The price of cloud file storage is trending toward zero

I was working on a briefing for a client yesterday, and one trend I outlined was the file sync-and-share storage war, where I suggested that we are on a trend toward functionally zero storage costs, which will have serious repercussions, and force consolidation in the market.

And this morning, I read the news that Microsoft is escalating the war. OneDrive users will now get 15 GB free (up from 7 GB), and all versions of Office 365 will come with 1 TB of OneDrive storage. For Office 365 Home ($9.99/mo) accounts get 1 TB per person (up to 5 people), and with Office 365 Personal ($6.99/mo) and University ($79.99/4yr) users will get 1 TB per subscription.

This follows quickly on the heels of Microsoft’s April announcement that OneDrive for Business users will get 1 TB of cloud storage. And also follows on Amazon’s announcement last week that Amazon Fire owners would be getting free storage of photos taken on the phone.

Omar Shahine of Microsoft captured the thinking behind this battlefield:

With OneDrive, we want to give you one place for all of your stuff: your photos, videos, documents and other files. Of course, to do this, we need to make sure you actually have enough storage space for everything, particularly given that the amount of content everyone has is growing by leaps and bounds.

It’s also clear that you want more than just the ability to store your stuff in the cloud. You want to be able to share it, to collaborate on it, and so much more. The landscape is changing to the point that we believe it’s no longer enough to provide only cloud storage — that’s table stakes.

So, for all intents and purposes, consumer grade file sync-and-share is becoming free, and the money being paid for a subscription is really for other services and apps. Microsoft’s edge is Office applications, for example. Google has it’s own version of office-like applications. Dropbox is at work on a built-in chat capability (based on the Droptalk acquisition, or Zulip). Box has its Notes app (which was released for iOS yesterday). The upcoming Apple’s iCloud Drive looks to be truly competitive with other offerings, unlike today’s iCloud (see iCloud Drive is the Dropbox killer of Jobs’ dreams), although its announced storage pricing is so April: $3.99/mo for 200 GB. Apple might have to make that 1 TB, though.

So, the struggle is quickly shifting away from a commodity — storage — to the real point of leverage: connection. The winners in this marketplace will be those that create the best shared experience for people working together through the agency of these services. That’s what people will pay for: not for file syncing or storage.