Unfortunately two things in the way of that are will and the cost of building a long tail of product features. First, that I'm not interested in running a standalone business, and second - my research here (it's been a lot) depends on being able to spend 20% effort on an 80% solution. I don't build a dynamo or a SNS and don't need a sales and marketing budget when I'm embedded in a large company building something purpose-built. The overhead of normalizing for industry wide generic use cases kills the 500% dream.
There's obviously room here though because AWS definitely takes a margin and that means opportunity!
You're severely discounting the very large margin those companies take. It is not hard to build a medium sized infrastructure, with quality, cheaply - if you have access to expertise. This usually means hiring a few infrastructure jockeys from the larger companies.
Your SLA will likely be better than with public cloud.
Generally, at any scale over ~500 computers that run continuously, investing in private infrastructure is going to be 1/2 to 1/5 the cost of public cloud, including people costs. The real levers for improving engineering spend are around complexity of your actual serving software, which doesn't depend on / isn't really influenced by who you buy your computers from.