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Virtual Private Servers
In 2006 machine virtualization technology that allowed a single server
to be divided into a number of independent servers, each capable of
running its own operating system, started to be used to host web sites.
This allowed the benefits of a private, dedicated, web server to be
enjoyed at a low cost (though will less performance). By the fall
of 2007 this was becoming fairly common, though not entirely
trouble-free, and prices in the $40/month range for a VPS with about
20GB of storage and 1TB of data transfer per month were common place.
Linode.com has a pretty
good list of the sort of things you can do with a VPS. Some
possible vendors are:
- 2010-Jun-26: RackSpace now has cloudservers the pricing looks competitive to Amazon S3 and at first glance looks less expensive that a VPS such as linode.com, but if you need some bandwidth the cost goes up quickly (as of June'10 the cost for outbound bandwidth was $0.22/GB). Still, if you need a box for some short term data processing requirement, these would be quite competitive. 
- 2010-Jun-17: fivebean offers VPS hosting using OpenVZ, they have some very small plans and their intermediate plans offer quite a bit of storage. 
- 2010-Mar-26: One would think the Google, Amazon and some smaller players like Rackspace would have the largest cloud computing systems, but the largest by far are probably the botnets. 
- 2009-Dec-04: A price / performance comparison of various VPS offerings, Linode comes out on top. 
- 2009-Nov-26: A recommendation for the FreeBSD VPS service. 
- 2009-Nov-12: The Remus project is attempting to bring transparent high availability to Xen based virtual servers, replicating the state of the running server machine to a hot standby which allows for seamless failover including things like in use sockets staying active. 
- 2008-Nov-13: In Oct'08 Microsoft entered the cloud server market with its Azure Services Platform. Naturally developing for this platform will put you are risk of lock-in. It looks like Microsoft will be keeping this open to non-Microsoft languages like Python.  
- 2008-Oct-29: In Stop Doing Things That Don't Work the author takes issue with VPS hosting. It appears his experiences have been tainted by VPS vendors that are running some form of "easy managed" VPS environment. Solutions such as Linode.com exist that do not suffer from this issue. 
- 2008-Oct-24: It appears to be possible to run a Windows server as an Amazon EC2 instance. I wonder what happens when Windows wants to update itself?  
- 2008-Oct-03: One user's update on his experience with Amazon's EC2 service. At a minimum cost of $72/month (the web server needs to run the full month, so at $0.10/hour that's about $72 - other disk storage and bandwidth fees might increase this) the Amazon approach is a lot more than a VPS solution where a $20/month server might be enough for a lot of sites.  
- 2008-May-27: A look at the past, present and a guess at the future of web hosting from the perspective of what a startup company needs to spend on infrastructure just to get going. This is worth a read as it does a good job of pointing out that while the cost of the basic infrastructure (servers and software) has dramatically dropped in the last decade (for the entry-level portion of the market) it is still not easy to get the show on the road and while some progress is being made in addressing the scalability issues with things like Amazon's EC2 and Google's AppServer there is still much to be done.
Currently I think a virtual private server (VPS) solution is the best bet for those who need to start small, and while EC2 has some advantages its pricing is currently a lot higher. Going the VPS route has some scalability, some vendors (such as linode.com) offer about a 10:1 scaling ratio in features across their offered services.
Once you have maxed out a typical VPS vendor's offerings you are in the price range of a single dedicated server so the migration path could be continued by switching to a dedicated server or by getting your own hardware and perhaps co-locating it. Doing this could add about a factor of 5 to the scaling curve, so in total, the virtual and dedicated private server approaches should allow you to scale your application about 50 times without having to rework the architecture or selected technology. Once you have grown to encounter those limits you are probably leaving the domain of the startup, so its probably time for a rethink anyway.  
Mosso, the hosting could is another approach to the virtual server problem.  
- 2008-Mar-27: Slashdot discusses the Amazon EC2 service which has recently added static IP addresses so that it can be used as a publicly accessible web hosting platform. It is still rather expensive though - typically it seems to be more expensive than a similar VPS solution.
- 2008-Mar-06: AppLogic the next level beyond a VPS? 
- 2008-Feb-13: CanadianWebHosting has VPS plans, these tend to have more storage and less bandwidth included for the same price as other vendors. 
- 2008-Jan-18: VPSVille is a Canadian provider of VPS services. 
- 2007-Oct-15: MiniVDS offers a number of VPS plans in the $6 to $20 range. 
- 2007-Oct-13: WingSix offers VPS accounts. 
- 2007-Oct-13: iDAQ offers both Linux and Windows based VPS solutions in the UK. 
- 2007-Oct-13: Quantact offers VPS accounts, including a $9.99/month starter plan. 
Technologies is a hosting outfit in the UK that does Xen based
virtual private servers, their pricing structure is similar to the
US-based hosters except their bandwidth limits seem a bit lower. 
has some plans with a different rate structure, their bandwidth limits
are higher but their disk space is lower.
A quick guide to setting up a Scheme-based web server
slicehost.com and redwoodvirtual.com also
provide VPS servers.
on Slashdot) they are the only ones to provide a Linux version with
GUI/X windows pre-installed (the comments in this
article mention this briefly). They use a different virtualization
Linux) than the rest appear to use, and are the only ones that
mention you can (space-permitting) install more than one version of
Linux at the same time in your account, and then reboot to switch
between them - which might be a good testing tool. A quick
review of Linode. Some scripts to help monitor
your bandwidth usage. Documentation on the screen package
that lish uses.
a smaller provider with a competitive price and feature set, aimed at
the more experienced user and the only vendor that does not directly
charge if you use excessive bandwidth.
they offer a wide range of plans, the smallest having only 2G of
storage and only costing $8/month