Anther savings is that if you're using Amazon you're stuck with a few different memory sizes of virts that you can get from EC2: 1.7GB, 7.5GB, 15GB, etc. If you need a bunch of 4GB virts then you're stuck buying 7.5GB RAM servers and trying to politically deal with bundling up apps on the same O/S instance, or else just wasting RAM.
You'll get better "compression" by being able to size the virts yourself by running your own internal cloud.
I've also been doing these calculations repeatedly because our board of directors seems to be infected with irrational lust for the cloud, and keep on determining that break-even on a cash-flow basis comes after about 3-4 months for 100% duty cycle instances -- so Vijay is probably being conservative at what can be achieved in the real world.
However, if your IT department spends millions on expensive enterprise-class tools and money is flying out the door to VMware, EMC, NetQOS and every other IT vendor out there, then it may be cheaper to go with the cloud -- but in going with the cloud you are getting Amazon's framework build on top of Xen and open source or in-house tools. You are not getting infrastructure engineered to "five 9's" you are getting infrastructure engineered to "you bet it'll fail -- so spin up another one!"
If you run the numbers on cloud and find that it makes economic sense, you should fire your IT staff and start over from scratch with people who understand cheap open source.