I think eventually this will be great. At launch there are just about enough services to convince people to get on board assuming that live migration is included (an issue in Azure) for maintenance. I'd certainly buy it for IaaS over VMware any day. Once all of the PaaS stack is ported, and that shouldn't be long, this will be a truly great platform and a big enabler for development.
Personally I can't see a world where AWS doesn't respond. All of their stack is based on open source and they have hundreds of genius coders working to a very effective DevOps model. The only thing holding them back is a pricing model, and they are certainly smart enough to cope with that. It's possible they could rent hardware, or resell own brand hardware, they already have snowball and snowmobile so they aren't afraid of hardware. They already have SPLA licences in place so MS licensing wouldn't concern them either.
This is all very good for consumers, and it's nice to see a proper tech fight again which pushes things forwards. That said, unless there's a good reason to be on premises such as being on a ship out to sea I'd still go with real cloud. After all, who wants to be swapping out failed drives and fans these days? Even compliance has caught up with public cloud in most sectors.