What is Azure Active Directory? Features, Security, Pricing, and More

With hybrid work, zero trust security, and AI-driven cyber threats on the rise, identity management is more critical than ever. This is where “What is Azure Active Directory (Azure AD)?” comes in.

It centralizes authentication, eliminates password sprawl, and enforces adaptive security policies. This ensures seamless access control across Microsoft and third-party apps while protecting against evolving cyber risks.

This blog explains Azure AD’s features, security, and pricing, helping you understand identity management as you start your tech career in 2025.

What is Azure Active Directory? Overview and Key Functions

Azure Active Directory (Azure AD) is Microsoft’s cloud-based identity and access management (IAM) service. It enables secure authentication and authorization for users accessing Microsoft 365, Azure services, and third-party applications. 

Unlike traditional Active Directory, Azure AD is built for cloud and hybrid environments, ensuring seamless access across devices and locations.

Here’s how it works:

• Centralized Identity Management: Users sign in once to access multiple cloud apps and services.
• Cloud-Based Security: Azure AD protects identities with AI-driven threat detection and compliance policies.
• Seamless Integration: Works with on-premises Active Directory, hybrid environments, and third-party applications.

Also Read: Azure Portal Insightful Resources [Handy Guide] 

Here are some benefits of Azure AD:

• One login for multiple applications.
• MFA, Conditional Access, and Identity Protection prevent unauthorized access.
• Users and IT teams save time with self-service password resets and automated access provisioning.
• Enables secure remote access without traditional VPNs.
• Ensures regulatory compliance with detailed logging and access control policies.

Also Read: Top 12 Prerequisites for Cloud Computing

Key Features of Azure Active Directory

Azure Active Directory (Azure AD) provides essential identity management and security capabilities for organizations. Its features enhance authentication, protect against cyber threats, and simplify access management:

Also Read: Top 23 Cloud Computing Project Ideas for 2025 (With Source Code)

Windows AD vs. Azure AD vs. On-Premises Active Directory: Key Differences

Traditional Windows Active Directory (AD) was designed for on-premises environments, while Azure AD is built for cloud-based identity management. Hybrid AD combines both, enabling organizations to transition gradually.

Understanding the differences between these models helps businesses choose the right approach for authentication, access control, and security based on their needs:

Also Read: How Does an Azure Virtual Network Work? Everything You Need to Know

Now that you understand what Azure AD is, let’s dive into how it works to secure your organization’s authentication and access.

How Azure Active Directory Works: Authentication & Security

Azure Active Directory (Azure AD) is the backbone of identity and access management for Microsoft cloud services and integrated applications. It ensures users authenticate securely while providing IT administrators with powerful security controls to manage access.

Azure AD verifies user identities using modern authentication protocols like OAuth, OpenID Connect, and SAML. OAuth secures API access, OpenID Connect enables Single Sign-On (SSO), and SAML is used for legacy enterprise applications requiring token-based authentication. 

The process follows these steps:

• A user attempts to log in to a service like Microsoft 365 or a SaaS application.
• Azure AD checks credentials against its directory.
• Policies (e.g., location, device security, risk level) determine if access is granted.
• Users may need to verify identity via an OTP, biometric authentication, or a security key.
• Upon successful verification, Azure AD issues an authentication token, granting secure access.

Here are some key security features of Azure AD:

• Multi-Factor Authentication (MFA): Adds an extra layer of security by requiring additional identity verification.
• Conditional Access: Enforces security policies based on user risk, location, device, and behavior.
• Identity Protection: Uses AI-driven risk analysis to detect suspicious activities and compromised credentials.
• Role-Based Access Control (RBAC): Restricts access based on user roles to prevent unauthorized actions.
• Single Sign-On (SSO): Allows seamless access to multiple applications with one set of credentials.

Azure AD extends beyond Microsoft services, integrating with thousands of third-party applications, including:

• Microsoft 365: Ensures unified login for Outlook, Teams, SharePoint, and OneDrive.
• SaaS Applications: Supports single sign-on (SSO) for services like Salesforce, Zoom, and ServiceNow.
• Enterprise Systems: Works with on-premises directories and applications through Azure AD Connect for hybrid identity management.

