Pre-SaaS most companies would have paid upfront for a piece of software (before knowing if it works for them) and then upgraded ever few years in any case. For multi-user software they would have needed to pay for servers, ops staff, etc. on an on-going basis in any case.
When companies are evaluating a SaaS solution versus a boxed solution price is not typically a major deciding factor.
Which is why no company will make very much money with the SaaS model...since we all know it is a crummy deal, we'd never support companies doing SaaS (or PaaS or IaaS). I remember a small startup Sales-something trying to do a CRM as SaaS a few years ago. I'm sure they are gone by now.
I'm not talking about large installs for big organizations - I was speaking directly to the value options for small organizations. Most SaaS are designed to funnel end customers into higher profit services for no real reason other then higher profit. Value wise it's not a good deal for the customer.
The problem that I have with SaaS is that most companies pursuing it's business model fail at the value option. Take Freshbooks for instance - I started using their service 3 years ago for 9$ per month. This got bumped to 14$ per month. I now have to pay 20$ per month for the same service I got 3 years ago (very little has been added of value to me). I could have bought a stand alone invoicing solution for $100 once and been far better off (I'm now trying to find a good one).
SaaS is often a really crummy deal for the customer and we all know it.