> Companies also vastly overestimate their scale when their entire business could probably fit on a single commodity server.

Indeed, but that's completely leaving out the single most important thing: backups. With all of the major clouds, snapshots are easy to do both at a VM level and data level (e.g. RDS), and the cloud provider takes care that the backups are sufficiently spread to be disaster tolerant.

In contrast, when you co-locate you have to take care of backups completely on your own, and with many hosters you can't even influence in which of their DCs your servers will be.

If anything, OVHs SBG fire incident should have shown everyone how hard it is to build resilient systems.