Microsoft Entra ID Changes in 2026: What Admins Must Do Now

Introduction: The January 2026 Deadline

Microsoft has announced significant changes to Microsoft Entra ID (formerly Azure Active Directory) taking effect throughout 2026. Some changes are improvements—others are breaking changes that will disrupt organizations unprepared for the transition.

As someone who has managed Entra ID deployments for Fortune 500 enterprises over 25+ years, I've seen how authentication changes can cascade into business-critical failures. The 2026 updates require proactive planning starting now.

Critical Deadlines:

• January 15, 2026: Legacy authentication protocols disabled for new tenants
• March 31, 2026: Basic Authentication retirement for Exchange Online complete
• June 30, 2026: Security Defaults mandatory for all new tenants
• October 1, 2026: MFA enforcement for Azure portal access
• December 31, 2026: Legacy authentication fully deprecated across all Microsoft 365 services

This guide provides a comprehensive action plan for enterprise administrators managing Entra ID environments serving 500+ users.

Breaking Change 1: Legacy Authentication Deprecation

What's Changing

Microsoft is completing the multi-year deprecation of legacy authentication protocols:

Protocols Being Disabled:

• Basic Authentication (username/password over HTTP)
• POP3/IMAP without Modern Auth
• SMTP AUTH
• Legacy Exchange Web Services (EWS)
• Outlook Anywhere (RPC over HTTP)

Impact Timeline:

• Q1 2026: Warning messages to users still using legacy auth
• Q2 2026: Intermittent blocking (throttling)
• Q3 2026: Permanent blocking for all workloads
• Q4 2026: Complete removal of legacy authentication infrastructure

Why This Matters

Legacy authentication protocols don't support multi-factor authentication (MFA), Conditional Access policies, or modern security features. Every legacy authentication connection represents a potential credential stuffing vulnerability.

Real-World Example:
In 2024, a healthcare organization we consulted experienced a breach through a forgotten SMTP relay using Basic Authentication. Attackers used stolen credentials to send 50,000 phishing emails before detection. The breach cost $2.3M in remediation and regulatory fines.

Immediate Action Plan

Phase 1: Discovery (Week 1-2)

Identify all applications and devices using legacy authentication:

Using Azure AD Sign-In Logs:

1. Navigate to Entra ID > Sign-in logs
2. Filter by "Client app" = Legacy authentication protocols
3. Export results for analysis
4. Group by application, user, and device

PowerShell Discovery Script:

# Requires Microsoft.Graph PowerShell module
Connect-MgGraph -Scopes "AuditLog.Read.All","Directory.Read.All"

# Get sign-ins using legacy auth (last 30 days)
$startDate = (Get-Date).AddDays(-30).ToString("yyyy-MM-dd")
$signIns = Get-MgAuditLogSignIn -Filter "createdDateTime ge $startDate and (clientAppUsed eq 'Exchange ActiveSync' or clientAppUsed eq 'IMAP4' or clientAppUsed eq 'POP3' or clientAppUsed eq 'SMTP AUTH')"

# Group by user and application
$legacy = $signIns | Group-Object UserPrincipalName,AppDisplayName |
    Select-Object @{Name="User";Expression={$_.Group[0].UserPrincipalName}},
                  @{Name="App";Expression={$_.Group[0].AppDisplayName}},
                  @{Name="Count";Expression={$_.Count}},
                  @{Name="LastSeen";Expression={($_.Group | Sort-Object CreatedDateTime -Descending | Select-Object -First 1).CreatedDateTime}}

# Export to CSV
$legacy | Export-Csv "LegacyAuthReport.csv" -NoTypeInformation

Common Culprits:

• Printers/Scanners: Using SMTP AUTH to scan-to-email
• Line-of-Business Applications: Custom apps with hard-coded credentials
• Mobile Devices: Older iOS/Android versions using EAS
• Third-Party Services: Marketing platforms, CRM systems
• Service Accounts: Automated processes using Basic Auth

Phase 2: Application Migration (Week 3-8)

Remediate each legacy authentication source:

Printers and Scanners:

