Whether you co-lo or run in the cloud it seems to me that you would still want the same types of redundancy/failover processes in place. The advantage of EC2 is you can easily set up servers in multiple places across the globe (or at least across the country if you just want to host in the US.)
and there are many downsides to EC2, dependence on a third party to a greater degree, shitty disk IO, instances go down more frequently than real servers, inflexibility with hardware (no SSDs), etc, etc.
There are co-lo provides that have data centers in different places.
