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Using DirSync and Logging in to Outlook

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I have setup DirSync in my test lab and it is successfully pushing users/passwords to Office 365 portal..

 

Here is my question.. Should users still be getting prompted for a password when opening / configuring Outlook for the first time? The passwords are the same as their AD so I would think it would go right in, however, it's prompting for password and I just enter it and then it works..

 

Thanks


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