[AnthonyMouse]

> Buying and running your own server is much more expensive than running an EC2 box for pennies per hour.

Is it really? You can get a Pentium III era server essentially for free. Suppose it uses 60 watts (0.06KW). At the national average 12.2c/KWh that's 0.732c/hour. An Amazon micro instance is 1.3c/hour. That's the "I only need one instance" rate; if you need more than one then you can get slightly newer hardware with virtualization support which makes self-hosting even more attractive.

> And even if you do end up self-hosting everything, chances are you won't be responding to security issues as quickly as a full-time team of professionals on call.

Amazon doesn't maintain your VM. When your VM is vulnerable to Heartbleed or Shellshock you still have to patch it yourself unless you've configured auto updates, which applies the same to self-hosting.

What Amazon provides is convenience. If you need about a hundred cores for twelve hours, you can buy a dozen 8-core machines on eBay, use them for twelve hours and then sell them again for about what you paid for them, but that's a huge pain compared with configuring the equivalent on EC2. EC2 isn't necessarily cheaper, it's just a lot easier, especially if you don't already have the requisite experience and don't want to learn. Which is much the same as it has always been with free vs. proprietary software.

[rosser]

The CapEx costs of a server are a fraction of the OpEx costs of colocation (rack space, power, bandwidth, &c).

[AnthonyMouse]

That's kind of the point. Most of those costs don't actually exist at small scales. The space required for one or two physical machines is negligible, with so little heat load you don't need a dedicated cooling system, there is no bandwidth cost when the server is in the same facility as the users, etc.

You pay Amazon to host your VMs because it's easier, not because you're saving money. There are only a small number of use cases (like having a highly inconsistent/unpredictable load from day to day) where paying someone to host for you will actually save you money.