I think there's still piles of room for innovation on the desktop, both for open source and commercial software. We've reached a lot of local optima, but things can still be a whole lot better.
For an example of a Photoshop and Paint.net competitor, check out http://www.pixelmator.com/mac/. They've been around for a few years and seem to be doing quite well. BitWig is a new competitor in the DAW space: http://www.bitwig.com/en/bitwig-studio.html.