Hope I'm not rehashing too many old points, but just want to also note that dedi also will take more time to maintain.. I've gone back and forth myself and depending on the situation each can make sense, though for my stuff i only use Linode now.
One example I've been through quite a few times on various cheap dedi providers -- when that cheap power supply or NIC or hard disk fails, you end up with something like this on a dedi:
- If you were lucky, you set up or bought a monitoring service that alerts you when connectivity is lost. Otherwise, you discover when trying to connect that your server is down, or another user tells you.
- At this point, you don't really know if there is a hardware problem, a software problem, some intermediate network problem or data center problem like a power outage. The dedi providers I have used have nothing close to the Linode highly active forums where we see nearly instantly when these sorts of broader problems happen.
- You contact your dedi server provider and ask them to remote reboot, which they try, and the server never comes back up, because its power supply is dead
- At this point you open a ticket with them saying your server is not pingable. Depending on the level of support of your provider, they might respond within half an hour or so, but you need to be monitoring the situation and making sure they respond, escalate if they don't, etc. WIth the cheaper providers, there will be few techs and a continuous flow of breaking servers and the response times won't be great.
- Eventually a tech will go physically examine your server and diagnose why it's not powering on. Once they figure out its the power supply, they'll have to find a new one. Usually they will have spares around. Once i had it happen that the power supply was "obsolete", so they had to switch the chassis, which required getting a new server shipped. All kinds of crazy things can happen here, and if you care about your uptime, you need to stay on top of the process for hours and hours -- sometimes days.
- After you get the working power supply swapped in, they'll boot the server, and it will hopefully come back up.
- It might not come up, if, for example, you recently had modified some startup configuration option without testing it by rebooting. In that case, you' d need to get a remote console, which sometimes costs extra money and can also take some time to set up. It's often not like Linode where you click a button on the web page and have a console, whenever you want it. It's fundamentally easier to do this in a VPS like Linode, since it can be done all in software, as opposed to fancy hardware VGA-emulating virtual KVMs for physical servers.
Keep in mind that if some failure happens while you're on vacation or something, your server will be down until you can react. I've never had a non-managed dedi provider that actually fixed some hardware problem without me first pointing it out. Of course it's also the case that if your Linode goes down while on vacation you're also in trouble, but I've found this very infrequent compared to dedi provider issues especially considering Lassie reboots etc.
The only time I've found it appropriate to have a dedi provider is when I had an actual in-house team to keep them alive, and i had 10 or so physical servers and needed the power and predictability of a dedicated server Since the team had other lower-priority things to do while the servers were up, it wasn't really much more of a burden for them to handle keeping the dedi servers up, considering the extra processing power, space, etc. for the price. I've also opted for a colo rack in a similar situation -- could tolerate some downtime, needed huge, huge CPU and bandwidth capabilities, had a team to keep it alive.
Having said that though, I've also had points where I had a company get 20+ Linodes, many of which were for a sophisticated test environment that really needed a lot of server nodes all hooked together, and some dev tools like subversion, wiki, etc., by a private vpn. This would have been ridiculously expensive and unreliable with dedi servers and the power of even the cheapest dedi server would have been more than really needed.
And as others have pointed out it's extremely convenient to just push a button to upgrade/downgrade your Linode level as resource needs go up/down, and Linode's prorated pricing makes this very affordable. On a dedi server, switching to a different server is risky and time consuming because OS installs on physical hardware can be very sensitive to hardware changes and things can break if you're not careful.
And one more factor, which basically elaborates on earlier comments on Linode support: I've found dedicated providers to be very shifty and unreliable -- they are always buying and selling companies and switching business tactics. I once bought a dedi server for a good recurring price by spending a higher amount up front, ie $90 for the 1GB memory upgrade instead of an extra $5 a month or something. Within months, the place announced they were increasing prices 25% because they were supposedly going to offer better support, which they didn't. Can anyone imagine Linode ever doing that? Linode has been rock solid in its business ethics and is gives us a seemingly constant stream of free memory and disk upgrades, along with cool extra administrative features. In general ,after dealing with many types of purely internet-based IT service providers over the years, the business practices of Linode really stand out and are without a doubt the best I have seen.