In Exchange Online and Exchange Server 2013, you can use In-Place Hold or Litigation Hold to preserve mailbox content for litigation or investigations. Many organizations also need to preserve mailbox data for users who are no longer in the organization.
In on-premises Exchange deployments, this has typically been done by disabling the Active Directory user account and performing actions such as removing it from distribution groups, preventing inbound/outbound email to and from the mailbox (including setting delivery restrictions and configuring message size limits), hiding the mailbox from the Global Address List (GAL), and also setting an account expiration date on the user account in Active Direcory. Licensing costs are not a concern in this scenario, because you do not need a Client Access License (CAL) for a mailbox that’s no longer active.
In Exchange Online, admins remove mailboxes for departed users. However, once you remove a mailbox, it can no longer be included in eDiscovery searches (using Multi-Mailbox Search in the previous version). Additionally, 30 days after you remove a mailbox, it is permanently deleted from Exchange Online and can no longer be recovered. Multi-Mailbox Search requires that the mailbox be active, which means an Exchange Online or Office 365 plan is required for the mailbox for as long as you want to preserve data for eDiscovery.
Note: You can preserve mailbox data offline by exporting it to a PST file using Microsoft Outlook and then remove the mailbox. However, if you need to perform an eDiscovery search, you would need to inject it back to an Exchange Online mailbox.
In the new Exchange Online, we’ve introduced the concept of inactive mailboxes to handle departed users. When a user leaves the organization and you need to retain their mailbox data for some time to facilitate eDiscovery (or meet retention or business requirements), you can place the mailbox on In-Place Hold or Litigation Hold before removing the Office 365 user. This preserves the mailbox, but prevents it from sending/receiving messages, hides it from users so it's no longer visible in the GAL and other recipient lists. You can add inactive mailboxes to In-Place eDiscovery searches. Inactive mailboxes do not require an Exchange Online or Office 365 plan.
When your eDiscovery, retention or other business requirements are met and you no longer need to preserve the mailbox content, you can remove the mailbox from In-Place Holds or Litigation Hold. After you remove hold, the normal mailbox removal behavior of Exchange Online will resume for the mailbox - which means, if the mailbox was removed more than 30 days ago, it will be permanently deleted. If it was removed less than 30 days ago, it will be permanently deleted after 30 days of removal.
For more details, see Managing Inactive Mailboxes (short url: aka.ms/inactivembx) in Exchange Online documentation.
Inactive mailboxes are available in March 2013 in the E3, E4, A3, A4, G and Exchange Online P2 plans.
If you already have inactive mailboxes in your on-premises Exchange 2010 or Exchange 2013 environment or a third-party archive, you can move the data to inactive mailboxes in Exchange Online by first provisioning an Exchange Online mailbox, which requires a plan subscription, importing the data to the Exchange Online mailbox, placing the user on In-Place Hold or Litigation Hold and then removing the subscription, making it an inactive mailbox. You do not require a plan subscription for that mailbox after you make it inactive. However, you will need a subscription during the provisioning and data import process. If you have a large number of inactive mailboxes, you can provision them in batches using a smaller number of subscriptions. Note, the Product Usage Rights (PUR) states that licenses can only be reassigned once every 90 days.
You can preserve data in inactive mailboxes for as long as you need to, based on your organization's retention and eDiscovery requirements. Of course, you would need to continue to be an Office 365/Exchange Online customer.
Inactive mailboxes are not processed by the Managed Folder Assistant, so deletion policies (i.e. Retention Policies) are not applied to it. If you've specified a hold duration using In-Place Hold or Litigation Hold, the parameter does not impact inactive mailboxes. All content in an inactive mailbox is on hold until you remove the hold from the mailbox.