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archive feature on Office 365 is the Online Archiving feature from Exchange 2010, meaning this consists of a 'second' mailbox for the user to archive emails from his main mailbox
you have to enable this per user
there is 'legal archiving' freature to manage incoming and outgoing email on Office 365
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you have to buy an additional service called Exchange Hosted Email Archiving
this will take care of incoming email, not sure about outgoing
Please take a close look at Proofpoint. Leading 3rd party archiving provider for BPOS and Office 365 customers in the Enterprise space. We provide tight technical integration with on premise Exchange 03/07/10 and Office 365.
Email me if you have questions. Cheers!
Office 365 includes a Personal Archive with each enterprise plan (E1 to E4). For advanced archiving capabilities you will need plans E3 or E4 or use a third-party archiving solution like LiveOffice (www.liveoffice.com/.../office-365.asp).