Earlier quoted context omitted.
Exactly. Virtualization/Cloud are only good for scaling down, not scaling up. The 20-30% hit to IO, additional latency of SAN vs local storage, management overhead, and added complexity to infrastructure more than negate any potential benefits of improved load distribution when you're dealing with applications that use anywhere near the capacity of physical servers.
20-30% hit in IO? It hasn't been at that level for a long time. With new KVM versions and good Intel processors there is a performance hit of as low as 5% these days. That's not to necessarily say your particular workload will see that, but 10% is generally an 'at-worst' level at this point.
The outcome is pretty grim.