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I'd colocate if you have a proven/reliable revenue stream, predictable growth, you anticipate more than 6-RUs worth of servers, or need very high speced servers (e.g. 192GB of RAM in one box). You can build entire servers for the cost of one month of PaaS/SaaS in many situations. There is a whole strategy that addresses every single issue that has been brought up (e.g. hardware failing, sys admin, being on call).

Feel free to connect. I can speak to how I do it with about ~1.25 racks worth of servers for my company for ~5 years now. I've also done it for MUCH larger international companies. No, I am not trying to sell you something :)