Office 365 now supports Password Synchronization as a temporary backup for Single Sign-On (federation).

From the TechNet Wiki, "At General Availability, the Password Synchronization feature did not support the synchronization of passwords for users in a Federated namespace. We have recently updated the service code to allow this. This enables the added possibility of running Password Sync while using Single Sign-On and temporarily switching over to use synchronized passwords for login if you experience availability issues with your SSO infrastructure!"

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Switching from Single Sign-On to use Synchronized Passwords for Sign-In is not instantaneous, but it just might be the thing you need to protect against a catastrophic failure or natural disaster.

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