What are Microsoft Entra ID and Active Directory?

Directory services: definition

A directory service stores who belongs to a company: user accounts, groups, devices and their permissions. Active Directory Domain Services (AD DS) has existed since the year 2000. It runs on domain controllers in the company’s own network, verifies sign-ins and distributes group policies to Windows computers. Anyone who signs in gets access to file storage, printers and business applications.

Microsoft Entra ID is the cloud variant of identity management. Until 2023, the service was called Azure Active Directory. It controls sign-in to Microsoft 365 and many other online applications and offers single sign-on, two-factor authentication and conditional access. Despite the similar names, it is not a simple move of AD to the cloud but a separate service.

The key differences

Both systems solve related tasks but work differently under the hood. Active Directory is designed for networks with servers on the premises, Entra ID for cloud services and mobile devices. Many companies use both at the same time and synchronize accounts with Microsoft Entra Connect—this is known as a hybrid environment.

• Active Directory: on-premises, on domain controllers, with group policies
• Entra ID: in the cloud, with modern protocols and conditional access
• Sign-in via the domain in the company network, via web sign-in for cloud services
• Devices are joined to the domain or connected to Entra ID
• Hybrid: accounts are synchronized, and one sign-in works in both worlds

Real-world example: a law firm moves to Microsoft 365

A law firm with 20 employees runs a local server with Active Directory for file storage and sign-in. With the move to Microsoft 365, every person also needs a cloud account, initially with a separate password. When someone leaves the firm, they have to be blocked in two places, and that is occasionally forgotten.

With a hybrid solution, the accounts are synchronized, employees sign in everywhere with the same credentials, and two-factor authentication protects the cloud services. When someone leaves, it is enough to deactivate one account. In the long run, the firm can consider retiring the server entirely and working purely with Entra ID.

Benefits, risks and common mistakes

Central identity management organizes permissions, saves passwords and makes joiners and leavers manageable. Precisely because user accounts are the main target of many attacks, careful maintenance is a must: anyone who is careless here opens the door to email, files and applications for criminals.

Typical mistakes include administrator accounts without two-factor authentication, many old accounts that were never cleaned up, shared accounts and permissions that are too broad. An Active Directory that has grown over many years often contains legacy issues. Before a migration, a cleanup including documentation of groups and permissions is therefore worthwhile.

What companies should look out for

First clarify whether you need a hybrid environment or can work purely in the cloud. Protect administrators with two-factor authentication and assign permissions according to the principle of least privilege. Nano Concepts advises on the right structure, migrates accounts and sets up sign-in, devices and access rules.