But this ignores the cost of paying someone to setup/maintain that rack, cost to fix the server when something goes wrong, etc.
Setup/maintenance of physical infrastructure has a cost too.
A lot of conversation is about the cost of acquisition, but does not compare the prices of maintenance, hardware failure/outages, and recovery.
For example, with dedicated hardware and a guessed failure rate, how much does it cost, over time, to 1) replace the hardware, software, and configuration and 2) value lost (could be goodwill, could be $$$) due to outage.
With AWS using chef/puppet/salt/etc., it's trivial to boot up new nodes and down the malfunctioning ones. The value of that is super high.