The Space Race. Storage Wars Heat Up.

Microsoft Ups Free Cloud Gigabytes. What’s the Limit?

Some readers might remember the few measly megabytes of storage originally given by Microsoft’s Hotmail and the stern warnings when that limit was approached, and this shows how far we’ve come. A space race is going on as Web services and devices become intertwined.

Gadgets, apps, services, and storage are now a package deal, and they are getting better, bigger, faster and less expensive at a fantastic pace.

Microsoft has announced that all OneDrive account holders will get a free 15GB of cloud storage, a nice boost from 7GB. Microsoft also said that Office 365 subscribers will get 1TB of cloud storage included in the service, up from 20GB. Cloud storage has become an important factor for customer retention, and service providers are being extremely generous in giving out gigabytes — Microsoft seems to give them away like candy. Install the iOS OneDrive app and you can up your cloud real estate by a few gigabytes. Like, share, and be enthused — there are always ways for users to earn more space.

The trend is clear: cloud storage has become an extension of devices, allowing users to keep their files synchronized and accessible across various screens. Storage isn’t easy for the user to leave behind. Deep integration of cloud storage into platforms and services combined with flawless usability will keep consumers where they are.

We highlighted in yesterday’s Hotline (see Smartphone Market Dynamics in a Shifting Landscape) that value creation in the smartphone “must be considered alongside Web-based ecosystems”. Web-based services have become a seamless part of the device experience, and the dividing line between smartphone and service has faded. Storage is a clear example of this.

One of the notable announcements as Amazon unveiled its Fire phone last week was the unlimited cloud-based photo storage included in the price of the device. This isn’t unprecedented (Nokia offered unlimited storage with its now-defunct Ovi Web service) but it does raise the bar. Service providers are unlikely to race towards a free all-you-can-eat cloud space environment, but CCS Insight believes that these companies will keep up with users’ needs as storage costs continue to decline and the importance of storage to device tie-in increases. An included terabyte of cloud storage could become a key selling point in the not-so-distant future.

It will be interesting to see how the more agnostic storage competitors such as Dropbox and Box react in this competitive environment. Such players look to cater to small enterprise users, but their pricing will be under pressure.

It’s difficult not to be amazed by the value of these storage offers to the consumer, especially in the knowledge that more will come soon. In this space race, the sky’s the limit.