I work as an IT Infrastructure Architect for VMware and Windows Based Enterprise workloads and a lot of the time it's just more cost effective to have the servers in house for many of the workloads. It isn't the case for ALL workloads, for example we move almost all exchange email services to office 365, in combination with Azure AD for active directory service. As far as datacenter space and power usage, a lot of the time the server room is located in the utility room / closets, they already have the space and the building and the power infrastructure. Typically they have vendors that require VM's because the vendor software is not cloud based, many of these enterprise software can consume quite a lot of CPU/RAM/DISK and are very latency sensitive. Having a couple of powerful vmware hosts and an all NVMe SSD SAN is really really nice for performance and speeding up these applications and not paying 4K+$ a month for equivalent hardware in the cloud. You can even argue against the capital investment cost because a lot of this gear you can lease directly from DELL, and have full service contract for 7 years 24x7 4 hour SLA on hardware.
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