When this solution works well, it is often the easiest solution because it does not require a redesign of the software. However, there are many problems with scaling this way.
The problems that follow are apt, but often scaling up is a perfectly reasonable response, especially if it means you can spend precious engineering time on other problems and keep the team slightly smaller. But do need to know when re-engineering is appropriate, in advance. Especially true for the last problem: scaling up may not solve the scaling problem at all, regardless of cost.