Direct Connect to Office 365

An administrator came to me with a problem:

We are going to move to Office 365 and when we added our domain to the Office 365 portal and created the accounts, Outlook 2016 started prompting for the Office 365 login to reconfigure Outlook. We haven't yet changed our DNS records, we just created the accounts in Office 365 in preparation for the migration. If we hit cancel Outlook continues to work and we get prompted several times a day. If we provide working credentials for our Office 365 account it tries to reconfigure Outlook and breaks the profile, forcing us to delete the profile and start over.

It seems like there is some kind of "feature" in Outlook 2016 that checks Office 365 for an account matching the email address, and if it finds it, tries to configure the profile. Does anyone have any information on how Outlook 2016 it talking directly to Office 365 and how do we make it stop?

This behavior is caused by Direct Connect to Office 365. This new feature was added to Outlook 2016 in version 16.0.6741.2017 and makes it easier for end-users to configure Outlook profiles.

If Autodiscover is working and pointing to the correct server, Outlook should use it to find the mail server, so verify that it is working. Use the Remote Connectivity Analyzer to check your records. If Outlook is unable to reach autodiscover, Outlook will attempt to find your mail server using other methods, such as predefined URLs, SRV lookup or Direct Connect.

You can stop Outlook from checking Office 365 for settings by setting these two registry keys.

HKEY_CURRENT_USER\SOFTWARE\Microsoft\office\16.0\outlook\autodiscover
DWORD: ExcludeExplicitO365Endpoint
Value = 1

HKEY_CURRENT_USER\SOFTWARE\Policies\Microsoft\office\16.0\outlook\autodiscover
DWORD: ExcludeExplicitO365Endpoint
Value = 1

If you don't want to edit the registry yourself, I have this ready-to-use reg file to download and run.
ExcludeExplicitO365Endpoint