Clayton Christensen in his book Innovator's dilemma argues that disruptive innovation:
"offers less of what customers in established markets wanted and so could rarely be initially employed there. It offers a different package of attributes valued only in emerging markets remote from, and unimportant to, the mainstream."
The success of Salesforce.com on cloud against established leaders like siebel reinforces the very same idea. For SMBs, having sensitive data (i.e. leads & prospects) on cloud is better than losing them in sales people's laptop, when they move from one company to another.
Similarly, for most companies across the world, ERP & payroll are the only processes that are automated. Other than these two, there is a long list of applications that are not yet automated. At OrangeScape, we call these applications as the longtail apps. Unavailability of these applications will fuel the adoption of cloud, even if cloud is not as reliable as its on-premise applications.