If you’ve been managing Microsoft identities, you’ve encountered both Active Directory and Microsoft Entra ID (formerly Azure Active Directory). They handle authentication differently and serve distinct purposes: Active Directory runs on-premises identity management for corporate networks, while Microsoft Entra ID operates in the cloud, powering authentication for Microsoft 365 and thousands of SaaS applications. Understanding the differences will help you properly build your identity infrastructure, control user access, and protect your organization.
This guide breaks down the core differences between these two identity platforms, including architecture and authentication methods. Whether you’re planning a cloud migration, running a hybrid environment, or figuring out which system handles what in your infrastructure, you’ll get clear explanations to help clear up any confusion.
Understanding Microsoft Entra ID
Microsoft Entra ID is Microsoft’s cloud-based identity and access management service. It authenticates users, enforces conditional access policies, and manages permissions across thousands of applications. Here’s what you need to know about this platform and why Microsoft moved away from the Azure Active Directory name.
What Is Microsoft Entra ID?
Microsoft Entra ID is a cloud-native identity platform that authenticates users and controls access to Microsoft 365, Azure services, and third-party SaaS applications. It runs entirely in the cloud: no domain controllers or on-premises servers required. When someone logs into Outlook, Teams, or Salesforce through single sign-on, Microsoft Entra ID verifies their credentials and enforces your security policies in real time.
The platform manages multifactor authentication, conditional access rules, and identity protection through machine learning. IT teams configure policies once, and Microsoft Entra ID applies them consistently across every connected application. You can require MFA for users accessing sensitive data or block sign-ins from unfamiliar locations, and these rules take effect immediately. According to MSAdvance, organizations using Microsoft 365 E5 get Entra ID P2, which includes advanced identity protection and privileged identity management capabilities.
Microsoft Entra ID eliminates the infrastructure burden of identity management by handling authentication, authorization, and security from the cloud.
Why Azure Active Directory Became Microsoft Entra ID
In 2023, Microsoft renamed Azure Active Directory to Microsoft Entra ID to clear up confusion about its identity portfolio. The old name misled administrators because “Azure” implied that the service only worked with Azure resources. The platform actually authenticates users across Microsoft 365, Azure, and thousands of external applications. The rebrand consolidates all identity products under the Entra family, including Entra Permissions Management and Entra Verified ID, making the product line clearer and easier to manage. Your Azure AD tenant automatically became a Microsoft Entra ID tenant with no migration or reconfiguration needed.
What Is Active Directory?
Active Directory (AD) has been the foundation of corporate network authentication since Microsoft released it in 2000. It’s an on-premises directory service running on Windows Server that manages users, computers, and resources across your network. When you log into your corporate laptop at the office, for example, Active Directory is typically the system verifying your credentials and granting you access to network resources.
Core Components of Active Directory
Active Directory structures your network infrastructure through hierarchical components that authenticate users and enforce policies. At the foundation sits the domain: a logical container for objects like user accounts, computers, and printers that all share the same AD database. You can combine multiple domains into trees and forests, creating larger organizational structures that enable trust relationships and resource sharing across different business units.
The domain controller serves as the physical or virtual server hosting Active Directory Domain Services (AD DS). Each domain controller stores a complete copy of the AD database and processes authentication requests when users access network resources. When you deploy multiple domain controllers, they automatically replicate changes between each other, giving you both redundancy and load balancing across your infrastructure.
Organizational units (OUs) divide domains into logical containers that simplify user and device management. You can create OUs for departments, geographic locations, or security zones. Group Policy Objects (GPOs) attach to these OUs to push configuration settings, password policies, and security restrictions to specific parts of your network.
Active Directory uses the Lightweight Directory Access Protocol (LDAP) on port 389 for queries and Kerberos on port 88 for authentication. Both protocols are designed specifically for on-premises network environments.
How Active Directory Works On-Premises
When a user logs into a workstation, the computer sends credentials to a domain controller on the local network. The domain controller checks the username and password against its database, then issues a Kerberos ticket that grants access to network resources. This authentication process requires direct network connectivity: The client machine and domain controller must exist on the same network or connect through VPN.
Active Directory relies on replication to keep domain controllers synchronized across your environment. Changes made on one domain controller spread to others through a multi-master replication model. When you reset a password or create a user account in New York, that change automatically replicates to the domain controllers in London and Tokyo. This replication depends on network connectivity between sites and uses specific protocols designed for your corporate network perimeter.
