Software businesses can't afford to have religion about architectures and business models, however there is also a tension that exists to come down on one side of the line. The old saying about trying to be the Switzerland is, well, bullshit because only the Swiss can be from Switzerland. The one popular company that comes closest to having religion is Salesforce.com (or as we have begun to refer to it, sfdc), and even they have begun to integrate with desktop applications. My concern about this migration from server side hosted apps to desktop integrated with hosted apps is that there is the possibility for a fair amount of chaos as a myriad of scripting tools are used to accomplish integration. I suppose this is why a company like Weblayers is interesting, because they enforce a degree of policy on software developers and code.
Speaking of sfdc, I wonder what the complexity of their AppExchange increases to each time a new vendor develops an app? In other words, what are the commitments they have to adhere to with regard to upgrading their own service and not breaking any of the interfaces they are publishing. How would you even begin to test that?
Link: Most of the time: The end of the beginning: SaaS starts walking upright.
Enterprise deployment also offers a different cost (and profit) model. A hosted environment's capital and operation costs will increase with the user base, while customers bear most of those costs in an enterprise deployment. These aren't the only factors in determining profitability and growth (suuport cots and development costs may have different curves too) but having both offers the ISV faster adoption, and flexibility over time as customer requirements change and new opportunities appera.