It's been done, or at least, tried for legal services: http://www.cpusage.com/ http://www.gomezpeerzone.com/ http://zennet.sc/ https://pluraprocessing.wordpress.com/ and there were some older ones which I can't seem to refind at the moment. (Naturally, the illegal ones are fairly successful in being sold for DDoS and spamming and theft purposes.)

My best guess at the failure is that relying on consumer hardware is too high latency, too failure prone, hard to guarantee any sort of security or confidentiality, high overhead in finding and negotiating with and supporting all the ordinary people running your cloud software, and not particularly cost-effective since consumer hardware may be energy-inefficient and long out of date, especially compared to cloud companies like Amazon EC2 where they build custom hardware to get more efficiencies of scale.

(Note to other commentators: Ethereum isn't what he is proposing because it is incredibly inefficient compared to a regular distributed computing project, for mostly good reasons related to its goals and threat model.)