The release notes for today's macOS 12.3 beta cryptically says that the update is deprecating a kernel extension used by both apps to download files on demand.

The extension means that files are available when you need them but don't take up space on your disk when you don't. Apple says that "both service providers have replacements for this functionality currently in beta."

Both Microsoft and Dropbox started alerting users to this change before the macOS beta even dropped. Dropbox's page is sparse. The page notifies users that Dropbox's online-only file functionality will break in macOS 12.3 and that a beta version of the Dropbox client with a fix will be released in March.

Microsoft's documentation for OneDrive's Files On-Demand feature is more detailed. It explains that Microsoft will be using Apple's File Provider extensions for future OneDrive versions, that the new Files On-Demand feature will be on by default, and that Files On-Demand will be supported in macOS 12.1 and later.

In addition to integrating better with the Finder using modern Apple extensions should reduce the number of obnoxious permission requests each app generates. The extensions should also reduce the likelihood that a buggy or compromised kernel extension can expose your data or damage your system.

But the move will also make those apps a bit less flexible -- Microsoft says that the new version of Files On-Demand can't be disabled. That might be confusing if you expect to have a full copy of your data saved to your disk even when you're offline.