The big down-side I see for small business is: "What will happen in a cash-flow crunch?"

Every small businessperson knows that sometimes customers don't pay their bills, and it can be a challenge to meet payroll and there isn't enough left for other bills. So you pay your employees, take the dunning phone calls, pay some late charges when the money comes in, and business goes on. There are safeguards and due process built-in to the system so that the Sheriff can't come and padlock your doors the day after your bill is late. Your creditors get their money, just a little later and a little extra.

Now enter "the Cloud". Your business becomes entirely dependent on your Cloud provider. If they shut you off, you're dead, and they're probably not bound by procedural regulations similar to lending institutions or utilities. If you can't pay on time, they put your service "on hold", and you're out of business. You try to scramble to find money to pay them to keep the business going, and now maybe there's not enough money for payroll. But if you don't pay "the Cloud", your business is dead.

Like many "new deals", the Cloud looks attractive on the front end because it doesn't involve a large upfront capital outlay. But IMHO, choosing "the Cloud" for a small business is akin to walking into the lion's den, or jumping into shark-infested waters.