20€ is really cheap for colocation IMO. Cloud hosting isn't primarily about cost savings. It's more about agility, high availability, rich features, and offloading maintenance to the provider. Like sdifox said, commodity hardware does fail so you can't compare a single physical server to a public cloud. I'm not a sexy CEO
, but most businesses these days are better served with Cloud hosting. Although it seems like AWS and Azure have fat profit margins in their income statements, I know from experience it's a competitive industry with way too many players worldwide. DigitalOcean and Linode cut hourly rates drastically about 5 years ago, and I'm not sure how they make profits, if at all. The good news for the successful providers is that you can pack a LOT of tenants/instances onto a single physical host. The bad news is that x86 servers depreciate to 0 over a number of a years, so you need massive economies of scale to compete.
To state the obvious, cloud computing services are intended for business use. That includes sole proprietors such as independent software devs. So the costs are very fair IMHO, and you can control the costs. There is essentially no demand for cloud computing by consumers, because they have plenty of free/cheap SaaS platforms to post personal content. Such as social networks, blogging or whatever people like to do these days.