With only 500 customers, you don't need the power of EC2. There are plenty of places where you can get a Xen instance or buy a dedicated box for a monthly fee

With only 500 customers, you don't need the power of EC2. There are plenty of places where you can get a Xen instance or buy a dedicated box for a monthly fee that track closely enough with EC2's pricing. What those alternatives lack is the ability to add instances (potentially dozens) with minimal notice. I've had great uptime with EC2, but it just seems overkill for 500 customers. EC2's advantages come when you get big to the point that you need to increase capacity at a moment's notice.