Cloud
Active Directory vs Microsoft Entra ID: do you still need on-prem AD?
Active Directory runs on servers in your office; Microsoft Entra ID (formerly Azure AD) is cloud identity. Here is the difference, and how to tell whether your business still needs on-prem AD.
Active Directory and Microsoft Entra ID (formerly Azure AD) both manage who can log in and what they can access, but they are built for different worlds: Active Directory runs on servers in your office, while Entra ID is Microsoft's cloud identity service. Many businesses now run both, and some no longer need on-premises Active Directory at all.
What is Active Directory?
Active Directory (AD) is Microsoft's on-premises directory. It runs on domain controllers in your building and manages user accounts, passwords, group policy, and access to local servers, file shares, and printers. It has been the backbone of business networks for over two decades, but it assumes your people and resources live on a local network.
What is Microsoft Entra ID (formerly Azure AD)?
Microsoft Entra ID is the cloud identity service behind Microsoft 365. It manages sign-in, multi-factor authentication, and access to cloud apps from anywhere, with no servers to maintain. Microsoft renamed Azure AD to Entra ID in 2023. It is built for remote and hybrid work, where Active Directory's local-network assumption starts to break down.
Active Directory vs Entra ID: the key differences
In short: AD is on-premises, Entra ID is cloud. AD uses group policy and domain join; Entra uses cloud policies and modern device management. AD is strong for on-prem servers and legacy apps; Entra is built for Microsoft 365 and remote access. Microsoft documents the differences in detail, and most businesses today run a hybrid of both.
Do you still need on-premises Active Directory?
It depends on what you run. If your business lives in Microsoft 365 with no on-prem servers or legacy apps, you may be able to retire Active Directory and run cloud-only with Entra ID, which is simpler, cheaper, and easier to secure. If you still depend on local file servers or older line-of-business apps, you likely keep AD or run hybrid for now. The honest answer needs a look at your actual environment.
bdManagedIT assesses your identity setup and handles the move when it makes sense. See cloud migration for how we plan and run it.
Frequently asked questions
- Is Azure AD the same as Entra ID?
- Yes. Microsoft renamed Azure Active Directory to Microsoft Entra ID in 2023. It is the same cloud identity service behind Microsoft 365, now under the Entra brand. It is different from on-premises Active Directory.
- What is the difference between Active Directory and Entra ID?
- Active Directory runs on servers in your office and manages local resources with group policy. Entra ID is cloud-based, manages sign-in and access to cloud apps from anywhere, and needs no servers. AD suits on-prem; Entra suits Microsoft 365 and remote work.
- Can I get rid of on-premises Active Directory?
- Possibly. If your business runs entirely in Microsoft 365 with no on-prem servers or legacy apps that require AD, you can often go cloud-only with Entra ID. If you still rely on local file servers or older apps, you usually keep AD or run a hybrid setup.
- What is a hybrid Active Directory setup?
- Hybrid means you run on-premises Active Directory and Microsoft Entra ID together, synced so users have one identity across both. It is the common path for businesses moving to the cloud that still have some on-prem systems to support.
- Can bdManagedIT help move us from AD to the cloud?
- Yes. We assess your identity and apps, recommend cloud-only, hybrid, or staying on AD based on what you actually run, and handle the migration and security setup as part of managed IT.
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