Skype for Business on-premises - new deployment - on-prem or O365 accounts?

Skype for Business on-premises - on-prem or O365 accounts?

I am looking to roll out the Skype for business in a small organization. Not looking for PSTN or PBX at this time, just the chatting and conferencing.    
We have volume licensing, which I think includes Skype for Business Server. We also have O365 accounts (free licenses) that inludes the basic Skype for Business.    
What I'm unsure of is if I should deploy the Skype for Business client on-premises and instruct people to login with their O365 accounts, or deploy a S4B on-premises server and setup pass-through authentication.    
While I use AD Sync for on-prem AD and O365, I don't think the fact that their AD UPN logins match their O365 logins will mean automatic/pass-through authentication for the Skype client, so I'm worried about the end-user inconvenience factor on that approach.    
We do have Microsoft Exchange server on-prem where their mailboxes would be, so I'm wondering if on-prem Skype server makes more sense in that regard.    
Just not sure what is better to use. At this time I only recommend they install the O365 Office 2016 Suite, which include Skype, onto their personal computers only.
There's an article here "Deploy the Skype for Business client in Office 365" but I'm not sure if that's recommended for on-prem, and if it uses up a licenses for the users, taking away from their personal license count.
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Adam BrownSr Solutions ArchitectCommented:
I assume you're talking about the Non-Profit license for O365 when you reference the "Free" licenses. If so, I would highly recommend utilizing the S4B licensing you have in O365 rather than installing an on-prem server. I haven't done a Skype on-prem setup yet, but the Lync 2010/2013 and OCS servers before them were a huge pain in the butt to get working right, particularly if you want features like Federation and chat with other S4B users outside your environment (Lync Federation was seriously a beast).

You also have access to Exchange Online with the Non-profit license, so I would recommend migrating there when your current Exchange server reaches EoL (or before if you want).
garryshapeAuthor Commented:
Ok thanks. Yeah I'm wondering if it will pose any issues.

Our mailbox are on-premise, not in Exchange Online. Plans are to install Skype long before we migrate staff mailboxes to Exchange Online.  

I'm not sure if in O365 I could allow Staff to use Skype for communicating with external people, or just internal. Or if I can granular allow certain people to have external contact, or not.
Adam BrownSr Solutions ArchitectCommented:
You can limit Skype communication with external users entirely or by domain. You can't get as granular as individual users, in O365, though.

It should be noted, though, that there's a good bit of interoperability between S4B and Exchange, so you may want to get an Exchange Hybrid configuration set up before deploying S4B in O365 (If you go that route). Doing so greatly eases the setup requirements.
garryshapeAuthor Commented:
I really do appreciate the feedback.
One thing j should note is that this is an education institute.
So we have no plans to migrate any staff to Exchange Online but only students.
Staff would be getting Skype client on their computers so that's the area  I'm contemplating.
Is it supposed to pose a problem if they're logging into Skype for Business with O365 accounts of their mailbox is on prem Ezchange?    
My understanding is Skype still connects to both environments.  
I already have hybrid exchange setup.  
I'm just not sure if Skype with O365 account will work well with user on an on premise computer with an on premise mailbox.  
Features like saving conversations to Inbox folder.
garryshapeAuthor Commented:
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