OP. I tried to address that in the post. I'm not sure how to explain it differently. The only reason you need to spin up more instances to handle the load is because of how slow the machines are in the first place. That $750 you spend on 2x m3-xlarges could get you machines that can handle 4x the load (or more). Under normal conditions, you spend $750/m. Under peak, you'll spend $3000/month with EC2 but still $750/m with dedicated (plus it's less to manage).
Also in the post is that for the scenario you're describing, having dedicated servers handle the base traffic and relying on spot instances for the spikes, is much more cost effective.
The main issue with the hybrid approach is devops cost. you will be basically dealing with two very different infrastructures, and building the ops for such a hybrid system could be costly (in money and time). Taking this into account, the money you save shrinks, In addition, a more complex system most likely has more parts to fail as well, so your total reliability might suffer somewhat as well.
Another thing to take into account is inter-datacenter network reliability. I have personally ran a hybrid system (dedicated + EC2) before and suffered a routing issue. The upstream provider for the data center that my dedicated machines were in suffered a routing outage to EC2 US-East region (or at least to the AZs that my instances were in), and my EC2 web app servers could not connect to my DB for around 10 hours (during the day time too). If you have a hybrid system, during peak hours (where you have lots of EC2 spot instances serving traffic), networking issues could result in unexpected downtime. This is of course, in addition to the regular SLA downtime you get from either the dedicated provider or AWS, which is not an issue if you have everything hosted together, but could become an unavoidable problem if not.
My experience is that the devops cost drops: Most of the time you're dealing with a much simpler and more predictable dedicated environment - your challenges happen when you have to handle (rare) abnormal spikes.
In terms of inter-datacenter network reliability: You have to deal with this if you want reliable hosting anyway. If you spread your database and app servers across data centers, yes, you are begging for problems and the problem is that your app is not designed for resilience.
But you can easily enough do "hybrid" within the same datacenter, if you opt for any of the number of EC2 alternatives from companies that also do dedicated hosting.
If you are using a hybrid approach (assuming dedicated + EC2), you have to have the ops system in place to deal with the dedicated environment AND the EC2 environment, which is why devops cost will be higher. Of course if you only deal with dedicated hardware your devops cost could drop.
Inter-datacenter network issues are less of a problem when your datacenters are from the same provider, because they are responsible for making sure the connection is good. Plus, when problems do occur, you can troubleshoot fairly easily (when I had the routing problem with dedicated provider + EC2, I had to bounce back and forth with the network support for both a few times before one of them admitted the routing issue with the upstream network provider) as you are dealing with a single company.
I understand the hybrid solutions that other providers such as softlayer offers, but I was mostly addressing the suggestion of using dedicated + EC2 in the original article.
> you have to have the ops system in place to deal with the dedicated environment AND the EC2 environment, which is why devops cost will be higher.
Only if you choose your systems so that they can't be used across both platforms. I don't see why anyone would do that if they want to run a hybrid setup.
> Inter-datacenter network issues are less of a problem when your datacenters are from the same provider
If your data centers are from the same provider, your added degree of resilience is much lower.
> because they are responsible for making sure the connection is good.
That doesn't help you when one of the data centers goes out entirely. Such as when the power needs to be cut for fire brigade safety due to a fire alarm (yes, I've experienced that), or the supposedly redundant UPS's triggers failsafes and causes the entire site to go down (experienced that too), or when one of the sites see cascading failures take out heir entire network (seen that happen too).
Assuming you will have live, working network connections between your locations, and/or that all your locations will stay online is pretty much guaranteed to cut your availability.
Basically, if your systems can't operate independently, adding an extra data center means adding more failure points.
Rackspace and Softlayer both have dedi/cloud hybrid offerings. You don't need to support multiple companies or multiple private networks to get the benefits. They still offer multiple datacenters for reliability.
I am aware of that but thanks for pointing it out explicitly for others. I was addressing more about the original article's suggesting of running a hybrid system of dedicated + EC2.
Also in the post is that for the scenario you're describing, having dedicated servers handle the base traffic and relying on spot instances for the spikes, is much more cost effective.