I think there are lots of authors out there for whom self-publishing is not an option. It requires being able to use new desktop and online software applications (or being willing to learn) and that's a tall order for some, even for software like Word. Others don't have the time, or can't find a small press to accept their work, and just want someone to take their manuscript and deal with all of the production and editing steps. Believe it or not, there are many authors who are not focused on sales, but rather the dream of being a published author and getting their ideas/stories out to the world, even if the audience is limited.
I think there are some legitimate service providers filling that need, and doing so for reasonable prices considering the amount of work required. I contract out services with separate vendors like developmental editors, copy editors, cover designers, and paginators, but if I didn't have that knowledge or network, a company offering a package of services would be a real convenience and a fair deal ... as long as it's priced right.
Then there are the scam firms who are utterly taking advantage of new authors. I was at a publishing conference this weekend and someone from IngramSpark told the story of an author who came up to her booth at the American Library Association annual convention and said that his "publisher" was charging $15,000 to include his book in the Ingram database. "How much would it cost if I did it on my own?" Her response: "It would cost $49 for a new title in IngramSpark."
