Take the servers at hetzner.de, they don't charge much more than a VPS but you et much more power. The only real advantage of a VPS when you grow is when they offer you tools to automatically deploy new instances (like amazon ec2). Otherwise you should be switching to dedicated servers.
lsc, can you say a bit more about your # of VPSs per box, average cpu usage by user and disk contention. in your system if there is available extra cpu and one user wants that he cant, can he? your prices seem to be too good to be true comparing to others. is there any drawback?
Under Xen if there is available CPU, any user can burst to it. I use the credit scheduler, which means you spend scheduler credits to get that CPU. You gain scheduler credits by not using as much CPU. Your weight determines how fast your credits accumulate, so a domain with twice as much weight, assuming contention, gets twice as much cpu as another domain. I weight my domains based on the amount of ram they have, so a 64Mb domain has 1/4th the weight of a 256MiB domain.
The ceiling on how much CPU you can use when nobody else wants it is set by the number of vcpus you have. I give you one, and in this example, slicehost gives you 4. this is in an effort to make the jokers who run mprime all day (I'm looking at you) from dragging down the service for everyone else. And they don't. I see some users who regularly use as much cpu as they are allowed, and it doesn't cause problems for my more restraned users.
my standard system has 32GiB ram and 2 quad-core 1.9Ghz opterons. (I have one with 64GiB and 2 2.1Ghz shanghais, but most of that ram is being used as cache for my experimental ZFS domain, so it shouldn't have more contention than the 32GiB servers)
As for the number of domains, depends on how many users sign up for what plan. 62 domains are on the system that the user who ran this test is on.
I've found an interesting model for renting servers; I charge a kinda hefty setup fee (like $500 for a core2quad with 2 disk and 8GiB ram. within a couple hundred of the parts cost) but then charge $70/month ongoing. (for one of my 8 core 32GB ram systems, with some disks thrown in, it was $1200 up front and $175/month)
It does lock the customer in, which is not providing value, but on the other hand, if they stay for a while, it's much cheaper than market rates, and I'm ok with it because the customer has covered most of my capital outlay.
I think the thing is that most of us small operators are leery of capital outlays that take many months to repay, and I think the large operators actually pay more for the hardware.
No, I'm serious. every large company I've worked at bought pre-built servers from HP or Dell or whatever, and they always ended up paying a large premium over what I would pay buying parts (when they are on sale) for servers that did the same thing. I think part of it was that salesmen are professionals, and part of it was that in a large corporation, the guy making the buy decision, well, it's not his money. He's more concerned with making a decision that looks right than a decision that is right.
On the other hand after making an especially bad mistake I once said "Hey, that was my Porsche."