Microsoft Entra ID and Azure Services that Require Licensing

Microsoft Entra ID and Azure Services that Require Licensing

Microsoft Entra ID, previously known as Azure Active Directory, is the identity and access management platform that secures access to Microsoft cloud services, enterprise applications, and hybrid environments. It provides authentication, authorization, identity governance, and security capabilities across Microsoft 365, Azure, and thousands of SaaS applications.

While basic identity capabilities are included with Azure and Microsoft 365 subscriptions, many advanced security, governance, and identity protection features require additional licensing. Understanding which Microsoft Entra ID and Azure services require specific license tiers is essential for organizations planning secure cloud deployments.

Overview of Microsoft Entra ID Licensing

Microsoft Entra ID licensing is typically divided into several tiers that unlock different capabilities.

Microsoft Entra ID Free
Microsoft Entra ID P1
Microsoft Entra ID +

Some identity features are included within Microsoft 365 Enterprise Licenses such as Microsoft 365 E3 and Microsoft 365 E5, which bundle Entra ID capabilities together with productivity and Security Services.

Each licensing level provides increasing levels of identity protection, access control, and governance.

Microsoft Entra ID Free Tier

The free tier provides basic identity management capabilities that allow organizations to authenticate users and manage access to Azure services.

Key Capabilities Include:

User and group management
Basic authentication and authorization
Single sign-on for cloud applications
Azure AD join for devices
Self-service password change for cloud users
Basic security reports

The free tier is suitable for small environments or organizations that only require fundamental identity services.

Microsoft Entra ID P1 Licensing

Microsoft Entra ID P1 introduces advanced identity and access management capabilities designed for enterprise environments.

Capabilities that require P1 licensing include:

Conditional Access policies
Self-service password reset with on-premises password writeback
Dynamic group membership
Azure AD Application Proxy for secure remote access
Microsoft Entra ID Connect Health monitoring
Hybrid identity features for on-premises Active Directory environments

Conditional Access is one of the most widely used features in P1 licensing because it allows organizations to enforce security policies based on user identity, device compliance, or location.

Microsoft Entra ID P2 Licensing

The P2 tier adds advanced identity protection and governance capabilities. These features use machine learning and risk-based detection to protect identities and privileged access.

Capabilities that require P2 licensing include:

Identity Protection risk-based policies
Privileged Identity Management
Access Reviews
Risk-based Conditional Access
Automated investigation of identity risks
Just-in-time privileged access activation

P2 licensing is typically required for organizations with strict security and compliance requirements.

Azure Services That Depend on Entra ID Licensing

Several Azure security and identity services rely on Entra ID licensing to function properly.

Microsoft Entra ID Conditional Access

Conditional Access is a core security feature that allows administrators to control access to applications based on multiple factors.

Examples of policy enforcement include:

Require multi-factor authentication for external access
Block access from risky locations
Allow access only from compliant devices
Require hybrid joined devices for internal applications

Conditional Access requires Microsoft Entra ID P1 or higher licensing.

Microsoft Entra ID Privileged Identity Management

Privileged Identity Management allows organizations to control and monitor administrative privileges.

Key capabilities include:

Just-in-time administrator role activation
Approval workflows for privilege elevation
Time-based role assignments
Audit logs for privileged activity

This service requires Microsoft Entra ID P2 licensing.

Microsoft Entra ID Identity Protection

Identity Protection analyzes authentication events and user behavior to detect identity-based threats.

Capabilities Include:

User risk detection
Sign-in risk analysis
Automated remediation policies
Risk-based conditional access

Identity Protection requires Entra ID P2 licensing.

Microsoft Entra ID Access Reviews

Access Reviews allow administrators to periodically review and validate user access to applications and resources.

This feature supports governance processes such as:

Reviewing guest access to applications
Ensuring employees retain only required privileges
Auditing access to sensitive data

Access Reviews require P2 licensing.

 Azure AD Application Proxy

Application Proxy enables secure remote access to internal applications without requiring VPN connectivity.

Users authenticate through Microsoft Entra ID before accessing on-premises applications.

This capability requires Entra ID P1 licensing.

Azure AD Connect Health

Azure AD Connect Health monitors hybrid identity infrastructure and provides insights into synchronization and authentication issues.

This monitoring capability requires P1 licensing.

