One of the most interesting new technologies that has come out recently is Cloud Computing, the most popular instance seems to be the Amazon EC2 (Elastic Cloud Computing). I think it would be good if there were some open alternatives to EC2.
Amazon charges $0.10 per compute hour for a virtual machine that has one Compute Unit (equivalent to a 1.0 to 1.2GHz 2007 Opteron core) and 1.7G of RAM. Competing with this will be difficult as it’s difficult to be cheaper than 10 cents an hour ($876.60 per annum) to a sufficient extent to compensate for the great bandwidth that Amazon has on offer.
The first alternative that seems obvious is a cooperative model. In the past I’ve run servers for the use of friends in the free software community. It would be easy for me to do such things in future, and Xen makes this a lot easier than it used to be. If anyone wants a DomU for testing something related to Debian SE Linux then I can set one up in a small amount of time. If there was free software to manage such things then it wuld be practical to have some sort of share system for community members.
The next possibility is a commercial model. If I could get Xen to provide a single Amazon Compute Unit to one DomU (not less or more) then I wouldn’t notice it on some of my Xen servers. 1.7G of RAM is a moderate amount, but as 3G seems to be typical for new desktop systems (Intel is still making chipsets that support a maximum of 4G of address space , when you subtract the address space for video and PCI you might as well only get 3G) it would not be inconceivable to use 1.7G DomUs on idle desktop machines. But it’s probably more practical to have a model with less RAM. For my own use I run a number of DomUs with 256M of RAM for testing and development and the largest server DomU I run is 400M (that is for ClamAV, SpamAssassin, and WordPress). While providing 1.7G of RAM and 1CU for less than 10 cents an hour may be difficult, but providing an option of 256M of RAM and 0.2CU (burstable to 0.5CU) for 2 cents an hour would give the same aggregate revenue for the hardware while also offering a cheaper service for people who want that. 2 cents an hour is more than the cost of some of the Xen server plans that ISPs offer  but if you only need a server for part of the time then it would have the potential to save some money.
For storage Amazon has some serious bandwidth inside it’s own network for transferring the image to the machine for booting. To do things on the cheap the way to go would be to create a binary diff of a common image. If everyone who ran virtual servers had images of the common configurations of the popular distributions then creating an image to boot would only require sending a diff (maybe something based on XDelta ). Transferring 1GB of filesystem image over most network links is going to be unreasonably time consuming, transferring a binary diff of an up to date CentOS or Debian install vs a usable system image based on CentOS or Debian which has all the updates applied is going to be much faster.
Of course something like this would not be suitable for anything that requires security. But there are many uses for servers that don’t require much security.