If you are new to Azure, or to some extent using Azure, you often here the terms Organizations, tenant, Accounts, Subscriptions and Licences used a lot. If you are little confused about the differences, you are not alone.

In this post, I will try to explain these terms by using an analogy of renting an apartment.

Think of Azure as a big apartment complex owned by Microsoft, that I am interested in renting an apartment. Renting an apartment in this complex (Azure) is free, I only pay for the use of amenities like water, gas, in Azure terms, Azure resources.


I will present myself to the landlord (Microsoft) and fill a registration form. Once my application is accepted, I am referred to as an Organization. More formally,

An organization represents a business entity that is using Microsoft cloud offerings, typically identified by one or more public Domain Name System (DNS) domain names, such as contoso.com.

You don’t have to be a business entity to be referred to as organization, you can be an individual.

Azure Tenant

After registration, I will be given an apartment (Azure Tenant) with a key and room number (Tenant ID) to identify my apartment.

An Azure AD tenant is a specific instance of Azure AD containing accounts and groups. 

Azure Accounts

If I have a family, I will move in with them (Azure Accounts).

User accounts for all of Microsoft’s cloud offerings are stored in an Azure Active Directory (AD) tenant

Azure AD Directory

You get a dedicated directory that contains the identities of your family. We can look up this directory to see if a person is a member of your family.

Each Azure tenant has a dedicated and trusted Azure AD directory. The Azure AD directory includes the tenant’s users, groups, and apps and is used to perform identity and access management functions for tenant resources.

You can create as many directories as you want, but objects in each directory are independent of each other.


Remember I said, you don’t pay for the apartment, but the use of amenities. To use any amenity in the apartment, I need to enter into a contract with the landlord, to agree on how I want to pay for the use. It could be at the end of every month or pay before use. This is what we call subscription.

A subscription is an agreement with Microsoft to use one or more Microsoft cloud platforms or services, for which charges accrue based on either a per-user license fee or on cloud-based resource consumption

I can sign up for Pay-As-You-Go subscription for example. Whenever I use any resources in Azure, the bill will be tied to my subscription.


For Microsoft’s SaaS cloud offerings, a license allows a specific user account to use the services of the cloud offering. You are charged a fixed monthly fee as part of your subscription.

Summary of the hierarchy

I can sign up for multiple subscriptions as an Organization, but they must be tied to only one apartment (Tenant). The billing for the use of a resource must be tied to one subscription, and I can rent as many apartments (Tenant) as I want as an Organization.