It can be easy to get confused about Office 365, as it covers the new consumer Office 2013 subscriptions that don't include Exchange, SharePoint and Lync Online, the existing hosted services that don't come with Office licences, and the new business plans that include both hosted services and Office software subscriptions. So it's worth being clear about the difference between SkyDrive and SkyDrive Pro, as well as the different ways Office 365 lets you share files.

SkyDrive is Microsoft's cloud storage service, which gives users 7GB of free storage with the option to purchase more, plus Office Web Apps.

The latter comes with the three business Office 365 plans as well (plus the Outlook Web Access service from Exchange Online), as part of SharePoint Online, but the documents your users create with them are not stored in the free SkyDrive service. Instead they're stored either in SharePoint document libraries or in the 7GB of personal storage Office 365 users get in SkyDrive Pro.

Office web apps
Create, edit and view documents in the Office Web Apps

SharePoint Online includes 10GB of secure cloud storage with an extra 500MB per user, and you can buy up to 25TB of storage in total. You can choose how this tenant storage is allocated between users and control how they use it – like forcing them to encrypt confidential documents using rights management policies.

Skydrive library tools
Working with files and libraries in SkyDrive Pro

SkyDrive Pro storage is part of SharePoint and you can apply policies to it in the same way, but you can't change the amount of storage allocated to each user; it's always 7GB each and you can't yet buy more for them.

SkyDrive Pro, which is confusingly labelled SkyDrive in the Office 365 portal to fit on the ribbon, lets users store their own working documents privately. If you're familiar with SharePoint, you can think of it like the storage in a My Site – and documents can still have workflows or be checked in and out.

Users can also share documents with specific people – inside or outside the company – by clicking the three dots next to the file name to see the properties and preview pane for the file and choosing Share.

They can choose whether each person they invite can edit or just view the document and whether or not they need they need to sign in (you can choose whether to enforce sign in globally). It's very clear if a document is shared and who with, and you can stop sharing a document at any point.

Skydrive share
It's easy to share documents and keep track of sharing in SkyDrive Pro

It's easy to share documents and keep track of sharing in SkyDrive Pro

If you want to share a document in SkyDrive Pro with everyone (including those to whom you give the URL of your SkyDrive Pro), you can move it into the Shared with Everyone folder by default.

If you only want to make it available to a specific group of people, you can put a document into the library for a Team Site instead. It uses the SharePoint tenant storage and you can get those files onto a PC by opening them from SharePoint Online, opening the document library in Explorer (from the ribbon on the SharePoint site) or syncing the document library as a list in Outlook.

Office 2013 applications like Word and Excel understand SkyDrive Pro as a location and it appears on the list of Open and Save locations under the Office 365 section (which uses your company name), along with any Team Sites you have access to.

SDP integration
Office 2013 apps save directly to SharePoint and SkyDrive Pro

You can also sync your own SkyDrive Pro documents to your PC. Just click the Sync button in the corner of your SkyDrive Pro page on Office 365; this sets up the SkyDrive Pro sync tool and puts SkyDrive Pro into Explorer as a favourite location. It works in the same way as the free SkyDrive sync tool, and you can have both of them on your PC without conflicts.

SDP sync
Syncing files automatically from SkyDrive Pro

Using the SkyDrive Pro sync tool has another advantage; it doesn't have the 250Mb upload limit that's in SharePoint Online. So if you have a large video or a big database for SkyDrive, you can sync files that are as large as 2GB through the sync tool.

Although the range of storage and sharing options in Office 365 sound confusing, in practice they make a lot of sense. Users get the option to stick to SharePoint shared document libraries or use something that looks like popular free cloud storage services – but that gives you control and security.

Sharing documents is simple and users can easily collaborate (they can even edit the same document at once, in the Office desktop applications or the Office Web Apps) but again, you have tools to control it.