How can I create an application user for an environment with auto user sync between O365 and the D365?
At the moment users get created in the D365 instance when a user granted a license in O365 automatically, and the Application ID (AAD App Registrations Application ID) cannot be updated.
Am I missing something simple?
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As you've noted, Application users are basically Azure AD applications and not really Azure AD users. Background sync from O365 to D365 does not sync application users today. Customers add them manually and manage in D365. Current UX is very limited and there is work in progress to help add Application users in a better way.
You could post here as an idea if you want to see capabilities to automatically sync Azure AD applications based on some criteria.
the application users are not created in the Portal.office.com, but directly in the D365 intance, and they do not need license as it is documented here :
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