7k$/month is cheaper than hiring an additional head.
Basically, with his skillset, maybe it makes sense. With my skillset I'd rather have the hassles with the dedicated setup.
Obviously there's other overhead/costs involved, but surely he could find somebody for 60k+ a year (I make less then that at my current development job but I'm from Michigan)?
I agree though with one of the parents, AWS costs here can likely be significantly reduced. I cut costs in half by (a) reserving instances and (b) thinking about EBS and downgrading / downsizing where possible rather than using the defaults.