New and Improved SkyDrive Is a Threat to Dropbox

Microsoft is shaking things up with SkyDrive. The new features and capabilities move it out of the Microsoft-centric shadows and pit it more directly against Dropbox, and possibly the imminently rumored Google Drive. However, Microsoft also announced a change to SkyDrive that many won’t appreciate.

The big news is that Microsoft has done away with the convoluted Live Mesh system, and adopted a more streamlined syncing system very similar to Dropbox. Microsoft has an app for Windows and for Mac OS X that integrates SkyDrive with the local OS. Files can be stored in the SkyDrive folder, and they will be automatically uploaded to the cloud, and synced to other computers or devices.

For Mac users, Office 2011 for Mac has already offered SkyDrive integration, but the new app makes SkyDrive available to other software, and integrates with the Finder tool in Mac OS X. Microsoft also introduced a new version of the iOS app that provides a native experience on both the iPhone and the iPad. SkyDrive is suddenly much more capable as a cross-platform, cloud-based data storage option.

The down side is that Microsoft is cutting the default SkyDrive storage capacity from a very generous 25GB down to 7GB. It is actually a dramatic improvement, though. Even with the 25GB of storage, you could only sync 5GB using Live Mesh, and the maximum file size was limited to 100MB. Now, you can upload files up to 2GB, and you can keep the entire SkyDrive synced automatically.

The drop from 25GB to 7GB is dramatic, but Microsoft shares some data in a blog post indicating that less than one percent of existing SkyDrive accounts are using more than 7GB of storage. Combine that information with the fact that Dropbox only provides 2GB of free storage, and SkyDrive still seems like the better deal by comparison.

For users who need more space, SkyDrive is an even better deal. The cheapest option available from Dropbox for those who exceed the 2GB is a 50GB plan for $10 per month. Microsoft will offer paid plans starting at 20GB for only $10 per year. The 50GB SkyDrive plan is only $25 per year–nearly 80 percent less than the same storage capacity with Dropbox.

Microsoft is rewarding those who already use SkyDrive. Existing accounts can upgrade for free for a limited time from the 7GB allotment to the previous 25GB capacity. Just log into your SkyDrive account and click the link at the top to claim the upgrade. Existing accounts that are already near or over the new 7GB limit have already been automatically upgraded by Microsoft.

Linux users will still prefer Dropbox because there’s no SkyDrive app available for the open source operating system. But, with the new changes Microsoft has rolled out for SkyDrive, Dropbox may face some very serious competition on Windows, Mac OS X, and iOS.