It depends. Amazon started out really cheap with 1.7GB servers in 2006. However, it's now 2009 and the prices are the same. At that point in time, Linode had

It depends. Amazon started out really cheap with 1.7GB servers in 2006. However, it's now 2009 and the prices are the same. At that point in time, Linode had their 400MB instances for $80 (which became 512 which became 1024 which became 1200 which became 1440 over the years). Slicehost had just been founded at the same time EC2 came around and I remember the big waiting list as they became popular. So, I don't think that Amazon can become dominant unless it offers more for less. Their EBS (elastic block storage) is a good offering that's really attractive, but they're starting to look expensive. Slicehost will give me an 8GB box with 2TB of transfer for $450. Amazon would cost $628 for that (40% more). Even if you commit to a 3-year term and pay $2,000 up-front, you still only bring the cost down to $500. It will really depend on whether Amazon keeps prices down. Their competitors will have the ability to lower prices as hardware improves. If Amazon doesn't follow suit, they won't last. Right now, there aren't too many providers, but Xen knowledge is getting out there and more companies will start offering the same thing. Amazon is doing well now. They need to keep driving costs down to remain competitive in an industry where many providers will start being interchangeable.