Disruptions in Server / Data Center Market With the advent of cloud computing, data storage and scaling has become extremely cheap when compared to the strictly physical server alternative (which require a dedicated facility and substantial fixed/variable costs). Implicitly, we could view cloud computing as having comparatively big ecological advantages over dedicated servers. From this perspective, companies with server/data center needs will have huge incentives to choose cloud computing.

My question is, is the verdict really this simple? Wouldn't some companies be reluctant to use cloud computing for security / conflict of interest reasons? Instead, might they prefer to be the sole custodians of their data? For example, investment banks, hedge funds, ect?

Are there any other compelling reasons that might hold the server / data center industry away from adopting the cloud?
Institutions like banks for many years now keep  back-up archives of their data in physical locations owned and operated by other legal entities. This is a standard case of outsourcing to specialists a requirement of a business process that is not a directly value-added activity. So the "sole custodian of one's own data" has been proven in the market not to be strong enough against cost-reduction considerations (or against price/value optimization if you wish).  

Cloud computing is comparatively still new. The cost incentives to adopt it are indeed very strong. In practice, I believe we will observe, as in the past with other innovations, a certain degree of selectiveness: as the risks and rewards of cloud-computing will become more well understood (and measured), companies may select certain parts of their activities to keep off the-cloud, while enjoying the cost reductions for all the rest. 

This by the way, can be squarely put in the framework of the, dear to us economists, marginal optimization - it is not a "yes-or-no" decision but a process where each company will adopt the Cloud up to the degree where marginal benefit equals marginal cost.