Re: "This was inevitable" - but it also looks stupid
Nadella may be conservative (especially when he speaks about women and salaries), but is also obsessed with very few ideas, Azure being one (the other looks to be the data slurping)
IMHO a sensible strategy for MS would be to allow for both local and remote applications without huge price differences, with a strong integration between the two models, so companies can decide where to put their workloads considering their data sensitivity, availability, legal and costs reasons. One model doesn't fit all. Before Nadella, MS understood better different customers needs (because it meant more money, sure) , now it looks to have switched into a "cattle model" only.
Probably MS believe that companies with strong reasons to keep data local are also those with more money (which could be a truly flawed assumption), so they will accept to pay more for the privilege of keeping their own precious data under their full control. But the company with more money are also those that have the resources to move to other options if they see it's cost effective.
I would be also very careful about going to kill all those ISVs and the developers pool creating specific applications designed to be run on-premises - for several reasons-, and force them to choose other solutions (if they didn't already). You can't really believe to run everything from the cloud, at least for several years yet. The world is not made only by some ERP, customers database, and shopping applications.