Setting Up Azure AD

Setting up Azure Active Directory (Azure AD) involves creating a tenant, adding users, and configuring security settings for secure authentication and access management. 

Organizations can integrate Azure AD with on-premises directories using Azure AD Connect, enforce security policies with MFA and Conditional Access, and streamline identity management for cloud and hybrid environments.

1. Creating an Azure AD Tenant

• Sign in to the Azure Portal.
• Navigate to Azure Active Directory and click Create a tenant.
• Choose the appropriate directory type and configure settings.

2. Managing Users and Groups in Azure AD

• Add users manually or sync from an existing on-premises directory.
• Organize users into security groups for easier access control.
• Set up administrative roles and permissions using RBAC.

3. Authentication and Access Management

• Enable Multi-Factor Authentication (MFA) for enhanced security.
• Configure Conditional Access Policies to enforce risk-based authentication.
• Set up Self-Service Password Reset (SSPR) to reduce IT workload.

4. Azure AD Connect & Hybrid Identity

For organizations using Windows Active Directory (on-premises), Azure AD Connect synchronizes identities between on-prem and cloud environments. This enables:

• Hybrid Authentication: Users can log in with the same credentials across on-prem and cloud apps.
• Seamless Migration: Organizations can gradually shift from on-prem to cloud authentication.
• Password Hash Sync & Pass-Through Authentication: Provides flexible options for secure authentication.

Also Read: How to Learn Cloud Computing in 2025: 5 Proven Steps to Master the Skills and Advance Your Career

With a better grasp of how Azure AD ensures security, let’s explore its pricing plans to help you choose the best option for your needs.

Azure AD Pricing & Subscription Plans Explained

Azure Active Directory (Azure AD), now part of Microsoft Entra, offers various subscription plans designed to meet the diverse needs of individuals, small businesses, and large enterprises. Each plan includes a set of features tailored to different levels of identity and access management, security, and compliance requirements.

Here are the Azure AD pricing tiers and features:

How to choose the right plan:

• Free Plan: Ideal for startups or small teams that need basic user management and access to a limited number of cloud applications.
• Premium P1: Best for businesses needing advanced access controls, hybrid identity integration, and productivity tools.
• Premium P2: Designed for large organizations with strict compliance requirements, complex identity governance needs, and heightened security protocols.

Selecting the appropriate Azure AD pricing plan depends on your organization’s size, security needs, and application usage.

Premium plans, especially P2, are recommended for organizations seeking robust security measures like identity protection, advanced analytics, and comprehensive governance.

Also Read: Top 10 Best Cloud Computing Courses & Certifications for 2025

Now that you’re familiar with the Azure AD pricing plans, let’s look at real-world use cases to see how businesses like yours are leveraging Azure AD.

Real-World Use Cases of Azure Active Directory

Azure Active Directory (Azure AD) plays a vital role in modern IT environments, enhancing security, streamlining access management, and supporting digital transformation. Here are practical scenarios showcasing how organizations across industries leverage Azure AD to meet their evolving identity and access management needs.

Here are some real-life Azure AD use cases:

These real-world use cases highlight how Azure AD addresses the demands of remote work, secure app access, and hybrid cloud environments while enhancing organizational security and operational efficiency.

Also Read: Career in Cloud Computing: Top 11 Highest Paying Jobs, Tips, and More

After seeing how Azure AD benefits organizations, let’s discuss how upGrad can support you in further developing your expertise in identity and access management.

How Can upGrad Support Your Azure AD Learning Journey?

upGrad, South Asia’s leading EdTech platform, offers specialized courses focused on various aspects of cloud computing. With curriculum ranging from core concepts to advanced integrations, upGrad’s approach is ideal for Azure AD learners. 

The platform emphasizes hands-on projects, real-world applications, and cloud security labs, ensuring learners gain practical experience and enterprise-level security skills.

Here are some relevant courses to boost your Azure AD learning journey:

• Fundamentals of Cloud Computing
• Fundamentals of Cybersecurity
• Professional Certificate Program in Cloud Computing and DevOps
• Cloud Engineer Bootcamp
• Professional Certificate Program in UI/UX Design & Design Thinking

You can also get personalized career counseling with upGrad to guide your career path, or visit your nearest upGrad center and start hands-on training today!

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