On LinkedIn Answers, there is a question about when you would use SAAS in place of in-house apps. Bob Raffo points out some reality:

Failure: CEO sees SaaS as a low cost replacement for in-house systems and as a path to reduce IT headcount. CIO is seen as a marginalized procurment manager.

That's mentality is a definite problem. But then often IT and automation are all about reducing head-count. SAAS for smaller organizations is an idea based on available talent and time. Most very small businesses do not have a full-time IT person. But today technology has far outpaced the average person's ability to keep up with it. So hosted and managed software is ideal, especially for something as unyielding as Small business email. Companies are finding success offering hosted Zimbra. HyperOffice has had success offering a Collaboration suite of services. We have all heard about NetSuite and SalesForce.com. VoIP is a Hosted application. So is UC (unified communications).

QuickBooks offers an online version that I personally find works well for my small business. Other people like FreshBooks. Part of it is functionality, part of it is Usability. How steep is the learning curve.

In VoIP, providers that leave as much "sameness" have less headaches. The blinking Call park problem has undone quite a few installs. Undone by too many tech calls that resulted in a frustrated employee and a huge expense to the provider.

I had read somewhere that about 90% of downloaded software goes unused. People have good intentions, but either never actually install it or just never use it. Some of that is CHANGE. People hate change. And what business owner has time to unlearn a system and learn a new one?

This is where video could play a role. The more you can show demo features, uses, testimonials, tech support, the easier adaptation.