I don't think much of it. Data kept in .pst files can't be searched along with the data in the mailbox (at least not without an extra tool), can't be accessed from multiple devices, probably isn't being backed up, is in a less stable format, etc. It's a shortsighted "solution" that ignores questions that should be important to the organization:
-- What information is valuable enough to keep? And for how long?
-- Who is responsible for implementing message retention policies? The individual user? Or the mail administrator?
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Sue Mosher, Outlook MVP
Author of Configuring Microsoft Outlook 2003
and Microsoft Outlook Programming - Jumpstart for
Administrators, Power Users, and Developers