What’s Your “Web Service Tanked” Contingency Plan? | Social Media Explorer. I commented on this on the site as well. My key concern is not the service going down, but being at the whim of a "free" service that may decide to automate some processes like abuse handling. I'm still reliant on external hosting, but I am in control of recovering my content if backed up properly.
I was severely burned by a round of Blogspot automated spammer purging. I was writing a simple blog, hosted by Blogspot, to track my progress toward a certain running goal. I created a decent amount of content which linked back to my running logs. Somehow, I was locked out of my site for several weeks--with no access to my own content, under suspicion of being a spam blog. It took multiple tries through several channels with Google to get my blog released.
That was the nail in the coffin for Blogspot hosted blogs for me. For a time, I continued to use Blogger for FTP-based blogs, but service outages and lack of functionality finally got to me.
There was enough pain for me in a completely non-critical application that I can't fathom SaaS without a contingency and a stringent SLA for the SaaS application. This experience has made me aware of the inherent risk in relying on a third party (especially if through a free service) to meet your software needs.