• Update firmware to support Modern Auth
• Configure SMTP relay through Office 365 SMTP submission (port 587 with TLS)
• Alternative: Use Microsoft Graph API for sending email
• Document configuration for IT procedures

Line-of-Business Applications:

• Work with vendors for Modern Auth updates
• Implement OAuth 2.0 with client credentials flow
• Use Managed Identities where possible
• Test thoroughly in dev environment before production

Mobile Devices:

• Update iOS to version 12.0+ (supports Modern Auth for Exchange)
• Update Android to version 9.0+
• Configure Intune MDM policies to require Modern Auth
• Block legacy protocol access at Conditional Access level

Third-Party Integrations:

• Replace Basic Auth with OAuth 2.0 app registrations
• Use Microsoft Graph API instead of legacy APIs
• Implement certificate-based authentication for service accounts
• Monitor Graph API usage for errors during transition

Phase 3: Conditional Access Enforcement (Week 9-10)

Create Conditional Access policy to block legacy authentication:

Policy Configuration:

1. Navigate to Entra ID > Security > Conditional Access
2. Create new policy: "Block Legacy Authentication"
3. Assignments:
   • Users: All users (exclude break-glass account)
   • Cloud apps: All cloud apps
   • Conditions > Client apps: Exchange ActiveSync clients, Other clients (legacy)
4. Access controls > Grant: Block access
5. Enable policy in Report-only mode first
6. Monitor for 2 weeks
7. Switch to Enabled after validation

Testing Protocol:

• Test each critical application in non-production
• Verify MFA prompts work correctly
• Confirm mobile device access still functions
• Validate service account operations
• Document all findings

Break-Glass Procedures

Emergency Access Account Setup:

Every organization needs break-glass accounts exempt from Conditional Access:

# Create break-glass account
$breakGlass = New-MgUser -DisplayName "BreakGlass Admin" `
    -UserPrincipalName "breakglass@yourdomain.com" `
    -AccountEnabled $true `
    -PasswordProfile @{Password="Complex!Password123"; ForceChangePasswordNextSignIn=$false}

# Assign Global Administrator role
$globalAdminRole = Get-MgDirectoryRole -Filter "displayName eq 'Global Administrator'"
New-MgDirectoryRoleMember -DirectoryRoleId $globalAdminRole.Id -MemberId $breakGlass.Id

# Exclude from all Conditional Access policies
# (Do this manually in each policy under "Exclude > Users")

Break-Glass Account Requirements:

• Store credentials in physical safe
• Use 20+ character complex password
• Exclude from MFA requirements
• Exclude from all Conditional Access policies
• Monitor for any usage (should be zero)
• Test quarterly to ensure functionality

Learn more about EPC Group's Azure security consulting.

Breaking Change 2: MFA Enforcement for Azure Portal

What's Changing

Starting October 1, 2026, Microsoft will require MFA for all Azure portal access—even for Global Administrators. This applies to:

• Azure portal (portal.azure.com)
• Azure CLI
• Azure PowerShell
• Azure mobile app
• Microsoft Entra admin center

No Exceptions. Organizations cannot opt out.

Implementation Strategy

Phase 1: MFA Method Deployment

Ensure all administrators have at least two MFA methods registered:

Recommended MFA Methods:

1. Primary: Microsoft Authenticator app (passwordless or push)
2. Backup: FIDO2 security key (YubiKey, etc.)
3. Emergency: Phone number (SMS/voice - least secure, use as last resort)

Registration Enforcement:

# Create Conditional Access policy for MFA registration
# This forces users to register MFA methods on next sign-in

New-MgIdentityConditionalAccessPolicy -DisplayName "Require MFA Registration" `
    -State "enabled" `
    -Conditions @{
        Users = @{
            IncludeUsers = @("All")
        }
        Applications = @{
            IncludeApplications = @("All")
        }
    } `
    -GrantControls @{
        Operator = "OR"
        BuiltInControls = @("mfa")
    } `
    -SessionControls @{
        SignInFrequency = @{
            Value = 1
            Type = "hours"
            IsEnabled = $true
        }
    }

Phase 2: Pilot Testing (8 Weeks Before October 1)