Group policies maintain configuration standards across every device and user account in your organization. You can define password complexity requirements, disable USB ports, configure firewall rules, or deploy software, all through GPOs that apply automatically during user login or computer startup. These policies flow from domain controllers to client machines during regular refresh intervals, keeping your security standards consistent.
Active Directory Components Comparison
Here’s a breakdown of the core components that make Active Directory function and how each contributes to your network infrastructure.
Component | Primary Function | Key Characteristic |
Authenticates users and manages the AD database | Requires Windows Server installation and network connectivity | |
Groups objects for administrative management | Enables granular policy application and delegation | |
Enforces security and configuration settings | Applies automatically during login and system startup | |
Defines object types and attributes in the directory | Shared across the entire forest and rarely modified |
Entra ID vs Active Directory: Core Differences
When comparing Entra ID and Active Directory, you’re looking at two fundamentally different systems for managing identities. Active Directory operates on servers in your data center, while Entra ID runs entirely in Microsoft’s cloud. These architectural differences affect how they authenticate users, where they store data, and which applications they support best.
Architecture and Deployment Models
Active Directory needs physical or virtual servers running Windows Server in your data center or colocation facility. You install domain controllers, configure replication between sites, and maintain the underlying infrastructure. This approach gives you complete control over your identity platform, but you’re also responsible for patching, capacity planning, and disaster recovery. Your authentication system stays behind your firewall, processing requests from devices on your corporate network.
Microsoft Entra ID eliminates this infrastructure burden by running as a multi-tenant service in Microsoft Azure, which manages hundreds of cloud products across geographically distributed data centers. You don’t install servers or manage replication: Microsoft handles availability, scaling, and updates. Your identity data lives in Microsoft’s cloud, accessible from anywhere with internet connectivity. This architectural shift changes how you think about authentication, since users no longer need VPN access to authenticate against your directory.
The deployment model you choose determines whether your identity infrastructure scales automatically or requires manual capacity planning every time your organization grows.
Authentication and Authorization Methods
Active Directory authenticates users through Kerberos and NTLM protocols designed for local networks. When someone logs in, their workstation contacts a domain controller on the same network segment. This works well for applications running on your corporate network but creates friction when users work remotely or access cloud applications. You end up deploying additional infrastructure like Active Directory Federation Services (AD FS) to bridge the gap between your on-premises directory and cloud services.
Microsoft Entra ID uses OAuth 2.0, OpenID Connect, and SAML protocols built for internet-based authentication. Applications redirect users to Microsoft’s authentication endpoints, which verify credentials and return security tokens. This flow works identically whether someone accesses your application from the office, home, or a coffee shop. The platform enforces conditional access policies based on user location, device compliance, and risk signals without requiring VPN connectivity.
Identity Management Capabilities
The identity management capabilities differ significantly between these platforms. The table below breaks down how they compare across key administrative functions, helping you understand which system aligns better with your infrastructure needs.
Capability | Active Directory | Microsoft Entra ID |
Application Support | On-premises apps using Kerberos/NTLM | Cloud and web applications using OAuth/SAML |
Management Interface | Active Directory Users and Computers (ADUC) | Microsoft Entra admin center and PowerShell |
Device Management | Group Policy for domain-joined Windows devices | Intune integration for Windows, macOS, iOS, and Android |
Security Features | Password policies and account lockout settings | Conditional access, identity protection, and MFA |
Managing Hybrid Environments Effectively
Most enterprises run hybrid identity infrastructures that combine on-premises Active Directory with Microsoft Entra ID. Users authenticate against domain controllers for legacy applications while accessing Microsoft 365 through cloud-based credentials. This split creates complexity because you’re juggling two separate identity systems with different tools, security models, and administrative workflows. Synchronization gaps, permission conflicts, and visibility challenges crop up when changes don’t replicate correctly or administrators can’t get a unified view across both platforms.
Challenges in Hybrid Identity Management
Running both Active Directory and Microsoft Entra ID introduces operational friction that IT teams face every day. User provisioning becomes a multi-step process where you create accounts in AD, wait for Azure AD Connect to synchronize them, then assign licenses and permissions in Entra ID. Each step brings delays and potential errors. When someone joins your company, they might wait hours before accessing Teams or SharePoint because the sync cycle hasn’t finished running.
