Sorry about the length, I tried to include everything...
It will still use SMTP, but the DCM connection set up will use Azure OAuth for authentication. The +Connect Credential would then be populated with your Office 365 credentials. I believe that any email available through POP3 and IMAP4 clients needs SMTP. It is the standard for interacting between email servers. Setup is the same as setting up any other DCM connection and then linking it to credentials, except the SMTP connection info that would have gone in the tool, go in the DCM connection.
Note: an MS email server sending to another MS email server may not use SMTP, as it's all internal to Microsoft, but it will still be there for connecting to external servers.
There is a chance that SMTP is shut down by security protocols in an organisation and so no matter how hard you try, it may always fail to connect. This is organisation by organisation. In that case, you would need an api based tool. I know that when I've come across this, IT wouldn't let me send directly through any method, and so they set up a powerapp, and I called that API to send the bulk emails.
So, how that comes together... there is a chance that Alteryx could build an Outlook 365 output tool, but it's not being worked on currently as far as I know. That ideas page linked above from 3 years ago (adding OAuth2 to the Email tool) was marked implemented 3 years ago and so nothing would have happened to "progress" the sideline issue of companies shutting down access to SMTP in that time. (Hence why I responded, because there is nothing else expected on that idea, and so it will most likely be the same in 7 years).
Even further, If a company has shut down access to SMTP, which is the standard way to interact with a mail server for sending emails, then I'm not sure that a vendor creating another tool as a workaround will be high on the priority list and won't be blocked as well. But that being said, the best way is to post an idea for that, and see if it garners traction.
