Conveniently, the data center I've worked with for years[1] supports a hybrid setup, where you can use their cloud hosting combined with coloed physical hardware all in the same VLAN. It's hugely effective, since I can have physical hardware there to deal with the high-load/high-memory stuff there (like database servers) affordably, while at the same time, using VPS for less processor intensive/more ephemeral-load type stuff like webservers.
The result is that I drive to Chicago to work on hardware significantly less frequently than I previously used to, and it's fully worth it. If their cloud system goes down for whatever reason, I know their staff is on it, and I'm not worried in the slightest.
When I was 100% hardware based, I lived in a bit of terror of being out of town. If something happens, I had to get there. Now if something happens while I'm out of town, as long as I have internet access, I'm okay with it. Eventually, when prices go down enough, I'll go 100% virtual, and I'm not looking back.
[1] Steadfast Networks in Chicago: http://www.steadfast.net