Peter Coates talks about pros and cons to Hadoop in the cloud:
Hadoop was developed for deployment over Linux running on bare metal. Cloud deployment implies virtual machines, and for Hadoop it’s a huge difference.
As detailed in other articles (for instance, Your Cluster Is an Appliance or Understanding Hadoop Hardware Requirements), bare-metal deployments have an inherent advantage over virtual machine deployments. The biggest of these is that they can use direct attached storage, i.e., local disks.
Not every Hadoop workload is storage I/O bound, but most are, and even when Hadoop seems to be CPU bound, much of the CPU activity is often either directly in service of I/O, i.e., marshaling, unmarshaling, compression, etc., or in service of avoiding I/O, i.e., building in-memory tables for map-side joins.
Read the whole thing.