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How many folders can I have in Outlook in Office 365 1,000 or 65,536?

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I asked this question in Nov 12 before deciding to move to Office 365. http://answers.microsoft.com/en-us/office/forum/office_2010-outlook/how-many-folders-can-i-have-in-outlook-alsohow-to/a4c21be1-5d3d-47ed-8545-dca221914313

I was told that the limit was an old limit and that 2,000 should be no problem.

Imagine my surprise when we got an email today from "Microsoft Outlook" which says

Your mailbox folder "\Customers\Active" has reached a quota limiting the number of child folders. It contains 1121 folders.

New folders can't be added in this location in the folder hierarchy until the number of child folders is less than the number allowed. Please reduce the number of child folders by removing folders you don't need or moving folders to a different location in the folder hierarchy.

Is this a quota that can be changed? If not, how best to sort this out? All my customers have their own folder (surname) so do I have to set up a folder called A-L and another called M-Z and laboriously move the (surname) folder into the A-L or M-Z folder one-by-one?

It's a shame we did not get the correct advice when we asked the question originally. So what can we do now? Thanks.


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