WinRM Service cannot process the Request

Challenge

When adding an On-Prem or Hybrid organization to Veeam Backup for Office 365 we get the following error:

Cause

The On-Premises Exchange server does not have Powerhsell authentication enabled. 

Solution

On the On-Premises Exchange server, you need to enable Basic Authentication (See Below)

1. Open the Exchange Admin Center and Click on Servers
2. Choose the Virtual Directories tab
3. Click on Powershell (Default Web Site) or Powershell (Exchange Web Services web site)
4. Choose authentication
5. Enable “Basic Authentication”