Thanks Edward,
We are not looking at hybrid at all, the 40 users I mentioned will be local to the Domain controller on-premise, the remaining will be remote workers. All mailboxes will be migrated to Office 365 and the exchange 2010 server will be decommissioned.
If we proceed skipping step 3 as suggested, am I right in understanding that users will still get a log on prompt in Outlook except that they will use the same password as their AD account, or am I wrong.
regards