Microsoft turns cloud storage into Office 365 feature

But will the free 1TB boost subscriptions?

Microsoft's decision to boost free storage space to one terabyte for Office 365 subscribers is less a game changer for the rent-not-own concept than additional evidence that storage is transforming from a separate service to a feature, analysts argued today.

"Storage is a feature," said Wes Miller of Directions on Microsoft. "It's fast becoming a feature of the platform."

Although Miller's comment was directed at Microsoft's moves this year -- first an expansion of free storage for commercial Office 365 accounts, then Monday the same 1TB for consumers and students -- it pertained to other ecosystems, including rivals Google and Apple.

Google dramatically dropped prices of its Drive file storage service in March, reducing prices by as much as 80%; earlier this month, Apple announced, but has yet to implement, cuts to iCloud of up to 70%.

Microsoft did the same this week -- dropping prices by as much as 73% for extra storage -- but at the same time said it would push the free tier for customers of Office 365's consumer and student plans from 27GB per user to 1TB (terabyte). The company had announced the same for commercial Office 365 in April, when it said it would raise the per-user allowance of OneDrive for Business from 25GB to 1TB.

The additional storage will be automatically awarded users next month.

Some pundits did quick calculations and concluded that the additional storage meant Office 365's main draw -- the productivity apps -- were essentially free extras for consumers and significantly discounted for businesses. A terabyte of storage from Google, they argued, ran $119.88 annually. Office 365's consumer plans max out at $100 per year and the University edition at $80 (for four years), while the various corporate editions run companies between $150 and $264 per user per year.

Under that line of thinking, Microsoft should see a boost in subscriptions as customers came to understand the import of the additional storage.

Not so fast, analysts warned. "It's not a huge deal," Miller said of the move to 1TB. He wasn't dismissing the more-storage-is-better move -- he also called it a "big win" for Office 365 customers -- but he was skeptical that it would translate into a large increase in Microsoft's subscription rolls.

Instead, he saw the terabyte as another example of Microsoft's long-standing incremental feature additions to the software subscription, all geared toward demonstrating the value of renting rather than buying the suite as the company tries to convince customers to make that radical change.

Other experts agreed. "Clearly, Microsoft has been pushing hard on Office 365, and if it can incentivize customers based on value, it can raise subscriptions over time," said Ross Rubin, principal analyst at Reticle Research.

Rubin, however, acknowledged that Microsoft didn't care what motivated people into subscribing to Office 365, only that they did so. "They may be able to get more people paying for the productivity suite, even if they're not consciously paying for the applications, even if [the applications] are not motivating them," Rubin said.

But not everyone viewed the massive storage space expansion as trivial to Office 365's future success.

"In totality, the Microsoft deal is really, really good. Even exceptional," said Patrick Moorhead, principal analyst with Moor Insights & Strategy. "There's a storage battle going on, and people keep anteing up on the space, pushing more chips onto the table. That will pull in customers [to Office 365], and if the competitive disparity keeps going, could be a really big deal for both consumers and small businesses."

Microsoft's prime competitor in the office productivity space has been Google, with its $50 per user per year Google Apps for Business and the free personal use-only Google Docs, but Moorhead viewed Microsoft's 1TB give-away as less a strike against Google as one directed at Dropbox and Box, a pair of relative newcomers that based their models on cloud storage and synchronization, but have been adding document creation and document editing features and tools to make their offerings more than just storage.

"Box and Dropbox have been trying to make storage a product, make it 'sticky,'" said Moorhead. "But cloud storage is a feature, not a product."

Moorhead saw the logic of those who claimed the Office applications were now "free" to consumers, discounted to business, when the terabyte of storage was factored into the equation. "That's being proactive against Dropbox and Box," he said. "Those companies are trying to build apps to connect to their storage."

Microsoft already has those applications, he noted.

"Office 365 Home gives you the whole Office for five people, with 1TB of storage each. That will make it a really tough, tough choice to think about using anything else."

The ballooning of storage space -- a general trend as costs commoditize and for large providers, approach zero -- also will benefit Microsoft in ways beyond boosting Office 365's value and perhaps its subscriber base, the experts contended.

"What's more telling about this, I think, is seeing in it a shift to where the user is the hub," said Directions' Miller, referring to the per-user assignment of storage. That's a change from Microsoft's historic stance, where the device, in particular the personal computer, was the center of its universe, and the organization, as it managed those devices, controlled them.

Rubin looked at it differently. "This not only helps cement the value of Office 365, but helps bring them onto mobile platforms," said Rubin. Because the terabyte of storage can be shared across multiple devices owned by an individual, it could promote Microsoft software use on tablets and smartphones, he asserted, including Office for iPad, the scaled-down, touch-enabled suit the company launched in late March.

And Apple's announced changes to iOS will help, too. Under iOS 8, which will ship this fall, app developers will be able to revamp their wares so users can save files to non-Apple cloud storage services. "To some extent the major OS providers line up behind their storage services, offering a certain amount of integration," said Rubin. "Microsoft now has a great opportunity, what with the more level playing field on iOS. It was good timing on their part."

"A terabyte is a milestone," said Moorhead. "When we're not talking about gigabytes anymore, that's a really good deal."

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer, on Google+ or subscribe to Gregg's RSS feed. His email address is

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Copyright © 2014 IDG Communications, Inc.

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