Is it really so much cheaper to pay for "hosted" apps rather than just plumbing your own on VPS/metal?

It's far cheaper to do it yourself, but the entire point is that you outsource the management of the service. Lots of people don't want to deal with database failovers, or - god forbid - deal with Kubernetes control plane issues.

On the opposite, it is more expensive, and any large enough company should probably at least consider renting metal rather than services. For a small org, though, it lets you avoid a lot of infrastructure/ops work.