Phil, in some ways I agree with you. If a VERY small company doesn't have the infrastructure to support their business model, and they don't have the throughput that would require building it, hosting on the cloud and letting them deal with the details could be very profitable for them.

Here's where it blows up: I still hate VM'ing a SQL Server. There's politics involved (everywhere I've been, anyway) in getting access to the tools you need to actually see a performance problem. Even when you do, you may not be able to drill deep enough into the systems to find it. Counters go awry, CPUs disappear (even when they're set to not disappear in the VM software... when the new guy comes in), and any other number of problems block an admin who's not also a sysadmin, a vm admin, AND the SAN admin from figuring out what's going wrong.

The Cloud adds yet ANOTHER layer of abstraction, to the point where I'd just throw up my hands and tell my boss: "I have no idea. It works in dev. Tell THEM to figure it out, I can't see crap."