You don't have to manage a datacenter just because you don't go for Amazon. There's tons of companies that will do it for you, at various levels. You want colo space, nothing more ? Fine. You want dedi hosts with a few of your own machines in between ? No problems. On top of that, a lot of dedicated server companies will have spare instance so spinning up new devices is certainly easy enough. Feel free to contact me if you need solutions like this.
I think there's one huge advantage of Amazon : management effectively doesn't get to set policy on the datacenter, so they don't get to screw it up. An internal company department would use something like VMWare and won't let you spin something up without endless approvals, whereas Amazon treats you like a customer.
There are many software packages that are licensed to an individual peice of hardware. Tied to that are USB authentication dongles, and even parallel port dongles for some old school commercial software.
I think after 25 years in the industry I know a lot about software licensing. Enough to know that just because lots of software packages are licensed that way doesn't change the fact that they are silly.
What I understand so far - it is physically bundling a fixed amount of virtual machines to a physical host - in the example "dedicated host" 22 * m4.large.
Bundling your virtual machine to one or a series of physical hosts / on the same network segment is a service you can have from quite a few hosting providers (if you ask).
If you opt for a solution like this, it is also most likely that you will run an enterprise scale solution and you will do so for quite some time - at least 6 months upwards.
Keeping that in mind together with a lifetime of at least 2 years for such HW, you will be paying 8 times the HW cost for a 2y lifetime for a management layer (storage / connectivity you pay per GB with EC2).
I guess everybody will have to see how this fits into their business model for non volatile / predictable resource demand or a set of when physical iron might be a better choice (colo or rent).
For one of my clients that I manage multiple racks in two different locations for with 150+ VMs, "managing the hardware" comes out to about 1-2 days a year in aggregate to bring new hardware in and wire it up (most of that is travel) + 20-30 minutes to investigate the very few issues we can't diagnose and fix via IPMI. I pop a server in, attaches power and ethernet, checks that the IPMI is reachable and that it sees the PXE server, and beyond that "managing the hardware" comes to yanking the occasional dead harddrive and inserting a new one, and ever now and again to confirm a server is dead.
Meanwhile with EC2 I see most of the same non-hardware issues (e.g. kernel panic, applications occasionally spinning out of control and taking a server down) that are just as trivial to handle via IPMI as via the EC2 console, but we also have to engineer around things like the lack of solid, stable, directly attached RAID arrays, which we don't need to worry about with the bare metal servers.
And no, EBS does not count - the number of times volumes have gotten stuck in attached state on a failed instance terrifies me. It also can't in any way match directly attached SSD RAID setups for performance which is another reason why it ends up taking more ops time: You end up with setups that simply take more vms to compensate for platform limitations.
I absolutely think EC2 is great for things like large batch jobs etc. where your requirements vary wildly, but most people don't even have enough daily variance for that to get anywhere near compensating for the cost of EC2 (and nothing stops you from deploying hybrid approaches - in fact I'm working on hybrid approaches mixing bare metal servers with EC2 to handle batch jobs and load spikes now)
For example, if I want 128GB RAM and SSD disks, their prices suddenly go up to thousands of dollars per month because they're all some kind of beefy Dell or HP, whereas Hetzner can give me a single-processor, 6-core Xeon E5-1650 3.4GHz + 128GB RAM + 960GB SSD for $123/mo. LeaseWeb has cheaper SuperMicros, but they either max out at 32GB, or they don't have SATA disks. They're skewed very differently: With Hetzner you can't pick "less RAM, lots of CPUs" and LeaseWeb doesn't have "lots of RAM, fewer CPUs, SSDs".
A vendor like this needs to offer a much wider range of specs to be worth investing one's entire infrastructure in, to be honest.
Ones that I'm personally familiar with: Hivelocity in Florida ReliableSite in NY WebNX in LA 100TB (a SL reseller in some locations, and they own their own in others) OVH (lower quality, lower price, great for various workloads, NA data center) Hetzner (Germany)
It would be interesting to see how much you can squeeze the dedicated hardware with the largest EC2 types though.