I saw a press release about Sapien providing subscription based, hosted HRMS solutions to the mid-market. They are calling it "self provisionin" which sounds like a bad marketing ploy to me, but generally, the strategy is worth looking at.
Dave's Next Move (Dave Duffield's new company) is going to be pursuing the same strategy, except at the enterprise software level. They will be doing HR, PR, finance, etc... Dave has actually renamed the company in the last week, but I forget what it is and they don't have a website yet.
Anyways, it looks like decent scaleable HRMS is coming in a subscription web delivery in the near future. (some would argue it's already here, but "decent" is the critical word)