I haven't used the Image component but I've hosted a Next.js project. leerob's comment said "To clarify again, you do not need to use Vercel for optimizing images. It works using next start or any loader of your choice.". This implies that it would still work in SSR using any hosting method, it doesn't mean you're forced to use Vercel's hosting services.

There should be a warning that it won't work with SSG and is only for SSR, but there are also many features on next.js that are SSR only.