Since you already have a bunch of servers, making them useless by moving to Azure (or EC2) will not pay. But when the time comes to replace or add hardware you should consider a hosted (i.e. "cloud") environment, or even directly hosted solutions.
Your supposition of higher TCO for Azure/EC2 is far from certain. If fact, it is more likely that the reverse is true. How does your cost structure change if you don't own server and storage hardware? The monthly cost has to be much higher than you think for server ownership to be cost effective.
The compelling bigger issue is whether your company will trust Microsoft/Amazon and is willing to not have the servers and data on site. These issues are a problem for many companies - personally I am on the fence. A couple of podcasts ago Jeff and Joel talked to the guys from DocType who run on EC2.
Reasons to consider the cloud ..
1- Money. No hardware is owned, you just pay per month for usage. Lower "TCO".
2- Less Administration. No hardware, no obsolescence, no failures, etc. Fewer people.
3- Flexibility. Capacity is fluid, not discrete, and can be changed on the fly.
4- Availability. When is the list time Amazon has been down?
Reasons to not consider the cloud ..
a- Security. You have to trust the cloud provider.
b- Money. You are paying monthly. Some companies don't like that.
c- Availability. The apps are down if the internet connection is down.
d- Comfort. Some people/companies like to have the infrastructure under their control.
Other issues anyone?