Azure Services with Additional Licensing Dependencies

Several Azure services rely on Entra ID licensing for identity governance or security functionality.

Microsoft Intune

Microsoft Intune integrates with Entra ID to manage device compliance and conditional access policies. Licensing is typically included in Microsoft 365 E3 or E5 subscriptions.

Microsoft Defender for Cloud

Defender for Cloud integrates with Entra ID for identity-based threat detection across Azure resources.

Microsoft Purview

Microsoft Purview uses Entra ID for identity governance and data access control policies.

Windows 365 and Azure Virtual Desktop

These services rely on Entra ID for authentication, conditional access enforcement, and identity governance.

Education Licensing

Microsoft provides specialized Microsoft Entra ID licensing for academic institutions through Microsoft 365 Education plans. These plans are designed to support large academic environments that manage identities for students, faculty, researchers, and administrative staff.

Microsoft 365 A1
This entry-level education license includes basic identity and access management capabilities similar to Microsoft Entra ID Free. It provides user authentication, group management, and single sign-on for Microsoft cloud services. This license is commonly used by schools that require basic cloud identity services without advanced security features.

Microsoft 365 A3
This license includes capabilities equivalent to Microsoft Entra ID P1. It introduces enterprise-level identity and access management features such as Conditional Access, dynamic group membership, hybrid identity integration, and self-service password reset with password writeback. These capabilities allow educational institutions to implement stronger security controls and manage large student populations more effectively.

Microsoft 365 A5
This is the most advanced education license and includes features comparable to Microsoft Entra ID P2. It provides advanced identity protection, Privileged Identity Management, risk-based authentication policies, and access reviews. These capabilities help universities and research institutions secure sensitive academic systems and protect identities from advanced threats.

Government Licensing

Government organizations require higher levels of security, compliance, and data sovereignty. Microsoft provides specialized Microsoft Entra ID licensing through government cloud environments that meet strict regulatory and national security requirements.

Microsoft 365 Government Community Cloud (GCC)
This environment is designed for U.S. Federal, State, Local, and Tribal Government Agencies. It provides Microsoft Entra ID capabilities similar to commercial enterprise licensing while meeting government compliance standards.

Microsoft 365 GCC High
This environment is intended for organizations that must comply with stricter regulations such as ITAR and DFARS. It provides enhanced security controls and isolated cloud infrastructure to support sensitive government workloads.

Microsoft 365 DoD
This environment is designed specifically for the United States Department of Defense. It provides the highest level of compliance and security controls, supporting mission-critical workloads and classified environments while integrating Microsoft Entra ID identity services.

License Planning Considerations

Organizations planning Entra ID deployments should evaluate several factors when selecting license tiers.

Security requirements
Compliance regulations
Identity governance needs
Number of administrators and privileged accounts
Hybrid identity integration with on-premises Active Directory

Most enterprises adopt at least Entra ID P1 licensing because Conditional Access and hybrid identity capabilities are essential for secure cloud operations.

Organizations with advanced security and governance requirements typically deploy Entra ID P2 licensing to enable risk-based protection and privileged access management.

Best Practices for Entra ID Licensing

When implementing Entra ID services, organizations should follow several best practices.

Enable Conditional Access policies to enforce secure authentication.
Use Privileged Identity Management to reduce standing administrative privileges.
Implement identity risk detection and automated remediation policies.
Regularly review user access using Access Reviews.
Integrate device compliance policies through Microsoft Intune.

These practices strengthen identity security across Azure and Microsoft 365 environments.

Conclusion

Microsoft Entra ID is the foundation of identity and access management across Microsoft cloud services. While basic identity functionality is included in the free tier, many advanced security and governance capabilities require additional licensing.

Features such as Conditional Access, Privileged Identity Management, Identity Protection, and Access Reviews play a critical role in securing enterprise environments and require P1 or P2 licensing.

Organizations that understand Entra ID licensing requirements can design secure cloud architectures that protect users, applications, and sensitive data while maintaining compliance with modern security standards.

If you want to learn more about Microsoft cloud licensing structures and service capabilities, see the book “Comprehensive Microsoft Cloud Licenses Reference Guide.” It provides detailed explanations of Microsoft 365, Office 365, Microsoft Entra ID, Defender, Purview, EMS, Business, Education, and Government licensing models. The guide also includes feature comparisons, service limits, and architecture overviews for enterprise environments.