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Sugar Connect & Office 365 Contacts Synchronization

I noticed that the Sugar Connect portal setting is not translating into Outlook and need help figuring out what causes it.

Our setup is this:

However, when in Outlook, the functionality looks like this: 

"Add Sugar as a Contact" should be greyed out/disabled, but when clicking on the button it works.

How do I solve this?

Thank you so much. Barb

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