I imagine if you're already integrated into the AWS ecosystem, there's a convenience in treating your on-premise node as "just another node". You can run EC2 instances on it, and manage it using the same tools. But with better latency and more robust local connectivity due to the proximity.

The ability to build AMIs and run them on Snowcones gives you the power to build applications that do all sorts of interesting filtering, pre-processing, and analysis at the edge.

To me the product feels like snakeoil and I'm skeptical it will take off in a big way, but I think more than enough customers will use it to justify their investment.

Remember, AWS is selling a platform. The more claws they can sink into their customers, the harder it is for them to switch to a competing one.