Storage, a crucial element of any networked applications environment, is heading toward commodity status at blinding speed.

Centralized, Web-based storage is available today for free or close to it. Google is upping its free email hosting to 6 GB, but forget that — Yahoo email hosting has no limits at all. In a funny but telling tale, one user of Amazon’s S3 storage service noted that his monthly S3 storage charge was turned down by his credit card company — it wouldn’t accept a “one cent” charge. (True, his storage needs were small — but still).

Local storage capabilities are also climbing (while prices are dropping). You can get 150 GB for about $100 (not to mention a 4 GB SD card for twenty bucks), a pricing trend that is driving more and more local storage into consumer electronics devices ranging from MP3 players, cell phones, game units (Xbox, PS3) and set-top boxes.

A new set-top box called Vudu leverages a 250 GB hard drive to include start-up snippets from 100 movies and a peer-to-peer download network to speed delivery of the rest of the movie over a broadband connection. BitTorrent, the company formed to build a business on top of the BitTorrent P2P protocol, last week inked a deal with Internet TV provider BrightCove last week to take advantage of local storage and P2P distribution.

Service providers need to think long and hard about how they can use local storage from DVR boxes or other consumer equipment to not only speed broadband delivery but optimize other latency-sensitive services.

We wrote last week about cloud computing mega-datacenters in the context of Amazon’s Dynamo storage back-end, as well as the idea that telco central offices are nothing if not the exact same thing (at least in theory though definitely not in practice today).

Today, Google and IBM announced plans to build a “cloud factory” to help universities better research next-generation computing architectures. Says the NY Times:

Most of the innovation in cloud computing has been led by corporations, but industry executives and computer scientists say a shortage of skills and talent could limit future growth.

“We in academia and the government labs have not kept up with the times,” said Randal E. Bryant, dean of the computer science school at Carnegie Mellon University. “Universities really need to get on board.”

Makes us nostalgic for the golden days of Bell Labs as a key driver of 20th century primary scientific research.

Click on the picture above for a cool “cloud” — or really, solar — blast from Bell Labs past.

Google, MSN, Yahoo, Amazon. These companies first and foremost are businesses, managing advertising- or e-commerce-driven Web sites.But these mega-Web-companies are also building the next-generation of computing utilities — George Gilder eloquently calls them “information factories.”

Amazon’s CTO Werner Vogels opened the door just a bit to Amazon’s cloud factory, publishing a paper describing the massive storage infrastructure underlying Amazon.com (not to be confused with Amazon’s public-storage Web service, S3)

From the paper’s abstract:

Reliability at massive scale is one of the biggest challenges we face at Amazon.com, one of the largest e-commerce operations in the world; even the slightest outage has significant financial consequences and impacts customer trust. The Amazon.com platform, which provides services for many web sites worldwide, is implemented on top of an infrastructure of tens of thousands of servers and network components located in many datacenters around the world. At this scale, small and large components fail continuously and the way persistent state is managed in the face of these failures drives the reliability and scalability of the software systems.

A massive self-healing application infrastructure is an endlessly fascinating concept to consider. I got wind of the Amazon paper from Nick Carr, author of “Does IT Matter” as well as the upcoming book “The Big Switch,” which looks at next-generation computing architectures as represented by firms like Amazon and Google — and, one would imagine, tier 1 telecom carriers. Carr does a good job of putting Dynamo into context:

At the start of the last century, the great engineering project was the creation of an electric grid that could deliver power to millions of users with a reliability and an efficiency that were previously unthinkable. Today’s great engineering project, of which Amazon’s Dynamo is but one manifestation, is to build a computing grid that can achieve similar breakthroughs in the processing and delivery of information.At the start of the last century, the great engineering project was the creation of an electric grid that could deliver power to millions of users with a reliability and an efficiency that were previously unthinkable. Today’s great engineering project, of which Amazon’s Dynamo is but one manifestation, is to build a computing grid that can achieve similar breakthroughs in the processing and delivery of information.

Call it cloud computing or cloud OS or simply the “googleplex” — whatever. It’s an approach to next-generation networks/applications that telcos need to get in tune with as well.