As an ex big iron commercial UNIX sysadmin, let me tell you; they can do it
way better than most sysadmins.
Developing IT policies for physical security, server security, update policies, purchasing, wiring and so on takes a huge amount of knowledge, and the possibility that a middle-of-the-road sysadmin is not only competent at, but excels, in all those areas is literally zero.
Cloud providers have world-class experts in each area whose sole responsibility is providing for their specific area. It's economies of scale at its best. It doesn't mean that it's always the best choice, but having to have someone do full-time server maintenance at no additional value to yourself or customers is just a huge drag.