I think that's the standard question for cloud computing.

Is your system:

* Very consistent (no significant peaks or troughs of ~5x normal usage)

* Has predictable growth

* Comfortable with half of your capacity being down for x hours due to hardware failure

If you can answer all of that with "Yes", then cloud computing (and even virtualisation) is probably not for you, you'll be paying a premium for something you don't want or need.

But if you were to scale up your own application to have peaks that needed the capacity of 20 physical servers instead of 2, but with 18 of those same servers running idle 5 days a week, then the answer might start to look different.