Azure IAM: Identity and Access Management in Microsoft 365 explained

Azure IAM (Identity and Access Management) is the basis for secure and structured user and rights management in Microsoft 365. In this blog article, you will find out exactly what Azure IAM is, what tools and functions Microsoft provides for it and why the management of external users is often neglected. I’ll also show you how External User Manager closes this gap – with advantages in terms of overview, automation and security.

Tip: Do you want to know straight away how you can ensure good Microsoft 365 guest management? Take a look at External User Manager.

What is Azure Identity and Access Management (IAM)?

Azure IAM describes all processes used to manage digital identities and control their access rights to resources in the Microsoft cloud. In the past, Azure Active Directory (Azure AD) was primarily responsible for this. Today, this service is part of the Microsoft Entra platform under the name Microsoft Entra ID, which maps modern IAM functions across the board.

IAM addresses two key questions:

• Who are you? → Authentication
• What are you allowed to do? → Authorization

A typical IAM process works like this:

1. A user logs into Microsoft 365 – for example with a user name, password and a second factor such as an SMS code or app confirmation.
2. Microsoft verifies the identity using stored data and, if necessary, multi-factor authentication.
3. Based on policies and roles, a decision is made as to which resources (Teams, SharePoint, files, etc.) are granted access.
4. If necessary, further conditions such as device status or location (conditional access) are applied.

IAM therefore ensures that the right people have access to exactly the resources they need for their work at the right time.

Why is Azure IAM for Microsoft 365 important?

IT security is hardly possible without well thought-out identity and rights management. Azure IAM is therefore a central element in every Microsoft 365 environment – both for small companies and for large organizations with distributed teams.

The most important reasons for Azure IAM:

• Security: Prevents unauthorized access to sensitive data.
• Compliance: Supports legal requirements such as GDPR, ISO 27001 or NIS2.
• Transparency: Clear roles and rights prevent uncontrolled growth in the assignment of rights.
• Automation: Less manual administration saves time and reduces errors.

Practical examples:

• When onboarding new employees, Azure IAM is used to determine which teams, files and apps are immediately available.
• When someone leaves the company, lifecycle management can be used to ensure that all access rights are automatically revoked.
• Rights for sensitive data or admin access are regularly checked and documented via access reviews or PIM.

Collaboration with external partners or service providers in particular shows how important structured IAM processes are – but also where the limits of standard functions lie. More on this in the blog article below.

Azure Identity Management vs. Access Management

IAM is composed of two areas: Identity Management and Access Management. Both are connected, but fulfill different tasks.

Identity Management:

• Management of user accounts, guest accounts, groups and roles
• Assignment to departments, locations or projects
• Maintenance of profile information and attributes

Access Management:

• Regulation of which resources users have access to
• Implementation of security guidelines (e.g. only access with company laptop)
• Use of mechanisms such as conditional access, RBAC (Role-Based Access Control), OAuth, SAML

A secure, maintainable IAM system can only be created if both areas are properly interlinked. Example: A user is in the “Finance” department (Identity Management) and therefore has access to the budget SharePoint (Access Management), but only if they log in with MFA via a company end device.

Overview of the most important Azure IAM Services in Microsoft 365

Microsoft offers numerous services to fully map IAM in the cloud. Here is a selection of the most important Azure IAM services:

• Microsoft Entra ID (formerly Azure AD): The central identity provider for Microsoft 365
• Conditional Access: Control access based on location, device, risk level, etc.
• Multi-Factor Authentication (MFA): Additional protection against compromised accounts
• Privileged Identity Management (PIM): Temporary assignment of admin rights with approval processes
• Access Reviews: Regular review of authorizations by superiors or system administrators
• Lifecycle Management: Automatic creation, modification and deletion of user accounts
• Azure AD B2B: Invitation and management of external business partners

These services can be combined to create a comprehensive IAM concept with clearly defined roles, access and security levels.

Azure IAM for External Users: An often-neglected Area

While Microsoft Entra ID offers extensive functions for internal users, external users often remain a blind spot in the system. Although Azure AD B2B allows you to invite guests to Microsoft Teams, you quickly reach your limits when it comes to administration:

• No complete overview of all guest accounts
• Outdated or inactive guests remain unnoticed in the system
• Manual onboarding via individual invitations is prone to errors
• No expiration deadlines or automatic renewals
• No integrated overview within Microsoft Teams

Especially in companies with many guest users, this leads to security risks, a lack of transparency and increased workload for IT admins.

You can find out more about the challenges related to Microsoft Teams guest access in our blog article.

External User Manager: Addition for Azure IAM

External User Manager (EUM) specifically complements the Azure IAM functions with everything that is missing for the management of guest users. As an app for Microsoft Teams, EUM helps to manage external users in a structured manner – automatically, comprehensibly and in compliance with the GDPR.

What EUM offers:

• Import of all existing guest users – even before the introduction of EUM
• Request forms and automated onboarding of guests
• Integration of approval processes
• Guest accounts with expiration date, renewal or automatic removal
• Central overview of all guests – directly in Microsoft Teams

Area	Microsoft IAM	External User Manager
Internal user management	✅ Yes	–
External user management	⚠️ Limited	✅ Completely
Automated onboarding	⚠️ Partially	✅ Yes
Guest import	❌ Not possible	✅ Yes
Expiration management	⚠️ Manual	✅ Automated
Integration in Teams	❌ No	✅ Yes

Most frequently asked Questions about Azure IAM (FAQ)

Conclusion: Using Azure IAM correctly

Azure IAM is the foundation for secure identity and rights management in Microsoft 365. With Entra ID, MFA, Conditional Access, PIM and other tools, Microsoft provides a powerful basis. However, there are functional gaps, particularly in the area of external users.

With External User Manager, you get exactly the extension you need in your day-to-day work: an overview of all guests, automated processes, easy integration into Teams and a clear focus on security and compliance.

Best practices for your Azure IAM setup:

• Use MFA consistently for all users – internally and externally
• Carry out regular access reviews, especially for sensitive data
• Use PIM for all admin accesses
• Use expiration dates and clear guidelines for guests
• Complement Azure IAM with specialized tools such as External User Manager

Book a demo now and experience External User Manager live!