I am a reasonable, in-house system architect for a major federal agency. Yes, we use virtual servers for most of our applications. This doesn't reduce the number of operating systems that we have, but it certain reduces the number of physical servers and disk arrays that we have to maintain. It's a scalable environment and allows for redundancy between data centers. Most of our users who access our systems are scattered nationwide, so network outages either affect only them, or must be so severe that they take down mutiple data centers each with multiple ISP connections, power sources and HVAC. I supposed that you could call this operating our own "cloud." I don't really care what you call it. I believe it's the among the most efficient and effective solutions for our needs, but doesn't hold us hostage to any one service provider. During out last phase of the migration to our current architecture, our P2V process was straightforward and comfortable. The tools are robust and mature.
If you are thinking of replacing physical servers with virtual or a "cloud," please either build the cloud yourself, or encrypt at the LUN or virtual disk level. For God's sake don't allow any data at rest or in transit to reside or cross over networks owned by third-parties, contractors, etc.
BTW, yes, an MBA or MPP or even PMP probably would go father to get to up to the higher grades in federal public service than a computer science degree. Then again, a CCIE wouldn't hurt either.