At the risk of contradicting myself, I think Ray Ozzie is onto something with the Software plus Service approach.
One of the current issues with SaaS for desktop apps is the lack of support for disconnected users. I don't think it's any coincidence that Google apps doesn't have a PowerPoint equivalent yet - how many times have you made last minute changes to your presentation on the plane
"Software plus services" seems to be a sensible choice for desktop applications at this point in time. However, I suspect this will change once we have broadband connections from our aisle seats.
<update> There's an interesting announcement today from Corel, who seem to have already launched a hybrid software plus service application.
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