It's a risk shift.

Generally speaking, most sysadmins at small places do a horrible job engineering for failure. Or, worse, they don't have professional SA's, just devs who know enough to be dangerous.

So while you don't run into a US-East EBS failure every now and again that affects millions of servers, you are subject to random unforseen failures because somebody didn't do X correctly. (Where X could include: disk configuration, HA configuration, DR plan, backup/restore plan, os management, firewall management, etc)

There's no one right answer here. I've rolled specific hardware solutions managed by a single team for certain applications, and everything was fine. I've been stuck working within the bounds of a managed services provider, and things worked too. Cloud is just another model.

EC2 lets you roll a globally distributed solution with good tooling for low cost.