After finally getting my hands on the old 1.x AzureAD PS Module I was able to successfully restrict creation of O365 Groups to an on-prem AD Group, and it seems to be working. This was actually done to control Teams creation (I combined it with a PS to disable the Teams Service Plan in user licenses).
Shortly after that minute of happiness, I had a couple of other thoughts:
Could locking things down like I did end up breaking some of the other functionality of O365 and its apps? Groups seem like the 'glue' or 'plumbing' that runs throughout O365, and MS seems to be really pushing them to be the eventual single point of control for many things. With that, I'm worried about unintended consequences of restricting their creation. Has anyone run into anything like this? Essentially, the question is one of identifying anything that is directly or indirectly dependent on O365 groups.
So I can possibly be looking, is there a URL or can someone tell me which other O365 apps are tightly integrated with and/or do some kind of auto-provisioning of Groups?
I've seen the following cited, but haven't dug too deep into any of them and don't know for sure:
Thanks to this community for helping me close the barn door before the horse(s) got out on Groups/Teams.
If you havent started using Groups/Teams yet, disabling them will not break anything. All the "core" workloads function just fine without Groups, albeit you will be missing on some of the new stuff. There are specific functionalities built on top of Groups, such as Planner or StaffHub, you will not be able to use those.
Main issues you will have, as Vasil says, are related to any other Apps that need to automatically create Groups behind the scenes such as Outlook Customer Manager or StaffHub. For the other Apps you will have to relay on the people that can create Groups to create Plans, Teams, etc.