SaaSweek had this excellent interview regarding ISV strategies for switching to SaaS. Most of the comments seem to mirror my viewpoints. Here are some interesting quotes;
On ISVs changing to SaaS delivery;
“You cannot do what every enterprise company ends up doing, which is taking their technology that’s on premise and then putting it on their own servers with a web front-end then call it SaaS. In most cases, that original software is not designed to be delivered as an on-demand solution. Trying to move from on-premise to on-demand is not just an exercise in relocation of software. On-demand is much more than that. It’s about making a solution that is easy to set up and easy to use.”
On the risks to ISV’s of creating a cannibilization model;
Probably the most challenging is the fear of cannibalization. You’ve got these big companies that sell $500,000 licenses and then they start to worry when you talk about instead signing on customers that pay a half million upfront, you’re going to sell contracts that charge $70 per user per month. They start saying, “we’ll avoid that by taking our traditional enterprise product and we’ll target that to large enterprises and so we won’t see cannibalization there. What we’ll sell to now for on-demand is the mid-market. Then we’ll see increased and not cannibalized revenues to the mid-market.”
It’s good to hear that most SaaS commentators agree about this stuff
Ben Kepes is an analyst, an entrepreneur, a commentator and a business adviser. His business interests include a diverse range of industries from manufacturing to property to technology. As a technology commentator he has a broad presence both in the traditional media and extensively online. Ben covers the convergance of technology, mobile, ubiquity and agility, all enabled by the Cloud. His areas of interest extend to enterprise software, software integration, financial/accounting software, platforms and infrastructure as well as articulating technology simply for everyday users. 
Ironically, I look at the Force platform, and I see a SaaS vendor repeating the mistakes the ISV’s made with their own platforms. More on my blog:
http://smoothspan.wordpress.com/2007/09/19/the-ugly-truth-about-the-force-platform-salesforces-is-no-better-than-saps-or-oracles/
Best,
BW