There seem to be some buzz around hosted solutions these days. I still feel that hosted solutions are facing some pretty steep technical challenges, that most users may not be aware of until it is too late (make sure you have a 30 money-back-guarantee).
I expect that a hybrid solution would be optimal in most situations. By hybrid I suggest that the recording is done locally, or at least close to the cameras (in network topology), but that setup and investigation can be done via a remote host. The recording nodes health should be monitored by the host (notifying the client when recorders are not online or having trouble). The software on the nodes can also be updated from the host automatically and so on.
A solution could be to offer features on a subscription basis – as an example, you might buy the right to do motion detection on 4 cameras for 10 weeks for 10 bucks, or perhaps enable “left object” on 8 other cameras for a year for 100 bucks. Sort of an “app store” for video surveillance.
I suppose “clustered hosting” is another solution – a shopping mall may offer video surveillance as part of the lease.
Or – we can just wait for the bandwidth to become available and cheap enough that it is viable 🙂