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We use on-premise Exchange for compliance reasons. We have users that want to use MS teams, though, and because I set up an o365 account as a test years ago, Microsoft's o365 account focus makes it difficult. Anytime someone uses their work email address it checks o365 first and gives them an error if they haven't been set up there.

I want to sync my local AD to get past this using Azure Active Directory Connect (https://docs.microsoft.com/en-us/azure/active-directory/hybrid/how-to-connect-install-roadmap#install-azure-ad-connect). Will I need o365 licenses to make this work properly or can I just sync the account info for free so accessing Teams is more seamless?

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Syncing on-premises AD user accounts to office 365 tenants does not require any Office 365 licenses.

But your ultimate goal should be to require these users to use Microsoft teams, and you still need to assign them licenses.

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I don't understand the exact problem you're having, but syncing your on premises AD user accounts to your Office 365 tenant does not require any Office 365 licenses.

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From my experience, you need a license that gives you basic Azure AD access at a minimum. You may be able to purchase this alone or purchase a single o365 enterprise license.

I know this comes with our E3 o365 licenses.

Then that will allow you to sync your users to o365 and license them for teams.

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