Updating exams

Exams based on memory make so little sense nowadays. 90% of people’s work will be based around using the internet as a readily available source of information and what’s for sure 0% of people’s work involves remembering facts about books they’re read or using handwriting which can’t be wiped out.
But how do you let someone use online sources and type their exam answers without opening up to a cheating-fest? Is it better to keep to the old crap system just in order to avoid this? Also what skills should we be measuring nowadays even assuming we could make a viable cheat-proof system?
My initial answer is – yes we should definitely update the exam system. One obvious answer would be to sniff all network traffic of people doing the exams and log it in a non-repudiatable way. Then do spot checks on every 20th candidate (say) and really check out what they were doing during the exam. If there is any foul play, then you throw out that person’s submission and apply the usual deterrents…