The guy who runs prgmr.net (http://news.ycombinator.com/user?id=lsc) more or less says the same, despite running a virtual-server company:
Prgmr.com is no longer offering co-location ... the margin on co-location is such that I can't justify setting aside time and space that could otherwise be used for my xen VPS hosting business at this time. (note what this implies about the relitive pricing of these two commodities; quite often, owning your own hardware and co-locating it saves you money over renting virtual servers, especially once you start approaching 16 or 32GiB ram)
That said, I rent a VPS from him because I just need a small, always-on server in the cloud that I don't have to administer.
We've experienced location-wide outages due to natural disasters in host centers - putting all our servers in one place is no longer an option, so we're looking at a combo of colo and cloud. We're scaling up to 5 locations in the next months, thanks to all the great replication tools we have at our disposal now it's a fairly simple task, more than it would have been 5 years ago.
For anything requiring real IO performance or tons of memory, stick with your own hardware.