffee wasn’t on the SaaS panel, he simply summarized why the Web has become the preferred vehicle for delivering business services and software. In observing the most lively Q&A of any session I attended it also became clear that this is a fast-growing segment in some ways adjusting the playbook as it goes. The exchanges reflected the challenge for SaaS companies to adapt to end user-created demand, as well as to address public misconceptions about the security of these services.

In addition to the SaaS companies represented by the panel executives, the current and potential role of SaaS within Web 2.0 for business and government could be seen with exhibitors such as Digital Now, Kapow, and others delivering powerful software and applications via the Web.

I believe the reason SaaS was so well received by attendees was two-fold. First, while some areas of Web 2.0 have been long on hype and short on revenue streams, SaaS delivers a tangible business path for companies instead of, as Leonsis put it during his keynote, a model that simply piggybacks on Google’s revenue stream.

Second, SaaS hits a pain point in the Federal government, where Agencies are seeking a simplified delivery model for services and applications that fits with budget and manpower constraints.

Brian Lustig is co-founder of Lustig Communications, a Rockville, MD-based communications firm that works with growing technology and government IT firms. Lustig is also a contributor to local business and industry publications.