I much prefer the middle ground of dedicated servers over the hassle of colocation and hardware management. (16GB RAM quad core with 2TB raid1 from OVH for £65 a month are a good affordable level, and very quick and easy to spin up new ones).
Building your own servers is dirt cheap, but there's always the risk of hardware breaking, and you can't exactly scale up very quickly.
But the middle ground, rented dedicated servers, can be a perfect compromise for a lot of companies. Scaling up and adding servers might take a day instead of instantly, and it costs more than owning servers, but you get all the benefits of managed hosting, broken hardware simply isn't something you need to worry about anymore. If a server goes wonky, just scrap it and rent a new one.