Cloud Identity is the simplest form of identity. With this authentication model, the identity is stored and completely managed inside of Azure Active Directory (Azure AD) and Office 365. You can manage this identity through the Microsoft 365 admin center (https://admin.microsoft.com), through the Azure Portal (https://portal.azure.com), or through scripting with PowerShell or Microsoft Graph.

When a user authenticates to the service, they are providing an identity that has been created in the service. This user identity is standalone from any other identity they may have (such as the username and password they use to log on to their computer or other services).