People are starting to realize that there is now a hosted Team Foundation Server solution on the market with the launch of TFS Now this week. Jonathan Allen posted an article on his blog(?) pondering the need for a hosted offering.
I guess from a business perspective we would like to think that there is a market for hosted TFS, and before launching the service we certainly did research into the kinds of customers that are likely the leverage the offering at its current price point.
Over time I am confident that TFS will becoming a better multi-tenant system which will help drive down costs. Believe it or not we actually want this offering to be as cheap as possible to help drive adoption and we are going to be actively giving Microsoft feedback on our current pain points so that feedback can be integrated into future versions of Team Foundation Server.