Last Updated on June 23, 2024 by Arnav Sharma

When it comes to securing your applications and resources in Microsoft Azure, there are several options available, including Managed Identity and Service Principal. Although these terms may sound similar, they are actually quite different in terms of their capabilities and use cases. Understanding these differences is critical to ensuring that you are using the right tool for the job, and that your applications are secure and well-protected. In this blog post, we will take a deep dive into the differences between Managed Identity and Service Principal in Microsoft Azure and explore how you can use these powerful tools to secure your applications and resources in the cloud.

Understanding the basics: What is Azure Service Principal and Managed Identity?

Before diving into the differences between Managed Identity in Azure and Service Principal, it’s important to understand what they are and how they function within the Azure ecosystem.

Managed Identity is a feature in Azure Active Directory that automatically creates an identity for a resource, such as a virtual machine or a web app. This identity can then be used to authenticate with other Azure resources or external services without the need for credentials to be stored within the resource. Essentially, it allows the resource to authenticate itself securely without the need for any additional configuration.

On the other hand, Service Principal is an Azure Active Directory object used to manage authentication and authorization for applications, services, and other resources. It provides a way to securely connect an application to an Azure subscription and manage access to resources within that subscription.

In simpler terms, Managed Identity is a built-in identity provided by Azure for a specific resource, while Service Principal is an identity created for an application or service that needs to interact with specific Azure resources.

How Managed Identity Differs from Service Principal in Azure

Managed Identity and Service Principal are both important features in Microsoft Azure, but they differ in several ways. Managed Identity is an Azure Active Directory (AAD) service that allows an application to authenticate and access Azure resources without the need for explicit credentials. It’s a built-in feature that provides automatic management of the identity lifecycle and helps to simplify application security.

In contrast, Service Principal is a type of AAD object that represents a service that needs to access resources. It’s essentially a security principal that allows an application to authenticate and access Azure resources, but it requires a secret or certificate to authenticate.

The primary difference between Service Principal and Managed Identity is that Managed Identity is designed to be simpler and more secure, as it eliminates the need for explicit credentials to be stored in code or configuration files. With Managed Identity, the application receives a token from Azure AD that can be used to access Azure resources. This means that the application doesn’t need to store any secrets or certificates, which reduces the risk of credential theft or leakage.

On the other hand, Service Principal requires the application to store a secret or certificate, which increases the risk of credential theft or leakage. It also requires more management overhead, as the secret or certificate needs to be rotated periodically to maintain security.

Benefits of using Managed Identity over Service Principal

When it comes to Microsoft Azure, both Managed Identity and Service Principal can be used to authenticate and authorize applications and services. However, there are some distinct benefits to using Managed Identity over Service Principal.

Firstly, Managed Identity removes the need for developers to store and manage credentials, thus mitigating the risk of credentials being exposed or compromised. With Managed Identity, Azure takes care of the authentication process, so developers do not need to write code to handle credentials. This not only improves security but also reduces the burden on developers, allowing them to focus on application development and functionality.

Secondly, Managed Identity provides a seamless experience for developers as it can be easily integrated into Azure services such as Key Vault, Azure Functions, and Azure App Service. This makes it easy to configure and use Managed Identity with these services, providing a consistent and streamlined approach to authentication and authorization.

Finally, Managed Identity supports the automatic rotation of credentials, ensuring that they are regularly updated and reducing the risk of compromised credentials. This means that even if a credential is compromised, it will only be valid for a limited time, making it more difficult for attackers to gain unauthorized access.

When to use Managed Identity over Service Principal

Knowing when to use Managed Identity over Service Principal is crucial in understanding the differences between the two in Microsoft Azure.

The main advantage of Managed Identity is that it can be used without having to manage any secrets or credentials. This is particularly useful when you have multiple services or applications that need to authenticate with Azure resources. With Managed Identity, you don’t need to manage and store separate credentials for each application. Instead, you can grant permissions to the Managed Identity and let the system handle the authentication process.

