Re: "where it hopes to save an estimated $400 million annually"
"Microsoft's Azure cloud is having difficulty providing enough capacity to meet demand"
I miss the good old days. When calling in for some service, I'd get the reply, "Sorry. Our computers are down." With the air of finality that there is nothing to be done about it, as it's some fundamental law of nature or something like that.
"Also cloud infrastructure has a ton of overhead - you would have to provision much more resources to match the performance of natively running infrastructure."
Been there, done that. I was the chief cook and bottle washer for an internal corporate system that consisted of some very lightweight web services. We were given the option of "buying" in-house server support from our IT department. At some outlandishly high rate. About $50,000 per month per server* IIRC. But why worry? It's just inter-organizational "funny money". Not real cash. The alternative (which we chose) was to rescue a couple (for redundancy) of Sun "pizza box" workstations and reconfigure them as web servers. They were sufficiently powerful enough to support the demand of some dozens of concurrent users.
*I came to find out that this figure was high due to corporate maneuvering to sell off our IT division. Big numbers like the above made that business unit look quite profitable, justifying a very high sales price. Which came back to bite the eventual buyers in the *ss when contracts were renegotiated with them for much lower, competitive services. The moral of the story is that mere peons like myself can never understand the devious machinations of the BOD or accounting department. There is often far more money to be made reorganizing business units than actually rolling product out the door.