Robert Cringely writes in the context of IPTV:
the supposed strengths of centralization aren’t really strengths at all when viewed in terms of the much more imposing issue of bandwidth costs, where all the advantages are local.
I explained this to a group of PBS station managers meeting last month in Orlando, Florida. Where these folks tended to fear IPTV portended the disintermediation of local television, I argued the exact opposite. My reasoning came down to the price differential between Internet bandwidth and intranet bandwidth, the latter being that bandwidth entirely within the ISPs local point of presence or data center. There is a lot more of this intranet bandwidth, for one thing. Depending on how their network is segmented, a local provider of cable Internet or DSL service may have gigabits of aggregate customer bandwidth attached to a much smaller Internet pipe. A 100-to-one ratio of internal to external bandwith is typical, meaning the effective cost of internal bandwidth is 100 times lower.
What I advised the station general managers to do was to serve their traditional audiences as much as possible over internal, rather than external, connections. This means colocating a server down at the telephone and cable TV companies.
The same idea can be used for having server-centric computing and thin clients.