Looking at this MS Blog http://blogs.office.com/2014/05/13/choosing-a-sign-in-model-for-office-365/ it lays out the distinctions between these two (three total with federated identity being the third) usage models for authentication within Office365. We currently have the completely separate cloud identity for the entire company and need to be moving to at least the synchronized identity as we will be ramping up the usage of Office365 beyond just the email portion. The article says you can easily move to the right and increase the level of integration between your local AD and office365, but I was looking for feedback from anyone who has actually done this. I was planning on using MessageOps password synch tool to replicate password info between local AD and office365, but this blog article looks like the MS way is a straight forward...
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