[garethmcc]

You forget a few things:

1. AWS and other cloud vendors don't have just one data centre per region, they usually have three redundant locations for availability reasons connected via a direct fibre link. 2. Cost of time; time to find hardware, prep hardware, maintain hardware 3. Cost of your agility. If you need more compute capacity, it will take you weeks to get the hardware required and installed, otherwise you need to have unused hardware sitting around "just in case". 4. Cost of your availability. What if you have a sudden spike of traffic within minutes and the current available hardware cannot service it? At least in the cloud you can spin up short lived resources to manage that load before it throttles back down again. 5. Permanent running costs of fixed hardware. A lot of implementations do not need permanent hardware running and can throttle down to a base of almost nothing so the average running cost on a monthly basis is actually very low.