I've been developing software for 8 years now. Cloud-based software, or services rather, are a growing trend because they allow businesses to consolidate / over-commit resources or make particular IT tasks redundant.
Software producers can either sink or they can swim. Many companies do not like the idea of cloud-based solutions from a security and accountability perspective depending on the service and refuse to use them. Others see it as an opportunity to reduce costs and increase services. For example, see Microsoft Office 365 services online (or Google Apps). You can host Exchange yourself but then you'll either need on-staff IT, servers on-site or at a co-location, you'd have to pay for power, etc. Cloud-based service worries about all of this for you and only costs you a fraction. There is a breaking-point, of course, in terms of manageability and cost as well.
Things to consider for cloud-based services are:
-Accountability of data on the cloud-based service
-Redundancy of service
-Liability of service and data
-Cost of service
-Manageability (is the service customizable? Do you control it? etc)
-Does it fit with the long-term goals of the business
Cloud-based services are a great way for individuals to license software (See O365), backup data (see onlinefilefolder.com, Acronis online backup, etc.). Virtual Machines and Virtual Servers have been a part of web-hosting solutions for years because they allow companies to commit all of their resources and save money on hardware, software licensing, power and administration. In turn it allows the consumer to do more with less.
Cloud-based computing and services will be a huge multi-billion dollar industry (it already is). It's the direction we're headed in whether people like it or not. Compare the paper book publishers with eBook mogul Amazon. eBooks are here to stay and paper-based publishers are going out of business. It's not sad, it's just life.