What’s so great about the saas model?

It is important to note a distinction between SaaS/Hosted applications and the data these applications generate/manipulate. Think of MS office as an example. The applications themselves are Word, Excel, Powerpoint etc. The data are the content created using these applications. Most companies are really only concerned about their content. The Hosted/SaaS models deal primarily with the applications themselves. The content (.doc, .ppt, .xls) files are typically held securely by companies on their secure servers.

From the IT point of view, hosted applications allow for a lower cost compute platform to be deployed since the PCs can be PC "lite"s or simple browser centric platforms like netbooks. Licenses are centralized and costs potentially reduced to a per usage structure vs the traditional licensing model of one license per PC deployed regardless of whether the user needs the application or not.

From the user point of view, hosted applications allow more local storage of user generated content for a given fixed storage capability. Also, the ability to access different applications one might not normally install or have room to install which are low cost or even free to use come into play. A good example of this is Google Mail. The application does not reside on the users local storage and is free to use being subsidized by Google's advertizing business model.

Reliability issues seen to date appear to center around connectivity reliability and speed rather than the hosted applications themselves. If the WiFi, 3G/4G, or wired data connections are of low quality, the applications may respond slowly or have issues loading. Depending on where users are physically located, performance can vary.