Don't start a conversation with an opening generalization like that if you want something constructive. Especially when the rest of your post is clearly based on the single anecdote of your experience.
>Running your own hardware is AWFUL.
Maybe for you. Not for any sysadmin with even just a couple of years of experience.
>patching operating systems
We're talking about instances, none of that sysadmin stuff goes away if you're on AWS. If you don't have patching management for operating systems on AWS then your instances are screwed. AWS instances don't eliminate the need for sysadmin work.
The only real difference is the hardware management. And if you read my post you would have seen that I said using aws for the on-demand flexibility is okay. All of the static workloads are what belongs down in your datacenter.
Netflix doesn't run 1/3 of the Internet traffic off of AWS, only a tiny subset because of the aforementioned shitty economics. The real workhorses are in custom netflix servers at peering points. Netflix would be bankrupt if they used AWS for video. Do some research before spreading free marketing propaganda.
This forum tends to only think in terms of explosive growth of traffic, which <0.1% of companies actually have to deal with. AWS flexibility is needed by very few successful B2C companies, but it's supported by the cargo-culting of orders of magnitude more developers ("jedberg said this worked for reddit, we need this because we're like reddit").
Also, your whole argument about non 'value-add' is bogus. That's the same excuse that management uses to outsource all development. Everything has a cost and provides some value to the company.