Microsoft shipped Active Directory with Windows 2000. The core authentication protocol, Kerberos, dates to the mid-1990s. If Active Directory were a person, it would be old enough to have a mortgage and a retirement plan.
Microsoft has been clear about the future: Entra ID (formerly Azure Active Directory) is the path forward. Active Directory has not received meaningful updates to support modern authentication standards like FIDO2, OAuth 2.0, or comprehensive device management for mobile and cloud-connected endpoints. It was designed for a world where every computer was a Windows PC, on a local network, inside a building you controlled.
That world is gone. Your team works from home. They use phones and tablets alongside laptops. Your applications are SaaS. Your data is in the cloud. And Active Directory was never built to secure any of that.
What actually needs to change
The shift from Active Directory to a modern identity service is not just a technology upgrade. It is an architectural decision about how your entire business authenticates and authorizes access.
An identity service like Entra ID or Okta does several things that Active Directory was never designed to do. It authenticates users across every platform and device, not just Windows. It manages device compliance, so a phone without security software cannot connect to company resources. It supports passwordless authentication with FIDO2 keys and passkeys. It enforces conditional access policies based on risk signals: location, device health, behavior patterns. And it works as a trust broker across cloud services, so your team can authenticate once and access Microsoft 365, Salesforce, your accounting platform, and everything else without separate credentials.
This last point is the one that changes the conversation. Your identity provider does not have to be Microsoft. Okta, for example, has trust relationships with Microsoft Azure, Google Workspace, and hundreds of other cloud services. A company using Okta for identity can use Microsoft 365 for collaboration, Google for specific workloads, and any SaaS application that supports modern authentication standards, all through one identity layer.
That flexibility matters. If your identity is locked to the same vendor as your collaboration tools, your email, and your file storage, you have a single point of dependency. Separating identity from collaboration gives you the option to change collaboration vendors without rebuilding your authentication infrastructure.
The practical path
Most businesses will not switch off Active Directory overnight. There is usually a coexistence period where AD and the modern identity service run in parallel, with synchronization between them. Over time, applications and workloads shift to cloud authentication, and the reliance on AD diminishes until it can be retired.
The important thing is to start. Every month you delay is a month your team is authenticating with a 25-year-old protocol that cannot support the security requirements of a modern business. And as your on-premises servers retire (see our post on VMware pricing), the infrastructure that Active Directory depends on is disappearing underneath it.
What the transition actually looks like
A typical AD-to-modern-identity migration runs in phases over three to six months, depending on the organization's size and complexity.
Phase one is assessment. We inventory every system, application, and service that authenticates against Active Directory. This often reveals dependencies that nobody documented: the accounting software that uses AD authentication, the badge access system tied to AD groups, the VPN that requires AD credentials. All of these need a migration path.
Phase two is coexistence. We deploy the modern identity platform (Entra ID, Okta, or another provider depending on the client's needs) alongside Active Directory. Synchronization ensures that both systems have the same user accounts, passwords, and group memberships. Users can authenticate through either path. This is the safety net that allows migration without disruption.
Phase three is migration. Application by application, service by service, we shift authentication from AD to the modern identity platform. Each shift is tested, validated, and documented before the next one begins. Users start experiencing the modern authentication flow: passwordless, conditional access, device compliance checks.
Phase four is retirement. Once all applications and services authenticate through the modern platform, Active Directory can be decommissioned. For most organizations, this is not a single moment but a gradual dimming as the last dependencies are migrated.
The cost of waiting
Active Directory runs on Windows Server. Windows Server runs on infrastructure. If that infrastructure is VMware, you already know about the pricing situation (see our post on VMware alternatives). The on-premises servers that AD depends on are aging out, and replacement costs are climbing.
Every organization will modernize its identity. The only variables are timing, planning, and cost. Those who do it proactively choose all three.
Why independent identity changes everything
The most important architectural decision in any identity modernization is whether your identity provider is the same vendor as your collaboration platform.
If you use Microsoft Entra ID for identity and Microsoft 365 for collaboration, you have a single ecosystem. That has advantages: tight integration, unified administration, one vendor relationship. But it also means your identity is locked to Microsoft. If you ever need to change collaboration platforms (because of pricing, because of a product change, because of a business need), your identity has to move too.
If you use Okta (or another independent identity provider) for identity and Microsoft 365 for collaboration, those layers are decoupled. Okta works with Microsoft, with Google, with Salesforce, with your accounting platform, with virtually every modern SaaS application. If you move collaboration from Microsoft to Google (or to anything else), your identity layer stays in place. Your users keep their same login. Your security policies stay intact. Your conditional access rules continue to apply.
One of our clients recently needed to extend their Microsoft-based environment to include Google services for a family member who preferred that platform. Because their identity was independent, the extension was a configuration change, not a rebuild. The security monitoring already covered multiple cloud platforms. We found the price for adding the Google services, and leadership made a straightforward yes-or-no business decision.
That is the kind of flexibility that an independent identity layer provides. It is not theoretical. It is operational.
Those who wait have all three chosen for them.
The question is not whether to modernize your identity. The question is whether you do it on your timeline, with a plan, or whether you do it in a rush when something forces your hand.