Test MFA enforcement with IT department first:

1. Create pilot Conditional Access policy targeting IT security group
2. Require MFA for Azure portal access
3. Monitor authentication failures
4. Collect user feedback
5. Refine MFA methods based on pain points

Phase 3: Phased Rollout

• Week 1: IT department (already done in pilot)
• Week 2: Infrastructure team
• Week 3: Application development team
• Week 4: All technical staff
• Week 5: Business stakeholders with Azure access
• Week 6-8: Remaining users, stragglers

Phase 4: Enforcement (October 1, 2026)

Microsoft's enforcement begins. Organizations not ready will experience:

• Azure portal access denied without MFA
• CLI/PowerShell scripts failing
• Automation runbooks halted
• Infrastructure deployments blocked

Automation Impact

Service Principal Best Practices:

Replace user account-based automation with service principals:

# Create service principal for automation
$sp = New-MgServicePrincipal -DisplayName "AzureAutomationSP" `
    -AppId "your-app-id"

# Assign minimum required role (Contributor, Reader, etc.)
New-MgRoleAssignment -ObjectId $sp.Id `
    -RoleDefinitionName "Contributor" `
    -Scope "/subscriptions/your-subscription-id"

# Use in automation scripts
$credential = Get-AutomationPSCredential -Name 'AzureAutomationSP'
Connect-AzAccount -ServicePrincipal -Credential $credential -Tenant 'your-tenant-id'

Why Service Principals?

• Not subject to MFA requirements
• Can use certificate-based authentication
• Easier to rotate credentials
• Auditable separate from user accounts
• No license costs

Breaking Change 3: Security Defaults Mandatory for New Tenants

What's Changing

All Microsoft 365 tenants created after June 30, 2026 will have Security Defaults enabled and non-optional for the first 90 days.

Security Defaults Include:

• MFA required for all users
• Legacy authentication blocked
• Azure portal MFA required
• Privileged actions require MFA
• High-risk sign-ins blocked

For Existing Tenants

Microsoft strongly recommends enabling Security Defaults or replacing with equivalent Conditional Access policies.

Check Current Status:

Connect-MgGraph -Scopes "Policy.Read.All"
Get-MgPolicyIdentitySecurityDefaultEnforcementPolicy |
    Select-Object IsEnabled, Description

Decision Matrix:

Scenario	Recommendation
<500 users, limited IT staff	Enable Security Defaults
500-5,000 users, IT team present	Use Conditional Access policies
5,000+ users, enterprise IT	Advanced Conditional Access + Identity Protection
Government/Healthcare	Conditional Access with compliance requirements

Security Defaults vs. Conditional Access:

Security Defaults:

• ✅ Free with any Microsoft 365 license
• ✅ Zero configuration required
• ✅ Automatically updated by Microsoft
• ❌ All-or-nothing (can't customize)
• ❌ Can't exclude users or apps
• ❌ Limited reporting

Conditional Access:

• ✅ Granular control (user, app, device, location)
• ✅ Extensive reporting and monitoring
• ✅ Integration with Identity Protection
• ❌ Requires Azure AD Premium P1 ($6/user/month)
• ❌ Requires configuration expertise
• ❌ Needs ongoing management

Recommendation for Enterprises:
Use Conditional Access. Security Defaults are too restrictive for complex enterprise environments.

New Feature: Conditional Access Enhancements

Continuous Access Evaluation (CAE)

What It Does:
Evaluates access continuously, not just at sign-in. Revokes access within minutes of security events.

Triggers for Immediate Revocation:

• User account disabled
• Password changed
• MFA method removed
• User moved out of security group
• User deleted
• High-risk sign-in detected

How to Enable:

# CAE is enabled automatically for supported applications
# Verify CAE status for your tenant:
Connect-MgGraph -Scopes "Policy.Read.All"
Get-MgPolicyAuthenticationMethodPolicy |
    Select-Object -ExpandProperty ContinuousAccessEvaluationPolicy

Supported Applications (2026):

• Exchange Online
• SharePoint Online
• Microsoft Teams
• Outlook (desktop and mobile)
• Office 365 web apps
• Azure management tools

Implementation Strategy:

1. CAE enabled by default for new tenants
2. Existing tenants: automatically enabled Q1 2026
3. No admin action required
4. Monitor Azure AD sign-in logs for CAE events

Authentication Strength Policies

What's New:
Define specific MFA method requirements per application or scenario.

