How can we enable collaborative document editing without creating split storage?

If the organization already has Microsoft 365 licensing, the most straightforward route is to establish SharePoint properly as the collaborative document repository. OneDrive is intended primarily for an individual user’s files, while SharePoint is designed for shared departmental storage and co-authoring. Plan the information architecture, permissions, retention, and migration first rather than letting each department create its own site. An experienced Microsoft partner or managed services provider could help avoid a rushed, disorganized deployment.

Teams can provide a convenient user interface for shared files, but its document storage is still based on SharePoint. It can be useful if departments also need chat, meetings, or task management, but it does not remove the need to design the underlying SharePoint permissions and storage structure.

Be careful not to treat file synchronization as simultaneous editing. Microsoft Office files can support co-authoring through SharePoint or OneDrive when AutoSave is enabled, but arbitrary file types generally cannot be edited safely by multiple people at once. For those files, use versioning or check-out/check-in to prevent conflicting changes. Also use Group Policy, Intune, or equivalent controls to disable unwanted OneDrive folder backup and standardize client settings across the organization.

A practical long-term design would be to clean up the existing file shares, decide what should be active versus archived, and create departmental SharePoint sites with appropriate role-based access. Keep the on-premises servers as an archive or backup if required, then migrate active working documents into SharePoint so users have one authoritative location. Retention policies, MFA, conditional access, and restrictions on personal cloud storage should be part of the rollout.