This is because Microsoft disabled Group Policy processing in the retail editions Microsoft Office 2013, 2016, and 2019.
If you manage Windows Server based networks, and license Microsoft Office 2013 or 2016 using the retail Product Key Card (PKC), you may have noticed that these Office applications ignore your Group Policy settings. We can easily preconfigure and lock down settings such as Outlook's Auto Archive, default file save locations for Word and Excel, locations of shared templates, and Trusted Locations and other security settings, for all current and future users and computers. This capability is partially what justifies Microsoft Office being the highest-priced suite of office productivity software. With Group Policies, we can configure system settings on Windows-based desktops and laptops throughout the organization, as well as set options for supported applications, such as Microsoft Office. Going back to the year 2000, we IT system administrators have enjoyed the unique power of Group Policies on Microsoft Windows Server. This article is for IT system administrators and managers. That are the registry keys that are mentioned in the blog post under the Outlook section.Group Policy Settings May Not Work in Microsoft Office Since 2013 Once you reconcile the settings service side - there could still be settings client-side that are forcing your Outlook clients to use basic auth. The bottom line is - you should check your Message Center posts and Service Health Notifications to see if Microsoft made changes to authentication in your tenant before the problem started. I do not know that this is a problem, but be aware if you see something about it, this will block all basic auth outright.
Modern auth could also be turned on in Azure by a setting called Security Defaults. That basically tells Outlook clients "you can use modern auth". As this is Outlook for Windows we are talking about - there is also a tenant setting as mentioned under Outlook section in that blog post. So first thing that needs to be understood is - which protocol is Outlook using to connect to Exchange Online? Is basic auth turned off for it? (running the diagnostics from that blog post will show you) Are those Outlook clients using POP/IMAP as a protocols or not? (this will depend on how profiles are created) There is a per-protocols modern auth setting, which is what we are turning on for tenants starting October 1st when that happens, basically there is no more basic auth for a particular protocol. Yeah so you need to clarify what it means that "modern authentication has been turned on".
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