Let's take Mint.com as an example. One could certainly build a Quicken-style application with the Unhosted platform which would perform its processing on the browser but save all data to a server in an encrypted form. Users would be able to access their data from any browser. What's broken is that a core part of Mint's value proposition is that it watches out for you and proactively tells you important stuff. Did you know that your credit card bill is due tomorrow? Mint.com sends you an email. If Mint.com did not have unencrypted access to your data, it could not provide you with this service. You would be back in the dark ages of Quicken when you had to remember to use the application to get such information.
The in-the-cloud services which provide the most value to me could not exist without being able to process my data in the background. A more interesting idea to consider is whether the ownership of the hosted software could be decoupled from the hosting provider. There seem to be a few open source projects out there which aim to provide AppEngine-like frameworks which could allow hosting of one's application as-is by a bunch of cloud hosting services. Think AppEngine with choices. What if someone produced an open source, GMail-like appliance bundle built for one of these frameworks? It could be deployed by an individual/company/whatever to a hosting provider's cloud. Included in the project would be easy ways to migrate from to another hosting provider, data export, etc.
Although such solutions would solve the background processing requirement problem, they would still require me to think about my email platform. Is it time to upgrade? Which provider should I use? Etc, etc. The likely market outcome would be that hosting providers would offer "managed" hosting of these open source appliances. What's the difference between this state of affairs and the current GMail/Hotmail/etc. landscape? Probably little more than an open standard for data interchange along with an easy way to export one's data.
The problem with such SaaS concerns is the same as with Java in 2004 when Stallman wrote about "the Java trap". Most people (me included) saw Sun as a benevolent dictator and didn't worry much about what could go wrong. Now that we've witnessed Oracle's apparent power, we know to be afraid. Perhaps there are some small examples of SaaS gone awry, but it's not like SalesForce.com has doubled its prices and throttled data export to keep users from running.
Today, no one thinks to demand complete data export capabilities along with a contractual agreement to continue to provide them. What if customer demand made such features commonplace? An upstart Mint.com competitor could offer Mint.com data import to reduce switching costs. Would such a state of affairs appease the majority of SaaS lock-in concerns?
I personally don't see what all the fuss is about. Whenever humans work together in any form to better their lives, they give up some control and risk that others will not act in their interests. The risk and uncertainty are a matter of degree rather than kind. The guy who plows my driveway could decide to run off to Vegas, and I wouldn't know until the next major snowfall. Wouldn't I be better off to operate my own plow so that I have the control? By this same logic, I would be better off running my own servers and maintaining my own applications. With the snowplow guy, the magnitude of my risk is capped -- if he doesn't show up, I can call up a competitor and have him take over the contract. Similarly, smart humans assess the risk of trusting others and make sure that their agreements do not provide too much power to the counter-party. The issue is that we as humans have learned over time what kinds of risks are inherent in various sorts of transactions, and the invisible hand has responded with defacto standards for agreements which constrain these risks to acceptable levels. It is that SaaS is so new that most people are unable to assess the risks of various offerings, so those which transfer power to the provider in extreme ways are not so obviously evil.