The question is, do you need as much elasticity as Netflix does?
Yes, Elasticity is THE advantage for Netflix when it comes to using EC2. Consider the vast differences in usage they have in North America during the evening after dinner vs during the middle of the night. I can only imagine their fleet capacity goes up and down drastically every single day. This amounts to huge savings over having the bare metal.
And EC2 is more than 2x as expensive as dedicated...
Don't get me wrong, EC2 has advantages, but it's not cost (unless Netflix is paying much less than the public prices, which is possible).
But yes like in "Some hardware failed, but yeah that's not my problem anymore!"
I wouldn't want to switch to AWS from this; bare metal plus a good account manager gives us a lot of visibility and reliability; Netflix blogs a lot about the chaos that is AWS, and we save a lot of effort by having machines that for the msot part just work, consistently; instead of having to deal with instances where performance is variable, etc. Running our own datacenter might be nice for some reasons: more control and information about the network, ability to make hardware choices that don't match the providers offerings, etc; but running a datacenter is a big change.
Regarding hardware failures - it's not that hard to arrange proper redundancies in your systems, and it will certainly be cheaper than outsourcing it to Amazon. Cloud only becomes cost effective when your spikes are several times larger than your normal traffic, and you must maintain good QoS at all times.
Two weeks later, they had to do it all over again because something went wrong with the air conditioning and the servers got cooked.
I kept recommending going with AWS because of that... I no longer work there, but as far as I know they're still running their own servers.
If it really were like 'apt-get install redundancy' I'm pretty sure that AWS would have 1/10th the clients it has now.
$40 / month for 4gb of ram, 4tb of transfer, and two cores, is very cost effective. Linode is also very reasonable.
If all I need is that scale of computing, what should I use instead that makes sense other than cloud services? Setting up colo or a dedicated box for that would be more expensive and a much larger hassle.
They're also far cheaper than AWS, where you pay a premium for the elasticity and access to the ecosystem. If there's anything to compare AWS with, it would be Google Cloud Platform, Azure and maybe Rackspace.