And one of the disadvantages is that you can't solve problems by just spending more. It's a real trade-off, and too often is simplified to one option being obviously better.
Why would you spend more if it's not solving problems?
You can certainly spend more, but on-prem/self-hosted, time is usually the limiting factor, either directly or through opportunity cost. Contrary to popular belief, time does not always equal money, if you need more storage and the blocker is that you need to build out an S3 equivalent (rather than just paying for S3), then you'll be blocked by hiring, by hardware lead times, etc.
Maybe I'm misreading what you mean, but I don't understand why it's not solving problems. Lack of capactiy solved buy buying more hardware or replacing existing hardware with more powerful hardware. In the datacenter you need to have capacity planning pretty early on, while in the cloud you can get by until reaching very large cloud bill.
I also don't think that every organisation that needs file storage must build a storage solution that should compete the reliabiltiy and features of S3. Most of the times you can get by just fine at fraction of the cost.
Take file storage for example. Going from one server, to one with backups, to N, to big-N, are all points of inflection where significant engineering is required for on-prem/self-hosted file storage. With a cloud solution none of these are inflection points, none require additional work, they only require additional money.
Assuming you have infinite time, you can just funnel money into things like hardware upgrades and hiring engineers to build these things, but if you don't assume infinite time, time is often as strong or even stronger a factor than money.
At my last company we had a bunch of servers in colo, and could not throw money at solving problems there. Getting a new machine took 2+ days and a bunch of emails, not an API call. We moved to the cloud mostly because the opportunity cost, i.e. the time spent by engineers on toil scaling things on physical machines, was higher than the monetary cost that we could pay on a cloud provider.
This won't be the same for everyone, but the point is that money is roughly the only consideration in cloud, but not the only consideration on-prem, at least when you discount common factors between the two.
If you are at the point of having to deal with individual servers and have a very fast-paced development (startup), or have to deal with very burstable traffic spikes (say e-commerce), cloud is probably your friend.
But sometimes you just need more compute and you are the type of organization that buys compute by the floor space and power consumption...
Regardless of the nuances of each situation, I think jsiepkes's comment meant to say that in the data center you can buy pretty killer hardware that will be totally overkill for the moment and won't require you to count active timeseries in order to not pay $300k a month for your metrics, and at the same time will last you for the next couple of years.
Also, for most companies, the next point of inflection will never come and this server will probably last them for a very, very long time.
I'm sharing my point of view as someone who works at an organization that took money as the only consideration and managed to grow over the years to now having to start taking both time and money into consideration because taking only money into consideration proves to be too expensive.
And you don't have to pick just cloud or on-prem, you can utilize both. Use cloud for your bursty workloads, or for it's CDN/edge, and then your on-prem for consistent workloads. As long as you're not using cloud specific services you can run open source versions on-prem (such as minio for S3, or your own Postgres cluster, or kubernetes + what ever operator)
