Got the reply from Grant (see previous post) and he highlights that firstly they used TFS 2008 (this was back in 2007) and it was a huge infrastructure overhead to accommodate the hosting story with TFS 2008 as you could not share instances due to security concerns etc etc - luckily with TFS 2010 that was address in a way making use of collections.
And then the mindset of people and the willingness to have you IP (source code) reside in the cloud. This is one that I'm going to struggle with but hopefully with the huge emphasis on cloud these days that mindset is being chiseled away.
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