UPDATE: On July 18, 2018, Microsoft announced an update to this SharePoint Online and OneDrive for Business versioning change:

“Since this announcement, we have received feedback from our customers on this functionality and timing. First off, thank you for your valuable feedback. We hear you and are making changes to accommodate different customer needs. With that said, we will be providing an option to opt out of the site versioning requirements.”

As I mentioned in my original post, enforcing a minimum of 100 document versions in all SharePoint Online and OneDrive document libraries may significantly impact document retention policies for many organizations. The delayed implementation of this versioning increase (and the ability to opt out of it entirely) is a great outcome for companies with strong legal and compliance policy risks or concerns.

Companies wishing to opt out of the versioning setting update will need to execute a SharePoint Online Management Shell cmdlet. This cmdlet will need to be executed by the end of September 2018. Without the cmdlet, your tenant will be updated to the new versioning settings in October 2018. For details on executing the cmdlet, see Microsoft’s updated versioning announcement.

On May 16, 2018, Microsoft announced a big change to the default versioning settings for document libraries in OneDrive and SharePoint Online team sites. Versioning will now be enabled by default in document libraries and a minimum of 100 major versions of each document will be retained. This change will impact OneDrive for Business and all SharePoint Online team sites, regardless of whether the sites are connected to an Office 365 group or not. The change will not impact any on-premises SharePoint document libraries.

Targeted Release customers will start receiving this update in early June, and all tenants will receive the change by the end of July. As part of the change, any document library that does not have versioning enabled will be updated to retain 100 major document versions. Document libraries that have versioning enabled with a limit of less than 100 versions will have the version limit increased to 100. Document libraries that already have a version limit of 100 or more will be left as-is. Once this change is rolled out to your tenant, site owners and administrators will no longer be able to disable document library versioning or set a versioning limit of less than 100.

This is a big shift for SharePoint practitioners and evangelists. Many of us have advocated for strong version limits in our legacy SharePoint document libraries due to storage concerns. Unlimited versioning (or a high versioning limit) drove up site sizes, which in turn created site collection storage allocation limit issues. With the advent of Office 365, our ever-increasing amounts of storage in SharePoint Online, and our evolved approach to keeping site collections small and flat, storage concerns are no longer a primary driver for setting low versioning limits. Microsoft is also relying on versioning data to support an array of new features (e.g. file auto-save and OneDrive file restores).

It’s vital that SharePoint Online administrators and site owners understand these versioning changes and discuss the new minimum storage requirements with their business users. Compliance and legal teams should also be notified, as the required minimum versions may necessitate stronger eDiscovery controls or updates to your organization’s retention policies.