>Seems like unless you are going to need the ability to quickly scale the number of instances up and down it makes more sense to put your core services on dedicated servers rather than in the cloud.
Which is almost always the case for startups (needing to scale at will).
I don't know too many startups that need to scale in minutes as opposed to hours. Even sites that have taken off have usually had growth over a period of months or years. I do think it makes sense if you are doing something massively cpu intensive that has hugely varied demand (video encoding, etc).
Which is almost always the case for startups (needing to scale at will).