The thing about AWS that is so impressive is not what it does. What AWS does was previously done by every single IT department at every company across the globe. What is impressive is the scale at which they do it. When you move to a world of every product hosting their own AWS equivalent, you've removed the challenge and impressiveness of AWS since you no longer need their massive scale, you only need enough to host your own product.
Setting up your own servers was not a bottleneck to the generation of internet companies that preceded AWS, and time has only made hardware cheaper, bandwidth more affordable, and OSS higher quality and more plentiful. It is easier than ever to host your own services, AWS just makes it cheaper up front thanks to their massive scale.
Point being, people aren't choosing AWS because AWS solves a problem they're incapable of solving, people are choosing AWS for pricing flexibility and faster time to market.
Setting up your own servers was absolutely the bottleneck. Providing on demand scalable computing and storage untethered a generation of garage startups from venture funding. Prior to 2007, if you had a great idea you could build it and then start renting, or building and colocating, servers to run that app for you, at considerable up front expense. Plus, you got to do all of your own system administration, up to and including driving down to the colo when you couldn't adequately diagnose issues remotely.
So when you say "what AWS does was previously done by every single IT department at every company across the globe" yes sure but (1) it was done worse in many cases, with data loss or significant downtime, and (2) there were fewer such companies by magnitudes, because of the cost barrier.
What AWS did was take a costly process, done inconsistently and to varying degrees of correctness across the business world, and make it available to everyone at a very high quality, with a innovative pricing schedule.
Setting up your own servers was not a bottleneck to the generation of internet companies that preceded AWS, and time has only made hardware cheaper, bandwidth more affordable, and OSS higher quality and more plentiful. It is easier than ever to host your own services, AWS just makes it cheaper up front thanks to their massive scale.
Point being, people aren't choosing AWS because AWS solves a problem they're incapable of solving, people are choosing AWS for pricing flexibility and faster time to market.