Downside of using external user for content access vs. O365 Account.

Question

I have a team site in O365. I have 20 users that only need read/write permission to a couple of folders in our SharePoint.

is there any point in actually making an O365 account for them - which is not free vs. just creating an email/account for them on another internal system (i.e. they will be external users to O365) and sharing that with them?

Answer 1

If your users will not utilize any other functions of Office 365 - then yes you can technically just Share the folders with them. You can still audit access and control the accounts in Office 365 (You will see external users added to your Azure AD instance).

Yes you can add a contact object for these same users and add them to distribution lists.

The benefit of adding them to Office 365 directly is when you start using all the tools together and want to increase the ability to manage and report across the platform as a while. You can't enable things like SSO or Account/Password sync in the above scenarios.

Here are a few things external users can't do in SharePoint online

• External users cannot create their own personal sites (i.e OneDrive for Business)
• External users cannot see the company-wide newsfeed. They also cannot edit their own profile, change their photo, or see aggregated tasks.
• External users cannot be an administrator for a site collection.
• By default, external users cannot access the Search Center and will not be able to execute searches against “everything” (cross site collection search)

NOTE

This may be in violation of your usage terms as your people won't fit the description Microsoft places for external users.