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Assume the following:

  1. A user has Outlook 2010 installed onto their device, and has a single profile configured with a single email account; this account is an address hosted on an Exchange server

  2. The user has "Exchange Cached Mode" enabled, meaning as a result that the Outlook client caches everything within their Exchange mailbox to disk within an OST file stored within their local profile on the machine

  3. Due to storing lots of information within their Exchange mailbox, the size of the user's OST file eventually reaches 50 GB; the default maximum size for OSTs/PSTs in Outlook 2010

In this situation, assuming that Cached Mode is still enabled, what happens when Outlook is launched? Does it simply not add anything further to the OST to keep it at the 50 GB limit? If this is the case, does it then need to re-download any new items each time it launches to keep it at this file size?

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The 50GB size limit is not a fundamental limitation but a configurable one. I believe outlook will start notifying the user via the UI that they can no longer store any more data. There is a configured warning threshold that will start warning the user before that.
Details here and here for changing that configuration.

The actual OST/PST size limitation is 4PB though performance concerns make that unrealistic and hence why Microsoft has set 50GB by default for Outlook 2010.
A PST/OST residing on a HDD will understandable experience performance issues earlier than one running on an SSD.
If you are planning on increasing the limit for this user it might be wise to evaluate the disk performance of their system for suitability.

Alternatively upgrading to Outlook 2013+ will significantly improve the size limitation of the OST/PST due to smarter data handling but also with Outlook 2016 you'll get the ability to sync only x (3, 6, 12 month etc.) amount of historic data to the OST.

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