When opening Office files from a web server (i.e SharePoint), users are prompted for credentials, even if credentials have already been entered.
The Office application is trying to access the document directly from the server which has to communicate with the server to determine what type of server that's accessing the file and what web authoring protocol is available.
* Anytime a new process tries to access the server, the Office application will require renegoiation.
There are different resolutions depending on if users are within the network and if direct editing is needed. This blog is not all-inclusive of every prompting scenario, however, just a highlight of some of the most common resolutions.
Intranet users that want direct editing:
If you are in the intranet, you can configure the server to use Integrated Windows Authentication and then configure the client to enable automatic logon. The Local Intranet zone has a default configuration of automatic logon with the current user name and password.
NOTE: If the intranet user is accessing a site where they have not configured a proxy in Windows Internet Explorer and are using Web Distributed Authoring and Versioning (WebDav) to access a fully qualified domain names (FQDN) site, they will also be prompted for credentials (On Windows Vista or Later).
If the URL contains periods, the server is assumed to be on the Internet. The periods indicate that you use an FQDN address. Therefore, no credentials are automatically sent to this server unless a proxy is configured and unless this server is indicated for proxy bypass.
In this scenario, you will need add the following registy key:
1.Click Start, type regedit in the Start Search box, and then press ENTER.
2.Locate and then click the following registry subkey:
3.On the Edit menu, point to New, and then click Multi-String Value.
4.Type AuthForwardServerList, and then press ENTER.
5.On the Edit menu, click Modify.
6.In the Value data box, type the URL of the server that hosts the Web share (ex. https://*.abc.sharepoint.com), and then click OK.
7.Exit Registry Editor.
* You have to restart the Webclient service after you modify the registry.
Related article - http://support.microsoft.com/kb/943280
Extranet users that want direct editing:
Use Forms Based Authentication (FBA) with persistent cookies – The only way to maintain direct-edit functionality and also not be prompted by the Office application is to implement a proxy/firewall server by using Forms Based Authentication with persistent cookies such as an Internet Security and Acceleration (ISA) server or a Forefront Threat Management Gateway.
Extranet users and direct editing is not needed:
Disable Client Integration or the OPTIONS/PROPFIND Verbs - If the site provides WebDAV functionality through another extension, the provider of that extension should be engaged. For example, to do this with Windows SharePoint Services (WSS), the site should be configured to disable Client Integration, or the OPTIONS and PROPFIND verb should be inhibited. (To inhibit the OPTIONS and PROPFIND verbs on Internet Information Services (IIS) version 6, remove the verbs from the <httpHandlers> registration line in the web.config file. On IIS 7.0, use the HTTP Verbs tab of the Request Filtering feature to deny the verbs.) Be aware that this approach will open the content in read-only mode because this approach disables direct-edit functionality.
NOTE: Using Web servers that respond to a PROPFIND with a 200 response can also result in an authentication prompt if cookies are present.
Example of what is seen in the network trace:
PROPFIND http://abc.sharepoint.com/Shared Documents/ HTTP/1.1
HTTP/1.1 200 OK
Date: Mon, 24 Feb 2014 20:57:03 GMT
Server: Application Server/7.0
Keep-Alive: timeout=300, max=96
Content-Type: text/html; charset=ISO-8859-1
** For risk of using FBA with persistent cookies, client side approaches to reduce prompting, and other options when direct editing is not needed, see article - Authentication requests when you open Office documents - http://support.microsoft.com/kb/2019105