What I have come to understand is that with Office365 email routing the configuration settings for email relay are,
Port Number: 587
Authentication: Basic (An email address and password)
We can set this up on each individual server that needs to send out emails or we can configure a single outbound email relay server.
An example below email config for SQL servers other applications would be similar along with related network and firewall settings.
Alternatively. We can setup an internal relay server to which every server can send email and from that server we can forward to office365 with above credentials.
Additionally, the Exchange settings in Office365 can be set for inbound connection permissions to specify which servers can relay.
Both approaches have their pros and cons which need to be discussed.