I just read The Cloud and Why Installed Software Isn’t Going Away on the Software Advice website.
It's a good article, which applies some common sense to the hype surrounding all things "Cloud" at the moment. I thought I agreed with much of what James Colgan says but then it struck me that we can't view "businesses" as one, homogenous whole. I think small, owner-managed businesses and larger, enterprise businesses are very different markets for SaaS vendors.
For starters, much of the on-premise software used by smaller businesses is consumer software. It's the likes of Microsoft Office, Outlook or Photoshop. These tools are now available, in various forms, as SaaS products - often free of charge. Small businesses are unlikely to be "power users" of the software they use, so even if online alternatives have less functionality they will still be good enough.
Even where small businesses do use non-consumer software, such as accounting products like Sage or QuickBooks, these are relatively low-investment, shrink-wrapped software purchases. With little investment in them, making a change to a Saas alternative is not a big deal.
Larger businesses may also embrace online alternatives but are more likely to retain the need for desktop versions because they use the advanced functions of the software and require more fine-grained control over settings and options. Additionally, they may well have a host of other applications that interact with their consumer software - Microsoft Word and Excel typically - and these interactions only work at the on-premise level.
Secondly, small businesses tend to have simpler business models, with more basic administration and logistics processes. The work they do will also likely be less complex technically than might be the case for larger businesses. If a business is developing a new drug, or undertaking complex modelling, I argue it is more likely (not in every case I admit) that it is an enterprise not a small business.
This means that the computational speed and power that, currently, only on-premise software can provide is mainly needed by large businesses.
Finally, small, owner-managed businesses can be more nimble and decisive when it comes to changing software products or delivery models. In particular, an owner-manager can quckly assess risk and do so without the worries and constraints of corporate responsibility to other stakeholders. The small business can make changes, and reverse them if needed, with much less risk and cost than an enterprise.
So, for the reasons outlined above, I think SaaS software is, and will continue to be, much more successful in gaining adoption by small businesses. But for larger, enterprise businesses, on-premise software will, indeed, be around for a long time yet.