On the other hand, Service Principal is ideal for scenarios where you need to grant access to an application or service that is not hosted in Azure (traditional on-premises application or service). It’s also useful when you need to grant granular permissions to a specific application or service. With Service Principal, you can manage the access keys and secrets for each application or service, providing greater control over the security of your resources.

Use cases where Service Principal is a better option

While Managed Identity is a powerful feature in Azure, there are cases where Service Principal is a better option. One such case is when you need fine-grained access control. With Service Principal, you can specify the exact permissions that the application or service will have. This can be helpful in scenarios where you want to limit the scope of a specific application or service to a certain subset of resources.

Another use case is when you have multiple applications or services accessing the same resources. With Service Principal, you can have one set of credentials that all the applications or services can use to access the resources. This simplifies the management of access controls and reduces the risk of credential exposure.

Service Principal also provides more flexibility in terms of authentication methods. With Managed Identity, you are limited to using Azure Active Directory for authentication. With Service Principal, you can use other authentication methods such as certificates or OAuth tokens.

Differences in security and access control

One of the major differences between Managed Identity and Service Principal is in terms of security and access control. In Managed Identity, the authentication is managed by Azure Active Directory, which ensures a more secure method of authentication. This means that the credentials are not stored in the code or in configuration files, making it less vulnerable to attacks.

On the other hand, Service Principal requires a client ID and secret, which are stored in configuration files or environment variables. This can pose a security risk since these credentials need to be protected to prevent unauthorized access to your resources.

In terms of access control, Managed Identity provides a simpler way to manage access to Azure resources. It eliminates the need to manage and rotate secrets, reducing the risk of accidental exposure. With Managed Identity, you can grant permissions to the identity at the resource level, which makes it easier to manage access control across different resources and services.

Service Principal, on the other hand, provides more granular control over access control since you can assign specific permissions to individual applications using the client ID and secret. However, this also means that it requires more management and maintenance, which can be challenging in complex environments.

How to create, configure and manage Managed Identity and Service Principal in Azure

Creating and configuring Managed Identity and Service Principal in Microsoft Azure is relatively straightforward, but there are some key differences in how they are created and managed.

There are two types of managed identities in Azure – system assigned and user assigned managed identity. In both cases, the identity is linked to an Azure resource and can be used to authenticate and authorize access to multiple Azure resources. With system assigned identities, Azure automatically creates and manages the identity for a specific resource (linked to a single azure resource), such as a virtual machine or a Azure Functions app, and the identity is deleted when the resource is deleted.

User assigned identities, on the other hand, are created and managed separately by the user and can be assigned to multiple Azure resources. They do not get deleted when the Azure resource is deleted, making them more flexible for managing access to resources over time. Both types of managed identities provide a secure and convenient way to manage access to Azure resources without the need for managing passwords and credentials. 

To create a Managed Identity, you need to first enable it on the Azure resource that you want to use it with. This can be done through the Azure portal, Azure CLI, or Azure Resource Manager templates. Once enabled, you can use the Managed Identity to authenticate with other Azure resources, such as Azure Key Vault or Azure Storage Account, without needing to manage any credentials.

On the other hand, creating a Service Principal requires you to first create an Azure Active Directory (AD) application and then assign a role to it. This can be done through the Azure portal, Azure CLI, or Azure PowerShell. Once created, you can use the Service Principal to authenticate with Azure resources, just like with the Managed Identity.

Managing Managed Identity and Service Principal also differs in that Managed Identity requires no additional management, whereas Service Principal requires you to manage the credentials associated with the application that it is associated with. This means that Managed Identity provides a more secure and streamlined way to authenticate with Azure resources, as there are no credentials that can be compromised.

Best practices for using Managed Identity and Service Principal

When using Managed Identity and Service Principal in Microsoft Azure, there are some best practices that you should follow to ensure the security and efficiency of your applications.

Firstly, it’s important to limit access to only what is necessary. You should only grant the necessary permissions to your Managed Identity or Service Principal to do what it needs to do. This helps to reduce the risk of any security breaches or unauthorized access.

Secondly, you should always rotate your secrets regularly. Secrets are any sensitive information that is used to authenticate your Managed Identity or Service Principal. This includes passwords, tokens, and certificates. By rotating these secrets regularly, you reduce the risk of any unauthorized access or breaches.

