Having read with interest Ben’s previous post on Microsoft’s Software + Services strategy, I feel like adding my 2 cents worth from a slightly different angle.
The keyword here is Service, which leads to me to think that Microsoft Office and competing disruptive products are not the best examples of SaaS. A critical strength of SaaS and where it will significantly disrupt (and already has in CRM and Project Management) is in the outsourcing of tools with a significant server side component with complex business logic, tools such as CRM, ERP and Accounting, Project Management, Business Intelligence/Performance Management, Talent Management,Sales Support, all requiring server side processing power and scalability.
The advantages of SaaS (excluding cost of ownership and pricing arguments of subscription over perpetual licensing) include eliminating needing to fund server infrastructure and support resources for maintaining your own data center, and multi-tenancy which ensures you always have up to date features without complex upgrades.
Whether your SaaS vendor chooses to provide a client side User Interface which is browser based using AJAX, Silverlight, Adobe or via a Microsoft Clickonce style (A Software+Services option) deployment is secondary to ensuring they provide a service which effectively and economically solves business problems (the Service component). The client side user experience is a key factor for user adoption but all the options above can provide that. The general user probably doesn’t even care which one is used.
Microsoft certainly has its problems in the Web/Internet space and they are still playing catchup with SaaS but I don’t think delivering SaaS is going to be a long term problem for them.