Active Directory vs Azure AD (Entra ID): Identity Management Compared
Active Directory vs Azure Active Directory (Entra ID) — Compare on-premise vs cloud identity, hybrid deployment, licensing, Group Policy, Intune, and when to use each.
Active Directory (On-Premise AD DS)
Active Directory Domain Services (AD DS) is Microsoft's on-premise directory service for managing users, computers, and policies across a Windows network using Kerberos/LDAP authentication and Group Policy Objects.
Advantages
- Group Policy provides deep device configuration control
- Works without internet connectivity
- Native integration with legacy on-premise applications
- Mature ecosystem — every Windows-aware app supports it
- Full control over domain controllers and replication
Limitations
- Requires on-premise infrastructure (domain controllers, DNS)
- No native mobile or macOS management
- Extension to remote users requires VPN or Azure AD Connect
- Administrative overhead of patching/managing domain controllers
- No self-service password reset without additional tools
Best For
Organizations with on-premise Windows fleets, legacy line-of-business applications requiring Kerberos/NTLM authentication, or environments where internet connectivity cannot be guaranteed.
Azure AD / Entra ID
Microsoft Entra ID (formerly Azure Active Directory) is the cloud identity platform providing SSO, MFA, Conditional Access, and device management for cloud apps and modern devices — without on-premise servers.
Advantages
- No infrastructure to manage — fully cloud-hosted
- Native support for modern apps, SaaS, OATH/OpenID Connect
- Conditional Access policies for zero-trust enforcement
- Works seamlessly for remote and hybrid workers
- Microsoft Intune integration for full MDM/MAM
- Self-service password reset reduces helpdesk tickets
Limitations
- Requires internet connectivity for authentication (limited offline)
- Legacy app support requires Azure AD Application Proxy or ADFS
- Does not replace on-premise AD for Group Policy (needs Intune)
- Licensing costs (Entra ID P1/P2 for advanced features)
Best For
Cloud-first organizations, businesses already in Microsoft 365, hybrid workforces requiring remote access, and organizations migrating away from on-premise infrastructure.
Head-to-Head
Key Differences
How Active Directory (On-Premise AD DS) and Azure AD / Entra ID compare across critical factors.
Hosting
Active Directory (On-Premise AD DS)
On-premise domain controllers
Azure AD / Entra ID
Microsoft cloud (no infra)
Authentication protocol
Active Directory (On-Premise AD DS)
Kerberos, NTLM, LDAP
Azure AD / Entra ID
OAuth 2.0, SAML, OpenID Connect
Device management
Active Directory (On-Premise AD DS)
Group Policy (Windows only)
Azure AD / Entra ID
Microsoft Intune (cross-platform)
Remote worker support
Active Directory (On-Premise AD DS)
Requires VPN
Azure AD / Entra ID
Native — internet-connected
macOS / iOS / Android
Active Directory (On-Premise AD DS)
Limited — requires additional tools
Azure AD / Entra ID
Full Intune MDM
MFA / Conditional Access
Active Directory (On-Premise AD DS)
Add-on (NPS + RADIUS)
Azure AD / Entra ID
Built-in (Entra ID P1+)
Our Verdict
Most modern organizations benefit from moving toward Azure AD / Entra ID — either as a hybrid alongside on-premise AD or as a pure cloud replacement. It eliminates domain controller infrastructure, provides native remote worker support, and enables zero-trust Conditional Access policies. On-premise AD remains necessary for legacy app compatibility. Summit DNC designs and implements hybrid identity architectures that give you the best of both during your cloud migration journey.
Common Questions
Frequently Asked Questions
Do we need both on-premise AD and Azure AD?
Many organizations run a hybrid identity model using Azure AD Connect to synchronize on-premise Active Directory with Entra ID. This provides single-sign-on across both legacy on-premise apps (using on-premise AD) and modern cloud apps (using Entra ID). The hybrid model is the most common enterprise pattern during the transition from on-premise to cloud-first.
Can we fully replace on-premise AD with Azure AD?
Yes, for organizations without legacy applications requiring Kerberos/NTLM authentication and without complex Group Policy requirements. Cloud-native organizations using Microsoft 365, Intune-managed devices, and modern applications can run entirely on Entra ID. Summit DNC has migrated numerous SMB clients from on-premise AD to pure Entra ID + Intune — the migration typically takes 4–8 weeks.
What Entra ID license do we need for security features?
Entra ID Free (included with Microsoft 365) covers basic SSO and MFA. Entra ID Plan 1 (included in M365 Business Premium, E3) adds Conditional Access, self-service password reset, and group-based access management. Entra ID Plan 2 (E5 or add-on) adds Identity Protection, Privileged Identity Management (PIM), and access reviews. For most SMBs, M365 Business Premium licensing covers the Entra features needed.
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