Example Use Cases:

Scenario 1: Financial Application Access

• Require FIDO2 security key (phishing-resistant)
• Block password + SMS (vulnerable to social engineering)

Scenario 2: Remote Work Access

• Require Microsoft Authenticator passwordless
• Allow temporary access code from Authenticator as fallback

Configuration:

# Create custom authentication strength
New-MgPolicyAuthenticationStrengthPolicy -DisplayName "FIDO2 Required" `
    -Description "For financial apps and sensitive data access" `
    -AllowedCombinations @("fido2")

# Apply to Conditional Access policy
New-MgIdentityConditionalAccessPolicy -DisplayName "Finance App - FIDO2" `
    -Conditions @{
        Applications = @{
            IncludeApplications = @("finance-app-id")
        }
    } `
    -GrantControls @{
        AuthenticationStrength = @{
            Id = "fido2-strength-policy-id"
        }
    }

Built-In Authentication Strengths:

• Multifactor authentication strength (all MFA methods)
• Passwordless MFA strength (Authenticator, FIDO2, Windows Hello)
• Phishing-resistant MFA strength (FIDO2, certificate-based auth)

Migration Planning: 90-Day Action Plan

Days 1-30: Assessment and Discovery

Week 1: Inventory

• Run legacy authentication discovery script
• Document all Entra ID integrated applications
• Identify service accounts and automation
• Review current Conditional Access policies
• Export all custom roles and permissions

Week 2: User Analysis

• Identify administrators requiring Azure portal access
• Verify MFA registration status for all users
• Document users still using legacy protocols
• Review break-glass account configuration

Week 3: Application Assessment

• Test each LOB application with Modern Auth
• Contact vendors for legacy app updates
• Identify apps requiring OAuth 2.0 migration
• Document API integrations using Basic Auth

Week 4: Risk Analysis

• Identify business-critical processes at risk
• Calculate downtime costs if unprepared
• Document compliance requirements (HIPAA, SOC 2)
• Present findings to leadership

Days 31-60: Implementation

Week 5-6: MFA Rollout

• Deploy Microsoft Authenticator to all admins
• Configure FIDO2 security key support
• Create MFA registration Conditional Access policy
• Train help desk on MFA support

Week 7-8: Application Migration

• Update printers/scanners to Modern Auth
• Migrate service accounts to OAuth 2.0
• Replace Basic Auth in custom applications
• Test all changes in dev/test environments

Days 61-90: Testing and Enforcement

Week 9-10: Pilot

• Enable legacy auth blocking for IT department
• Monitor sign-in logs for failures
• Refine Conditional Access policies
• Document lessons learned

Week 11-12: Rollout

• Expand legacy auth blocking to all users (report-only)
• Enforce MFA for Azure portal (all admins)
• Enable Conditional Access enhancements
• Train users on new authentication flows

Week 13: Go-Live

• Switch Conditional Access to enforce mode
• Monitor for authentication failures
• Provide immediate support for blocked users
• Celebrate successful migration (seriously, this is a big deal)

Real-World Case Study: Fortune 500 Financial Services

The Challenge

25,000-employee financial services firm faced October 2026 MFA enforcement deadline with:

• 1,200 service accounts using Basic Authentication
• 300+ printers using SMTP AUTH
• 50 legacy applications without Modern Auth support
• 3,000 administrators with Azure portal access
• Strict SOC 2 compliance requirements

Our Approach

Phase 1: Rapid Assessment (2 weeks)

• Automated discovery of all legacy auth usage
• Risk-scored applications by criticality
• Identified quick wins vs. complex migrations

Phase 2: Service Account Migration (6 weeks)

• Converted 1,200 service accounts to managed identities and service principals
• Eliminated 80% of legacy auth within first month
• Documented all changes in runbooks

