James D. answered 12/13/24
Ivy League-educated Master of Music (production, performance, theory)
I agree with you that software emulations are getting so good that they're often indistinguishable from the "original" hardware unit, even to the trained engineer's ear. I wouldn't say that "every plugin is designed to emulate classic rackmount units" though. More accurately, "most classic rackmount units have acceptable software emulations available, which are widely used in the music industry".
I know of at least one very well-known Mastering Engineer (multiple Grammys and Latin Grammys) who works almost *entirely* in-the-box now (at least when it comes to the processing chains — the acoustics in the room cannot be replicated by software, just yet).
Still, among gear-heads, it's often desirable to understand the true physical circuitry of a particular piece of signal processing hardware, and as you've correctly pointed out, there is a thriving market and aftermarket for high quality compressors, EQs, and so forth.
Someone has to make the things and understand the actual engineering.
I personally like having some rack mounted physical gear. Both for the "vibe" aspect (which *is* important when recording with others), and for the tactile nature of the knobs and settings. There can be an art to moving those settings around in the physical world, vs. just a UI on a plugin.
Moreover, some hardware really does impart a kind of warmth and tone (or other qualities) into the signal, which cannot be truly replicated by software. There simply isn't enough power behind the software versions. An exception might be the hardware-accelerated UAD plugins, which come very very close to the original hardware that they emulate.
Another point to consider is that mic preamps are hard to fake. It's a good idea to have high quality hardware preamps for your inputs when recording music.
All in all, for most DIY artists/musicians/engineers/producers, you're completely fine staying "in the box" these days. This also applies to Grammy-winning records.