On-Premise Active Directory vs. Cloud-Based Active Directory
3 min

On-Premise Active Directory vs. Cloud-Based Active Directory

3 min

Companies of all sizes prefer Active Directory (AD) as a solution for identity and access management. For this reason, Microsoft has developed its own cloud-based access management - Azure Active Directory (Azure AD). In this article, you will learn more about the differences between on-premise Active Directory and the cloud-based Azure Active Directory. The comparison can help you choose the right Active Directory for your organisational requirements.

What is Active Directory?

Active Directory is a central directory service developed by Microsoft to help organisations manage identities and access to their network and resources. This technology is particularly useful for administrators as they can easily manage user accounts, computers, groups and other resources. The main purpose of Active Directory is to authorise user and computer access to the corporate network.

In general, Active Directory facilitates the use of security policies that simplify administrative tasks considerably. For this reason, you can also use Active Directory to access your organisation's resources easily and securely.

Active Directory with Windows Server

On-premise Active Directory is usually installed directly on the organization's network servers. This type of Active Directory is mostly used when organizations prefer to have complete control over their identity management system.

The main advantage of having your Active Directory on site is that you have total control. The Active Directory processes all authentications and authorizations, therefore, if they are only processed within your organization's network, you significantly reduce the risks of unauthorized access.

Tip: Local solutions also come with long-term cost savings. Contact us if you are interested in purchasing Windows Server 2022 perpetual licenses or deploying your Active Directory locally.

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Azure Cloud-Based Active Directory

 As mentioned above, Azure Active Directory is Microsoft’s cloud-based identity and access management tool. Due to its scalability and security, the modern Azure Active Directory is mostly aimed at companies operating in the cloud.

An important advantage of cloud-based Active Directory is its flexibility and scalability. These are two very important aspects of Azure Active Directory which once again show that it was created to meet the needs of organizations of all sizes. If you choose Azure Cloud-Based Active Directory, you can arrange the payment plan according to your (company's) needs.

Differences between on-premise Active Directory and Cloud Based Active Directory

See the main differences between on-premises Active Directory and Cloud-Based Active Directory below:

Acquisition and Implementation: On-premise Active Directory is a perpetual solution. This is also why you would only need to make a one-off payment to acquire it. While on-premise Active Directory is installed on your organization's own network servers, Azure Active Directory is a cloud-based solution. As such, you must purchase it on a subscription basis. The hosting is then done by Microsoft.

Management: Active Directory on-premise is usually managed by the organization's IT department. The cloud-based Azure Active Directory is managed by Microsoft.

Integration: On-premise Active Directory integrates well with other Microsoft services, such as Exchange Server and SharePoint Server. Azure Active Directory, on the other hand, integrates with other subscription-based Microsoft services like Office 365 and Dynamics 365.

Scalability: There is a limitation of the server capacity on which you can install on-premise Active Directory. With Azure Active Directory you have more scalability possibilities to meet the needs of your company regardless of its size.

Cost of Active Directory: On-premise Active Directory requires companies to maintain their own servers. Azure Active Directory is a subscription service, where the customer pays to use Microsoft servers. This means that on-site projects can be more expensive in the short term and cheaper in the long term, just as cloud projects can cost less at the start and much more in the future once all the monthly payments have been made.


Active Directory has been the preferred identity and access management solution for companies. However, with the rise of cloud computing, Microsoft introduced Azure Active Directory as a cloud-based alternative. Selecting the right solution for you depends on deciding between on-premise Active Directory and Azure Active Directory. On-Premise Active Directory is suitable for companies that require a comprehensive control over their identity system. Azure Active Directory, on the other hand, is ideal for cloud-centred companies looking for scalable, and robust identity management.

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