Phase 3: Application Modernization (8 weeks)

• Worked with 15 vendors to update legacy applications
• Built OAuth 2.0 proxy for 3 apps without vendor support
• Retired 12 applications no longer needed

Phase 4: MFA Deployment (4 weeks)

• Provisioned FIDO2 security keys to all administrators
• Deployed Microsoft Authenticator company-wide
• Created phased rollout plan by department

Results

Security Improvements:

• Legacy authentication: 100% → 0%
• MFA coverage: 40% → 100%
• Phishing-resistant MFA: 0% → 85% (admins)
• Security incidents: 15/month → 2/month

Operational Efficiency:

• Authentication failures: 200/day → 12/day
• Help desk tickets (auth-related): 150/month → 30/month
• Password reset requests: 500/month → 150/month
• Time to provision new admin: 4 hours → 15 minutes

Compliance:

• SOC 2 audit findings: 8 → 0
• NIST 800-63B compliance: Achieved AAL3
• Cyber insurance premium: Reduced 15%

Timeline:

• Assessment: 2 weeks
• Implementation: 18 weeks
• Go-live: 2 weeks ahead of Microsoft deadline
• Total budget: $450,000 (vs. $2M+ if delayed until enforcement)

Explore similar enterprise security transformations.

Compliance Implications

HIPAA (Healthcare)

Impact:

• MFA requirement aligns with HIPAA Security Rule § 164.312(a)(2)(i)
• Legacy authentication deprecation reduces PHI exposure risk
• Continuous Access Evaluation improves access controls

Action Items:

• Document MFA enforcement in Security Risk Analysis
• Update policies and procedures for authentication
• Train workforce on new authentication requirements
• Audit Conditional Access policies quarterly

SOC 2 Type II (All Industries)

Impact:

• Common Criteria CC6.1 (logical access controls) strengthened
• CC6.2 (prior to access, users must authenticate) enhanced
• CC6.3 (network access points protected) improved

Evidence Requirements:

• Conditional Access policy configurations
• MFA registration and usage reports
• Legacy authentication blocking evidence
• Quarterly access reviews

FedRAMP (Government)

Impact:

• Aligns with NIST 800-53 IA-2 (Identification and Authentication)
• Meets IA-2(1) multifactor authentication requirements
• Satisfies IA-2(2) cryptographic authentication
• Supports AC-7 unsuccessful logon attempts

Action Items:

• Update System Security Plan (SSP)
• Document in Continuous Monitoring reports
• Test controls for Assessment and Authorization
• Maintain evidence for annual assessments

Cost Analysis

Direct Costs

Licensing (if not already owned):

• Azure AD Premium P1: $6/user/month (Conditional Access)
• Azure AD Premium P2: $9/user/month (Identity Protection)
• Microsoft 365 E3: Includes Azure AD Premium P1
• Microsoft 365 E5: Includes Azure AD Premium P2

FIDO2 Security Keys:

• YubiKey 5 NFC: $45-55 per key
• Enterprise volume pricing: $35-40 per key
• 1,000 admins × $40 = $40,000 one-time cost

Implementation Services:

• Assessment and planning: $25,000-50,000
• Migration and implementation: $75,000-200,000
• Training and change management: $15,000-40,000
• Total professional services: $115,000-290,000

Cost Avoidance

Security Incident Prevention:

• Average credential stuffing breach: $2.3M (IBM Cost of Data Breach 2025)
• Probability reduction: 85% with MFA + legacy auth blocking
• Expected value: $1,955,000 per prevented breach

Help Desk Efficiency:

• Password reset cost: $70 per incident (Gartner)
• Reduction with passwordless: 60%
• 500 resets/month × $70 × 60% × 12 = $252,000 annual savings

Compliance Fines Avoidance:

• HIPAA penalty range: $100-50,000 per violation
• SOC 2 audit failure: Loss of enterprise contracts
• Cyber insurance: 10-20% premium reduction with MFA

Total Annual Savings: $300,000-500,000 for mid-sized enterprise

ROI Calculation

10,000-User Enterprise:

• Implementation cost: $200,000
• Annual savings: $400,000
• Break-even: 6 months
• 3-year ROI: 500%

The cost of not preparing? Service disruptions, security breaches, compliance violations, and emergency remediation at 3x the cost.

