the problem is that the $1K/month in 'the cloud' buys you servers that would cost $4K to buy. Even I (and as far as I can tell, nobody else using Xen has lower prices) price things out so I cover my hardware in four months.
The advantage to 'cloud' stuff is that if you have servers with less than 32GiB ram, the economics of owning get much, much worse, mostly due to hosting costs. If you have tiny little servers, VPSs really are cheaper over the long term... of course, 'serious business' hosting usually requires larger servers, so we're back to saying that you save a lot of money buying if you are big.
The advantage to 'cloud' stuff is that if you have servers with less than 32GiB ram, the economics of owning get much, much worse, mostly due to hosting costs. If you have tiny little servers, VPSs really are cheaper over the long term... of course, 'serious business' hosting usually requires larger servers, so we're back to saying that you save a lot of money buying if you are big.