But it finally gelled: The problem with SaaS is that it welds the data to the code.
Let me explain using “traditional” software applications as an example. You have documents you edit in Microsoft Word. These documents are
.doc files which are on your disk drive and you can do anything to them that you can do with any other file: Copy it, delete it, encrypt it, archive it to tape, attach it to an email, etc. All outside of Word. If Microsoft does something to annoy you, you can even edit the documents in WordPerfect or AbiWord or OpenOffice or anything else which understands the
.doc file format, which there are plenty of because file formats aren’t protectable as intellectual property.
Contrast this with the SaaS situation: You can’t give a WebDAV address to Google Docs for a document you want to edit in that webapp, and have it open and save to that file. You can’t manipulate your Docs files at all, except through the webapp. The only way you can (eg) attach it to an email is to be using Google’s email webapp, and hope that Google’s programmers have provided integration between them (at time of writing, they haven’t).
Update: Seems Steve Wozniak has some concerns along these lines, about you not controlling data you upload to a cloud store.
Update 2: Now Wired is sounding this alarm, with the focus on data security.