Frequently Asked Questions

What happens if we're not ready by October 2026?

Microsoft will enforce MFA for Azure portal access regardless of readiness. Unprepared organizations will experience:

• Administrators locked out of Azure portal
• Automation scripts failing
• Infrastructure changes blocked
• Help desk overwhelmed with locked users

Recommendation: Don't wait. Start planning now.

Can we disable MFA enforcement for Azure portal?

No. Microsoft has stated this is non-negotiable. The only exception is break-glass accounts specifically excluded from Conditional Access policies.

Will service principals require MFA?

No. Service principals and managed identities are not subject to MFA requirements. This is why migrating from user account-based automation to service principals is critical.

How do legacy applications work after October 2026?

They don't—unless migrated to Modern Authentication. Applications using Basic Authentication or other legacy protocols will be completely blocked.

Can we extend the deadline?

No. Microsoft has provided multi-year advance notice. There will be no extensions or grace periods.

What about third-party applications integrated with Azure AD?

Applications using OAuth 2.0 and Modern Authentication are not affected. Applications using legacy authentication must be updated or replaced.

How do we test Conditional Access policies without disrupting users?

Use "Report-only" mode:

1. Create policy in report-only mode
2. Monitor sign-in logs for "what would have happened"
3. Refine policy based on findings
4. Switch to Enabled after 2+ weeks of monitoring

What if a vendor won't update their legacy application?

Options in priority order:

1. Find alternative vendor with modern authentication support
2. Build OAuth 2.0 proxy/wrapper for the application
3. Isolate application in separate environment (not recommended)
4. Retire the application if not business-critical

How do we handle contractors and external users?

• B2B Guest Users: Subject to same MFA requirements
• External Identities: Configure in External Identities settings
• Partner Access: Use Azure AD B2B collaboration with MFA
• Temporary Access: Use time-limited Conditional Access policies

Tools and Resources

Microsoft Resources

• Microsoft Entra admin center
• Azure AD Conditional Access documentation
• Legacy authentication deprecation timeline

PowerShell Modules

# Install required modules
Install-Module Microsoft.Graph -Scope CurrentUser
Install-Module AzureAD -Scope CurrentUser
Install-Module MSOnline -Scope CurrentUser

# Update to latest versions
Update-Module Microsoft.Graph
Update-Module AzureAD

EPC Group Tools

• Legacy Authentication Discovery Script: Download from GitHub
• MFA Readiness Assessment Tool: Request from EPC Group
• Conditional Access Policy Templates: Available for clients

Conclusion: Prepare Now or Pay Later

The 2026 Microsoft Entra ID changes represent the most significant authentication updates in a decade. Organizations that prepare methodically will strengthen security posture and reduce operational costs. Organizations that delay will face service disruptions, security vulnerabilities, and emergency remediation at 3x the cost.

Critical Success Factors:

1. Start immediately - 90-day preparation timeline assumes starting now
2. Assess comprehensively - Legacy authentication lurks in unexpected places
3. Test thoroughly - Conditional Access policies can lock out entire user populations
4. Communicate clearly - Users need advance warning and training
5. Monitor continuously - Authentication logs reveal issues before they become crises

The EPC Group Advantage:

EPC Group has guided 200+ enterprise organizations through major Microsoft identity and authentication transformations. Our team combines 25+ years of Active Directory expertise with cutting-edge Entra ID capabilities.

Our Services:

• Entra ID readiness assessments
• Legacy authentication migration
• Conditional Access architecture design
• MFA deployment and training
• Compliance validation (HIPAA, SOC 2, FedRAMP)
• Break-glass and emergency access planning

Schedule a Microsoft Entra ID assessment →

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This guide represents expertise from managing Entra ID environments for Fortune 500 enterprises across healthcare, financial services, and government sectors. For personalized guidance on your 2026 Entra ID transition, contact EPC Group's identity and access management practice.