We have thousands of users who run their servers on Amazon using one of our AMIs (http://bitnami.org) Whether EC2 is more or less expensive than the alternatives is a complex topic highly dependent on your particular requirements. Having said that, our perspective is that you need to consider the overall value you get for your money. There are features like the ability to take incremental snapshots of your entire machine for backup or cloning purposes that have no match by other hosting providers. That feature alone saves us innumerable hours of development and system administration. Our staging servers are not setup like or production servers, they can be exact copies of your production servers, on demand. How many bugs/issues do you think we avoid with that? For us, enough of them that any price difference with a "traditional" setup is not worth it