SaaS (Software as a Service), where you rent software on a per use basis, likely hosted by a third party, is a great model for many applications.  Backoffice, workflow, content management, backup, etc.  The smaller the business, the better the return.  Not having to support a heavy infrastructure for these overhead items is usally a great benefit for SMB's.

SMB's often have great experiences with SasS and this may lead them to make a critical mistake.  SMB's may look to SaaS vendors to provide software that is delivered direct to the SMB's own customer's over the web.  While this may be an easy way to get a business started, once that business becomes enterprise class, SaaS has many drawbacks that could ultimately kill future growth. 

 Lack of control over features, capacity, security, customer data and usage statistics are just some of the issues.  In a future post, I'll discuss things you can do to help minimze the risk if you are forced, through budgetary or other reasons, to use SaaS for a core piece of customer used functionality.  Until then, avoid doing this if you can.