Recently, a Microsoft individual made a brash statement toward a customer who is still using Exchange on-premises. For Microsoft, those that are still utilizing on-premises services are archaic and a dying breed – at least the company hopes so. The company makes much more sustainable revenue when customers move to the cloud.
However, the response from Microsoft was unkind and the replies from customers were incendiary. You can catch up on that here: Microsoft Draws a Line in the Cloud, Customer Calls It Predatory
The problem is that Outlook calls back to Microsoft no matter what and can cause Outlook logins to fail. Outlook assumes that all customers connect to Exchange in the cloud instead of a local Exchange server.
Microsoft has been planning the “feature” that caused the issue for some time. There was a support article created in September to provide a workaround for those outliers affected by it.
The support article is: Unexpected Autodiscover behavior when you have registry settings under the \Autodiscover key
Basically, Microsoft has provided a registry modification to ensure that Outlook stops the callback to Microsoft’s servers.