Active Directory in the Cloud Era: Should You Still Host It On-Prem?

As businesses accelerate toward cloud adoption, the question of whether to keep Active Directory (AD) on-premises or transition to a cloud-native identity model is more relevant than ever. While cloud platforms like Azure Active Directory offer convenience and scalability, the traditional Active Directory Domain Services (AD DS) still power critical workloads for many small and medium-sized businesses.

So, where should your organization land in this hybrid identity landscape? Let’s explore the pros, cons, and practical considerations of hosting Active Directory on-prem vs. in the cloud.

Why On-Prem Active Directory Still Matters

Despite the rapid shift to cloud infrastructure, on-premises Active Directory Services continue to provide foundational features that many modern organizations depend on:

• Group Policy Objects (GPOs) for managing user and computer configurations
• Kerberos authentication for secure identity validation
• Support for legacy applications that aren’t cloud-aware
• Granular access control and organizational unit (OU) management

For many industries, especially those bound by strict compliance requirements, on-prem Active Directory is not just relevant but necessary.

The Rise of Cloud Identity and Azure AD

Cloud-first identity providers like Azure Active Directory (Azure AD) offer strong value propositions:

• Scalability without infrastructure overhead
• Seamless integration with Microsoft 365 and SaaS applications
• Conditional Access, MFA, and identity governance built-in
• No physical hardware required for domain controllers

However, Azure AD is not a 1:1 replacement for on-prem Active Directory Domain Services. Features like Group Policy, NTLM/Kerberos support, and traditional LDAP authentication are either limited or unavailable in pure Azure AD environments.

Hybrid Identity: The Best of Both Worlds?

Many businesses are choosing a hybrid approach, where Active Directory Services continue to run on-premise and synchronize with Azure AD using tools like Azure AD Connect. This allows businesses to:

• Maintain legacy support while gaining cloud flexibility
• Synchronize credentials across environments
• Use Active Directory Management Gateway Service (ADMG) to extend AD administration through PowerShell and remote management APIs

This hybrid model provides a smoother path for organizations that can't fully commit to the cloud due to compliance, application dependencies, or connectivity limitations.

Where Uplevel Systems Fits In

For SMBs and distributed IT environments, the infrastructure burden of managing Active Directory in-house can be overwhelming. That’s where Uplevel Systems steps in.

Uplevel delivers managed Active Directory services as part of its all-in-one IT infrastructure platform—designed for remote and hybrid offices. Their appliance-based model simplifies:

• On-prem Active Directory deployment and maintenance
• Secure remote access to AD services
• Integration with cloud identity tools and VPN services
• Proactive AD health monitoring and backup

This model is ideal for businesses that need enterprise-grade directory services without enterprise-level IT overhead.

So, Should You Still Host Active Directory On-Prem?

It depends. Here’s a quick decision matrix:

For many businesses, a hybrid model with managed on-prem Active Directory offers the optimal mix of control, security, and convenience.

Final Thoughts

Active Directory is evolving—but it’s not going away. In the cloud era, organizations must weigh their application stack, compliance needs, and IT capacity before deciding where AD should live.

Whether you're running legacy workloads or planning your next cloud migration, tools like the Active Directory Management Gateway Service and hybrid directory setups can offer agility without sacrificing control.

And if managing all that feels overwhelming, companies like Uplevel Systems offer managed solutions that bring the power of Active Directory to smaller IT teams—securely, reliably, and cost-effectively.