What happens when the SSD in your colo server malfunctions? What happens when the (an) SSD attached to your cloud VM malfunctions? Why do you think those two setups should cost the same?

Because it happens at a low enough frequency that dealing with it at places I've managed physical racks is pretty much a rounding error relative to the hardware costs.

And AWS has other complexities, so the devops costs with AWS are different, but rarely lower than managing physical hardware.

I'd never pick AWS based on total cost - it's an expensive convenience that first starts to pay off in terms of cost once you're big enough to negotiate huge discounts.

If you can afford it, it's great, but a lot of people who use AWS have no idea how much of a premium they pay for it.

If you go with dedicated servers instead of colo, the provider will still take care of swapping faulty SSDs. Prices are similar to colo, only downside is that you're restricted with the hardware the vendor offers and cannot guarantee that all servers are in the same rack. But neither of that is true with cloud providers.

Yes, which are mostly SRE salaries.