VST vs hardware, completely different.
VST’s are studio oriented, hardware is performance oriented.
MIDI controllers have to be configured per plugin. Have to remember knob assignments
Program change is a more complicated affair with plugins. What bank is loaded, what channel is it on, is the plugin even loaded. Can’t treat the computer as a sound module that “just works” as easily as with hardware.
Doing stuff in the box tends to encourage you to do more stuff in the box, locking everything behind configurations, drivers, and other moving parts.
Hardware does not sound better than plugins. Unless it’s analog, both are just running code so it depends entirely on the developer.
Plugins have more latency.
Plugins tend to be cheaper, but not always.
What else…
Oh, DRM. Installation. Having to reinstall everything if you move to a new system. Dealing with 32-bit vs 64-bit.
Option overload might be more of an issue in the plugin world, because there are no limits on the parameters and knobs in the virtual space.
Hardware doesn’t mesh as well into computer ecosystems. This isn’t an inherent problem with hardware … blame the manufacturers, who aren’t all making use of standard filesystems, standard file formats, USB, cough cough SD cards… Overbridge is an interesting exception but it’s still dependent on what Elektron decides to provide.