In order for Skype for Business to search your Outlook contacts, Outlook needs to be running in cached mode.
1. Check the Status bar at the bottom of Outlook.
- If your Outlook Client says Online with: Microsoft Exchange this is non-cached mode.
- If you Outlook Client says Connected to: Microsoft Exchange this is cached mode.
2. To turn Cached Exchange Mode on, launch Outlook then go to Tools > Account Settings.
3. On the E-mail tab, click the Exchange server account and then click Change.
4. Under Microsoft Exchange server, select the Use Cached Exchange Mode check box.
5. Exit and relaunch Outlook.
More information can be found here: https://support.office.com/en-in/article/Turn-on-or-off-Cached-Exchange-Mode-78c1b9a7-9677-4655-ab97-d20ca35e29f9