The once heated war of words between Apple Inc. (Nasdaq: AAPL) and Adobe Systems Inc. (Nasdaq: ADBE) has quieted down – not because Apple has let Flash on its browsers (just in apps), but because others have found workarounds. (See Jobs Offers 6 Reasons Adobe Sucks , Adobe Fires Back: We Don’t Need Apple, and Adobe Attacks Apple… With Love.)

One alternative comes from Skyfire Inc. , which uses cloud computing to transcode Flash video into HTML5 on the fly, allowing it to be viewed on the iPhone and, soon, the iPad.

Demand for the Skyfire app, a full-featured Web browser overlay that can be downloaded for $2.99, was so high when it launched in the App Store last month that it overwhelmed Skyfire servers and it had to declare it was sold out. Jason Guesman, Skyfire's SVP of marketing and sales, says they are beefing up bandwidth to prep for the iPad launch.

The app is also available on Flash-friendly Android platforms, where it has 2 million users. But here the value prop is about getting access to more video, Guesman says, although Android versions 2.1 or less don't support Flash, either.

Why this matters
Bringing Flash to the iPhone may be its biggest accomplishment, but Skyfire sees its main business with the carriers and is in talks with operators like AT&T Inc. (NYSE: T) and Verizon Wireless to include its capabilities in their data centers to reduce data strain -- a very real problem.

"Direct-to-consumer is still profitable and great marketing for us and great visibility for Skyfire, but the real end game is with the operators and deploying it across the portfolio," Guesman says.

Guesman describes Skyfire as a complete closed-loop system. The browser, built on the Webkit core of Safari or native Android browsers, monitors network quality conditions and adapts the bit rates in real time to maintain video quality. The Skyfire viewing experience can save 75 percent bandwidth compared to traditional Flash, he says, which is important to consumers on tiered pricing plans and to carriers looking for capex savings.

Launching an alternative browser is a unique approach to the bandwidth crunch, but one that requires consumers to actually download and, in this case, pay for the app instead of using the native option. It's working for Skyfire so far, but winning carrier relationships will be critical for it to prove it's valuable beyond just the iPhone, where users have no choice if they want Flash.

For more
For more on the various approaches to bandwidth optimization, check out the following stories:

• CTIA 2010: Startup Pitches Mobile Streaming Alternative
• Opera’s Not-So-Mini Success
• Mediocrity Rules Mobile Video
• Brightcove Optimizes Flash on Android
• 5 Mobile Apps That Bust Data Caps
• Dilithium Launches iPad Video Streaming

— Sarah Reedy, Senior Reporter, Light Reading Mobile