Permission delegation quickly gets complicated. Active Directory uses OUs and delegation of control wizards, while Microsoft Entra ID relies on administrative units and role-based access control. Your help desk might have rights to reset passwords in AD but lack equivalent permissions in Entra ID, forcing escalations that slow down ticket resolution. Teams often end up granting broader permissions than necessary just to avoid coordination overhead.
Getting visibility across both platforms means jumping between management consoles. You check Active Directory Users and Computers for on-premises account status, switch to the Entra admin center for cloud attributes, then open PowerShell to correlate data between them. Tracking down why a user can’t access a resource means investigating group memberships, licensing states, and sync errors across disconnected interfaces. This context switching wastes time and increases the risk of missing security issues.
Hybrid identity management demands that administrators maintain expertise across two fundamentally different platforms while keeping them synchronized and secure.
How Cayosoft Administrator Simplifies Hybrid AD and Microsoft Entra ID Management
Cayosoft Administrator provides a unified console for managing both Active Directory and Microsoft Entra ID from a single interface. Instead of switching between management tools, you handle user provisioning, group management, and license assignments across your entire hybrid infrastructure from one place. The solution automates provisioning workflows that typically require manual steps in multiple consoles, cutting the time it takes to onboard new employees from hours to minutes.
The platform enables granular delegation that works consistently across both on-premises and cloud environments. You can assign help desk personnel the exact permissions they need to reset passwords, modify group memberships, and manage licenses without granting broader administrative rights. This reduces security risk while eliminating the permission gaps that force unnecessary escalations. Your team maintains operational efficiency without compromising security.
Cayosoft Administrator automates tasks like license optimization in Microsoft 365, inactive account cleanup, and group membership management across hybrid environments. The platform identifies unused licenses, flags dormant accounts that should be disabled, and maintains consistent group policies between AD and Entra ID. These capabilities reduce administrative burden while enforcing security policies efficiently across your entire Microsoft infrastructure.
Ready to see how unified hybrid identity management works in practice? Schedule a demo to explore how Cayosoft Administrator streamlines administration across your Active Directory and Microsoft Entra ID environments.
Conclusion: Choosing the Right Identity Solution
Your organization’s identity infrastructure choice depends on whether you’re managing corporate networks, cloud applications, or both. Active Directory handles authentication for on-premises resources through domain controllers and Kerberos, while Microsoft Entra ID authenticates users accessing cloud services through OAuth and SAML protocols. Most enterprises fall somewhere in between, running hybrid environments that require synchronization between these platforms, which creates administrative overhead and complexity.
The right approach balances your current infrastructure needs with your organization’s future direction. Expanding cloud adoption while maintaining legacy systems demands tools that unify management across both platforms, eliminating the console switching and permission gaps that slow down your team. Evaluate your authentication requirements, application dependencies, and administrative workflows to determine which identity platform (or combination of platforms) fits your infrastructure reality.
FAQs
Cloud Sync handles basic synchronization scenarios with a lighter footprint, but Connect Sync remains necessary for complex hybrid environments requiring features like device writeback, password hash synchronization filtering, or Exchange hybrid deployments. Most organizations with established hybrid infrastructures still rely on Connect Sync for its comprehensive feature set.
Set up a pilot group in staging mode using password hash synchronization or pass-through authentication in Entra ID, then gradually migrate users while monitoring authentication logs for failures. This approach lets you validate that cloud authentication works for your applications before decommissioning AD FS servers.
You can transfer Azure subscriptions to a different Entra ID tenant through the Azure portal, but this breaks role assignments and service principals tied to the original directory. Plan for reassigning permissions and updating application registrations after the transfer completes.
Active Directory manages domain-joined Windows devices through Group Policy on your corporate network, while Entra ID integrates with Intune to manage Windows, macOS, iOS, and Android devices from the cloud, regardless of location. The distinction between Entra ID and Active Directory for device management comes down to network-dependent policies versus cloud-based mobile device management.
On-premises MFA server deployments don’t automatically transfer to Entra ID’s cloud-based MFA, requiring users to re-register authentication methods during migration. Self-service password reset must be reconfigured in Entra ID separately, as the policies and user registration data don’t sync from your on-premises environment.
Want to See Cayosoft in Action?
Cayosoft is recognized by Gartner as an ITDR solution provider and provides solutions that make identities more resilient to attacks and guarantee a fast forest recovery, if needed. Learn how Cayosoft Guardian facilitates granular change tracking, post-breach analysis, and long-term AD security improvements. Schedule a demo to see the capabilities in depth.