According to the Microsoft blog, less than 99% of users make use more than 7 GB of space on the online storage service anyway. Therefore, it’s lowering the free amount of space down to 7GB. The following quotes and chart are courtesy Microsoft:

Keep Your 25GB of Space

You’re able to ensure you get your original 25GB of space now though. Log in to your MS SkyDrive account. At the top of the page you’ll see a link to.

On the next page CLick the Free Upgrade button to 25GB guarantee you still have your original 25GB free.

That’s it. You’re given a message letting you know you still have your 25 GB of free storage. Click Close.

The amount of space you have will be shown in your SkyDrive account.

If you’re already using 4GB or more space on SkyDrive, you’ll automatically be opted into the 25GB free account. So, don’t panic if you don’t see the link at the top of your SkyDrive account screen. It seems counter intuitive for Microsoft to lower the amount of free space. But, it’s still more than a lot of other similar services like Dropbox or SugarSync…where they offer 5GB of free space. Microsoft also announced improvements to its mobile and Mac apps (including Office for Mac 2011) as well. This is interesting news as today Dropbox announced improvements to its UI including 2-click sharing and Google is rumored to be announcing its long awaited online storage competitor as well. Still, 25GB of online stoage isn’t something to sneeze at! Thank you, MS! Comment Name * Email *

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