Ask HN: Local server, Global client – What am I missing?

I'm thinking about various deployment options for this client-server product my small team is making. OnPrem and SaaS comes with their own pros and cons, and this hybrid approach seems like a good middle ground.

This is what I am thinking of: We would package our python server that the user installs on their machine. The user then opens our internet hosted web client. The client calls APIs at localhost:5000.

The customer is happy because their files never leave their machine. We get real time analytics of what the user is doing with our product. We get to push fixes to the client quickly and conveniently. The server responds to our client only because we set the allowed origins.

I've been playing around with a POC and it works without issues so far. However I know that I'm definitely not the first person to think about this. Yet I do not recall seeing any product that is deployed like this. This leads me to believe there are some big issues with this idea which I seem to to be missing.

What are those issues? Have you seen/done something like this?