What is Azure Active Directory?

What is Azure Active Directory?

Azure Active Directory (Azure AD) is a comprehensive cloud-based platform used around the world. It is an identity provider and access management service. If a company employs OneDrive, Skype, or Outlook, they are already using Azure in some capacity. Similarly, if a company uses Microsoft Teams or other applications in the Microsoft Office Suite, they are accessing them by logging into Azure AD.

Through Azure, employees gain access to a plethora of outside resources and SaaS applications that streamline productivity. They eliminate the need for many usernames and passwords and gain access to everything they need from one central portal. As a company scales, Azure allows teams to adapt their infrastructure to meet rising performance demands. This post covers what this directory is, what it provides, and the different editions that are available to enterprises based on their specific needs.

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What Is Azure Active Directory?

Azure Active Directory is a directory service that was built by Microsoft in 2000 and released with Windows 2000 Server edition. As later versions of Windows Server were released, the directory was improved, and additional services were tacked on (like Active Directory Federation Services). Teams with subscriptions to Microsoft 365, Office 365, or Dynamics CRM already have access to an edition of Azure AD.

First and foremost, Azure AD helps organizations manage identities. An identity is anything that can be authenticated – typically a user with a username and password. But it can also be an application or another server with a certificate. 

Rather than team members connecting to many different components directly, they can connect to Azure AD instead. By entering a verified username and password, the user receives a token that can be used to access all other components. Team members, clients, partners, or whoever is using the system need only one login. This frees companies from the burden of on-premise security management. Instead of spending time and money on in-house security measures that may not be foolproof, enterprises can use Azure for free or very low cost and get state-of-the-art security that has been perfected over time.

Azure Active Directory provides ways for IT Administrators and Application Developers to do their jobs better. IT Admins can configure multifactor authentication, synchronize new users, and protect the organization from cyber threats. Application Developers can set up identity management for web application services and take advantage of single sign-on. Azure can also be used to integrate with other services by connecting to them or using API.

In addition to identity management, Azure’s other big claim to fame is access management. Let’s say a user wants to update a virtual machine. They first need access to it. The current owner can then go into the virtual machine privileges and assign a role to that user. Each role has a set of privileges associated with it. This is known as role-based access control, and Azure AD offers plenty of flexibility for teams to create whatever roles they need. Built-in roles include owner, contributor, reader, and user access administrator.

Some core organizational elements of Azure Active Directory include:

  • Objects – Objects represent users, contacts, groups, applications, and more.
  • Organizational Units – OUs are for grouping objects together. Once grouped, the admin can assign roles and apply policies to that group.
  • Trusts – Trusts enable access to resources. They can be one-way or two-way, and how they are authenticated depends on their configuration.

As Azure becomes more complex and multifaceted, oversight and management have become more of a challenge. But with Azure monitoring, teams can keep track of all Azure metrics and ensure maximum ROI for their Azure spending. This gives teams a system that is robust enough to help them grow but lean enough to help them conserve time, money, and resources.

Active Directory vs Azure AD

While often used interchangeably, there is a difference between Active Directory and Azure AD. Azure Active Directory was an evolution of the cloud-based identity and access management solutions of its time. First released in 2000, Microsoft built Active Directory Domain Services to offer enterprises more control over the management of infrastructure. Single users could log in and manage various infrastructure components from one place marking a turning point in directory management technology.

Azure AD is like an upgraded version of Active Directory in that it provides Identity as a Service (IaaS). IaaS is a cloud-based authentication service operated by an offsite provider. It ensures that those logging in are who they say they are. This allows organizations to beef up security while maintaining key user privileges and access across multiple platforms – both on-premises and in the cloud.

To get the most out of either platform, it’s helpful for IT admins to be aware of the differences and similarities between Active Directory and Azure Active Directory. With Active Directory, organizations can only support mobile devices with the help of a third-party software provider. With Azure AD, teams can use Microsoft Intune, which provides data that helps the identity system with authentication.

In Active Directory, traditional on-premise applications use Windows-Integrated Authentication, Lightweight Directory Access Protocol, or Header-based authentication for access controls. Azure Ad gives access to these same applications through proxy agents.

In regards to SaaS apps, Active Directory does not support them natively. Instead, admins need to use a federation system like Active Directory Federation Services. Meanwhile, Azure AD supports OAuth2, WS, and SAML apps, and admins can use Azure for authentication.

These are just a few distinctions between the two different versions of Active Directory. For companies looking to transition away from on-premise infrastructure, Azure Active Directory is the clear solution. It’s also possible to use both of these platforms at once. For those that want a hybrid model, they can maintain on-premise infrastructure while using Azure for access to cloud applications (like Office 365 or any other Saas application). If teams don’t want to have two separate logins for each, Microsoft offers free software called Azure AD Connect. Users can install it on their server to synchronize Azure AD and Active Directory. Azure AD can also be used in tandem with Windows Active Directory.

