The web hosting costs basically nothing. Most of the cost comes from the database.
Modern computers are mind-bogglingly powerful. An old laptop off eBay can probably handle the load for business needs for all but the very largest corporations.
* Usage won't be uniformly distributed and you may need to deal with burst traffic for example when a new version is released and all your users are pulling new config data.
* Your application data may be very important to your users and keeping it on a single server is a significant risk.
* You're users may be geographically distributed such that a user on the other side of the world may have a severely degraded experience.
* Not all traffic is created equal and, especially paired with burst traffic, could have one expensive operation like heavy analytical query from one user cause timeouts for another user.
Vercel does not solve all of these problems, but they are problems that may be exasperated by a $4 droplet.
All said I still highly encourage developers to not sell their soul to a SaaS product that could care less about them and their use case and consider minimal infrastructure and complexity in order to have more success with their projects.
Okay, am I crazy or can you not really solve this without going full on multi-region setup of everything? Maybe your web server is closer to them but database requests are still going back to the "main" region which will have latency.