Would I be able to somehow authenticate users on AX 2012 R3 without using active directory and a domain controller? How could I set this up in the cloud for instance? I realize this is something more in line with Dynamics 365 but we're a ways off from adopting still.
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You can create local accounts on the AX server, and then create users manually in AX, rather than importing from Active Directory.
However, this can only be done after installation, since the installer prerequisite check will fail if you do not use an Active Directory account.
One thing I have not yet tried is using an AD LDS server rather than AD DS domain controller.
Yes, Dynamics 365 utilizes Azure AD, but you asked about AX 2012 R3.
Thank you very much for the responses. I would imagine I could authenticate Dynamics 365 users with their Azure AD credentials/Office 365 account SSO?
Your requirement is not feasible I am afraid. Active Directory and a domain user account is required for AX 2012 since the only way to authenticate is through the Windows Integrated Security using the AD credentials.
The only way as a workaround would be to use Shift + Right click > Run as on the client executable/shortcut, with which you can run the AX client under a different credential. However, that sounds nonsense from a business perspective, since you would want to isolate access to your ERP system where security is delegated to individuals through security roles with limited access to the part of the system where they actually need to work. That is how you track who did want in your system. That is important for example in fraudulent system use situations where someone would change a bank account to their own, or writing off inventory as "loss" and shipping it out your backdoor. A universal account would not allow such granularity to see who did what, you would have to provide wider system access and lose accountability.
For rich client user has to be authenticated using integrated windows authentication. For accessing a web client (Enterprise portal) a user doesn't have to provide AD credentials. Please refer technet.microsoft.com/.../jj860379.aspx
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