it depends how reliable the network is. the centralisation argument goes, you don't have your own power generator, you buy it from the grid which has a reliable network.
but there are even decentralisation trends in power. solar energy and wind are decentralising technologies (especially solar as you can just have panels on your roof) and also some buildings are moving towards small cogenerated power because its more efficient.
so as catherine says, the pendulum always swings.
and probably we will have a mix with software residing in the grid or cloud, and being pushed out to clients and being cached. then if the network goes down you have it local, but you don't have to maintain it all the time.
for the dangers of this approach see the movie "i, robot" =) and more close to home, automatic updates that break working servers!
I don't see the shift going back to completely dumb terminals at the user end or even dumb terminals with a local hard drive.
There will always be applications that you will want complete control over. Banking is the big one but purchased media is another. I think the end user wants to retain control over things they pay for.
Software as a Service and networked applications always carry with them the worry that you may not be able to access what you have been promised. Take Google Video for example. They were selling videos with the assurance that you would always have them available and one day they decided that it was not in their corporate best interest to continue offering them. If your personal consumer data or corporate infrastructure are controlled by another company you will always be dependent upon them in some way which makes many people nervous.