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It’s worth pointing out that the middle ground between black box cloud hosting like Heroku and vanilla EC2 is Engine Yard Cloud. They give you a tested and scalable Rails stack with a web UI for management, but under the hood you still have root access and the AWS keys, so the billing is transparent, and you can install whatever software and use whatever instance types you like, which is useful if Heroku’s architecture doesn’t fit your load profile, or you need some piece of software that is not available or very expensive as a hosted service.
Oh and of course they provide support as well.