Azure Active Directory Editions

Azure Active Directory is available in four different versions: Free, Office 365 applications, Premium 1, and Premium 2. (Active Directory Basic was retired by Microsoft in 2019).


The free version is accessible once a business signs up for a Microsoft service such as an Office 365 subscription. Users of free Active Directory receive a taste of the platform’s capabilities and how it provides value in the era of cloud-based technology. These capabilities include:

  • Scalability – Free Azure supports up to 500,000 objects (users, roles, assignments)
  • Registration of Devices – Devices can be registered in Azure’s free version to support work-from-home employees or those that bring their own devices to work.
  • Security Reports – While not the most comprehensive reports available in Azure, the free version includes standard reports that help teams keep an eye on security.
  • Azure AD Connect – This is available in all editions
  • PowerShell – A command environment that utilizes cmdlets to automate things in the management of systems

The free edition is ideal for testing but not for a live environment because it doesn’t have key security features. Many teams get comfortable with the free version and upgrade to premium as their needs advance. 

Office365 Applications

This level of Azure AD licensing access goes hand-in-hand with the free version above. There is often confusion around the tiers because many of Microsoft’s applications, features, and access levels overlap. This edition is basically Azure AD with Microsoft 365 and Office 365. This is the underlying framework that allows access to things like SharePoint and Exchange Online. Sharepoint is a web-based collaboration tool and Exchange Online is Microsoft’s messaging solution. Exchange can be used for emailing, storing contacts, and protecting against the loss of important data. This edition also allows for customized branding and has a service-level agreement (which the free version does not).

For larger enterprises, the premium editions may be attractive. They offer all of these things and several more features.

Premium 1 and Premium 2

There are two premium versions of Azure Active Directory known as P1 and P2. P1 opens users up to an entire realm of new controls like:

Premium 2 is a step up for advanced enterprise technology management. P2 has all the basic functions of P1 with six added functions. These additional functions fall under the category of threat protection and identity governance. With P2, users can:

  • Receive tailored recommendations to boost security
  • Calculate levels of risk
  • Provider greater capability to investigate risks when detected
  • Set up limited timeframes for specific resource access
  • Receive an audit history
  • Manage access to groups and apps for both internal and external users

Office 365 is free, and extra features are included in the following editions: E1, E3, E5, F1, F3. Premium 1 costs $6 per user per month, and Premium 2 costs $9 per user per month. Both Premium editions come with a 30-day free trial. Azure and Office 365 users can purchase P1 and P2 online with their Microsoft login. Get more visibility and insight into your Azure Cloud Costs.

What are the benefits of Azure AD?

Many teams are operating in an increasingly hybrid model, which means companies must be able to move fluidly between onsite and remote management of resources. Each team member must be empowered to access what they need regardless of their location, but this raises new security concerns. When many different devices are attempting to gain access, how do admins know whether they are legitimate users or rogue cyber attackers?

As infrastructure diversity grows, organizations need to uplevel their authentication methods and make sure privileges are in the hands of only those who need them. Azure AD offers precisely this, along with other key benefits for modern organizations that want to prioritize both flexibility and safety. Rather than a traditional network security perimeter, Microsoft provides authentication at the layer of organizational identity.

Access to various applications is simplified.

With features like single sign-on, IT administrators can access many different apps from the same login. This is done either through authentication or federation. 

Users save time with self-service features.

Team members can reset passwords by responding to extra security questions. This means authority isn’t required to unlock user accounts every time something happens. Users can also create and manage new groups and associated memberships. Dynamic groups are groups in which membership is automatically given according to a user’s attributes.

Security is achieved through multiple features. 

Azure Active Directory provides a two-step verification process for users. Conditional access may be granted to different users according to device type, network, user roles, and even the risk level of signing in. 

Collaboration for B2B and B2C is streamlined.

Teams can add partners to various projects and share pertinent information. If a business has its own app, customers can log in, and Azure will manage their identities.

Detailed reports give more control over user activity.

Administrators are never in the dark with real-time data and access to high-quality reporting. They can access what accounts might be in danger and identify spam accounts. Activity logs are given in tenant reports. 

The Future of Cloud Computing

Azure Active Directory is anything but static. Features are added and updated on a regular basis for superior functionality. As cyberattacks become more sophisticated and companies transition to remote work flexibility, security needs are changing quickly. As the second-largest cloud-based service provider, Azure equips teams to get ahead of their competition in cloud computing.Interested in maximizing Azure ROI, gaining more visibility, and sealing up security vulnerabilities? A tool that monitors a company’s entire Azure infrastructure can give a single-pane view of all critical business operations.