How to configure service account permissions required for Veeam Backup for Microsoft 365
You are required to provide a username and password to authenticate to your Microsoft 365 organization if you add an organization using the basic authentication or Modern Authentication and Legacy Protocols method.
I won’t recommend adding organization with basic authentication, Microsoft announced that effective October 1, 2022, they will begin disabling Basic authentication for Outlook, EWS, RPS, POP, IMAP, and EAS protocols in Exchange Online. SMTP Auth will also be disabled if it is not being used.