I've done the math many times and it's orders of magnitude cheaper to colocate as long as you can afford an IT guy and the upfront cost of hardware.
What happens when a harddrive fails in your colo? Unless you have best practice backups, you will lose customer data and trust.
GCloud abstracts the issue of hardware so you can focus on real business development. And to some, that's worth the cost until they can properly afford all the hidden costs of independent hosting.
Really though in my experience the cloud is far less reliable than colocation. I've had AWS VMs "degrade" or randomly die countless times but I can't remember the last time my Colo boxes went down, probably not since I last upgraded the OS.
It may be. But for many people, it does not matter.
Let's say you work at the place (I do) where "compute" cost is like ~0.5% of the total costs. Almost all of the cost is employee's salaries and benefits.
BTW we get (and from what I hear, everyone does) offers from other cloud vendors to switch, and get 1 year free or whatever. And it gets ignored because it is a big risk for a tiny possible gain.
It's really just a new form of vertical integration. If you're working only at the high levels you're not only paying someone to do that rest for you, those people are making profit off of you. Profit that could be yours.