Cloud implies running in virtualized environment. Dedicated implies that only your bits run on that hardware which is huge for I/O.
True, but the blog post didn't say if they are using virtualization or not.
Unfortunately, 'cloud' implies nothing. Apple's iCloud isn't necessarily storing my data using VMs and EBS/BigTable type FS. They could be using dedicated W2K/IIS 4.0 boxes storing BLOBs in MSSQL and still be considered cloud by everyone.
You will take an I/O hit when instead of a single physical machine asking for a set of sequential blocks off the disks, you have 20 virtual machines asking for seemingly random blocks off the disks.
Replace disks with storage array if you'd like.. but the fact remains: more VM's will mean more storage contention. If you have the funds to have dedicated arrays per VM, hats off to you. Most people never do this, and I/O suffers a penalty. Virtualization has is price, and even that being said, I think it's worth it for most people.
Basically, on any reasonably sophisticated hosting infrastructure those arn't a problem.
If your problem is just seq->random conversion due to additional VMs then bcache/flashcache does a surprisingly good join at making that just plain go away with little additional cost.
On any reasonably sophisticated host you have a DSAN, which has a cool little stats trick, which basically means that as you add additonal vm's together the variance on the total IO load drops, and the load pattern itself becomes more and more normal, the larger and more uncorrelated you get.
That gives each vm more 'burst' capacity when required with many fewer failures (ie. the vm asks for more IO then the current capacity of the system).
This leads to a bunch of interesting stuff when you try to apply it in real world systems, either in HPC or in clouds.
I work over at orion, and our standard cloud VM's dominate dedicated hardware in IO. There really isn't much competition.
You find most of the 'virtualisation is bad for I/O' is either 'oversold I/O is bad for io' or 'Trying to push all IO for every VM on a box as well as all WAN traffic through one gigE port is bad for io'.