As a founder of a startup building an authorization product, I can definitely say it's super appealing to build this as a service! It makes for a an easier story around monetising it.
When we were building Oso [1], we were optimising for the best thing for developers, and reached the same conclusion as you... (a) It doesn't make sense to rearchitect your app to move all the data to a separate service, and (b) it's way less complex to build it in the application. That's why we're building Oso as an open source library instead. You get to leave your application data in the application, and don't need to worry about adding an external service to the critical path.