Having a company that first started with web hosting and moved to web development one year later I can say you are completely wrong! If you are a reseller (VPSes, reseller accounts) and host your clients than you’re up for trouble.

If you prefer to call it a full service (web development, hosting, management) and price accordingly then there’s nothing to lose. I used to offer even shared hosting for clients that didn’t buy any other services, and it worked, until I figured that I should stick with the web development clients only, charge more, and offer a great service to them.

This way I can configure their accounts and servers the way I like, and I don’t have any issues because my client’s host has switched some configuration in the server. I prefer getting calls and emails regarding email quota’s as opposed to “The site is full of errors. What have you done?” and the try to explain to my client that I can’t have done anything since the site isn’t hosted by me.

It is so much better hosting your client’s sites. It sure is painful in the early days, but in the end it pays off big time!