Thirdly, it’s important to monitor your Managed Identity or Service Principal. You should set up alerts and monitoring tools to detect any suspicious activities or anomalies. This can help you to take action quickly if there is unauthorized access or security breach.

Finally, you should always keep your Managed Identity or Service Principal up to date. This includes updating any software or applications that are associated with them, as well as any security patches or updates that become available. This helps to ensure that your applications remain secure and efficient.

Limitations of Managed Identity and Service Principal

Although both Managed Identity and Service Principal are powerful tools for managing authentication and authorization in Microsoft Azure, they do have their limitations.

Managed Identity, for instance, is only available for certain Azure resources such as Virtual Machines, App Services, and Azure Functions. Thus, if you are working with other Azure resources that do not support Managed Identity, you will have to resort to Service Principal.

On the other hand, Service Principal has its own limitations. For example, if you are using Service Principal to manage authentication and authorization in your Azure application, you will have to manage its lifecycle manually. This means that you will have to create, update, and delete it manually, which can be time-consuming and error-prone.

Another limitation of Service Principal is that it requires the application to have access to the Azure Active Directory (AD) tenant, which can be a security concern in some scenarios.

FAQ – Service Principal and Managed Identity

Q: Can you explain azure ad and its relevance?

A: Azure AD stands for Azure Active Directory and it’s a section under azure active directory that provides identity services in the Azure cloud. It allows for applications using azure services to have a security identity used for access control.

Q: What is managed service identity in Azure?

A: A managed service identity provides an identity for the Azure service in Azure AD and ensures the service has access to resources. It is one of the confusing concepts in azure but, in essence, it’s a type of service principal security object.

Q: How is using a service principal beneficial?

A: Using a service principal provides a way for your application in azure ad to authenticate to other azure services. A service principal can be created using Azure CLI command or other methods and it allows for programmatic access to azure resources.

Q: Why would one need to access azure resources?

A: Access to Azure resources is essential for applications, services, or users to leverage Azure services, be it reading out an azure storage account or executing operations on an azure virtual machine.

Q: How can you limit access to specific azure resources?

A: Access can be restricted by assigning azure rbac roles. This ensures that only authorized service principals or managed identities can access specific azure resources.

Q: Can a service principal be linked to multiple azure resources?

A: Yes, a service principal security object can be associated with another azure resource, giving it permissions based on its role assignments.

Q: What is meant by security identity in Azure?

A: A security identity refers to the identity used for authentication and access control in Azure, whether it’s a user, service account, or a service principal.

Q: What do you mean by identity object?

A: An identity object, like a service principal object, represents the security identity used to authenticate and grant permissions in Azure.

Q: Is a managed identity always linked to an azure resource?

A: No, while a managed identity might often be linked to an azure resource like a virtual machine, it isn’t mandatory. However, it is typically used to provide access to resources securely.

Q: Could you elaborate on the service account in Azure?

A: In Azure, a service account typically refers to a type of service principal that is used for automated access, much like how an application might need programmatic access without literally using the azure administrative accounts.

Q: How do you define a stand-alone azure resource?

A: A stand-alone azure resource is an independent resource in Azure that doesn’t depend on other resources for its functioning. An example could be an azure storage account.

Q: Why would you want to grant access to specific azure resources?

A: Granting access ensures that services or users can perform necessary actions. For example, a service principal could be looked up to retrieve an azure storage account access key.

Q: How does Azure manage azure resources from a user-app scenario?

A: Azure employs service principals, managed identities, and azure rbac roles to manage and authenticate applications, ensuring they can access resources based on permissions.

Q: What are actually service principals in Azure?

A: Service principals are identity objects in Azure AD that represent applications and services. They are used to provide programmatic access to azure resources.

Q: How does Azure handle on-premises application or service scenario?

A: Azure can integrate with on-premises applications using service principles or managed identities, providing a bridge for hybrid scenarios.

Q: Can you link a security object to an azure resource?

A: Yes, a security object, like a service principal or managed identity, can be associated with an object to an azure resource, granting it specific permissions.