Understanding Federated Identity Management

Today, 16% of companies worldwide offer fully remote positions. And according to the World Economic Forum, there will be 92 million work-from-home (WFH) jobs by 2030. With the continued popularity of remote work, balancing security and the user experience requires a proactive approach. This is where federated identity management (FIM) comes in. 

What Is Federated Identity Management? 

Definition and explanation 

Federated identity management enables the sharing of digital identities. 

This means using a single set of credentials to access resources across multiple systems or platforms. 

Essentially, FIM uses single sign-on (SSO) for multiple system access. 

Key components and principles of federated identity management 

Federated identity management relies on a mutual trust arrangement between two parties: identity providers (IdP) and service providers (SP). We’ll explain more below. 

For now, we’ll answer a key question we’re often asked: What’s an example of a federated identity? 

Think of the last time you signed up for an online service. If you were given the option of signing in with Google, Facebook, or LinkedIn, that’s an example of federated identity. Instead of creating a new set of credentials, you logged in with your Facebook credentials.  

So, Facebook authenticated your identity, and you received access to the service you signed up for.  

Essentially, Facebook and the service platform have a mutual agreement to trust each other’s user authentication.  

The key components of FIM are: 

• Single sign-on (SSO): This allows users to log in once to access multiple resources. SSO and passwordless authentication are two complementary technologies that enhance security and the user experience.  
• Cross-domain access: Organizations can collaborate closely, allowing stakeholders seamless access to each other’s resources. 
• User convenience and security: FIM reduces the need for multiple logins, preventing password reuse and the likelihood of threat actors gaining unauthorized credential access.   
• Mutual trust agreements between IdPs and SPs: IdPs authenticate users for SPs that control access to requested resources.

Importance of federated identity management 

A digital employee experience (DEX) that prioritizes seamless collaboration and intuitive user interfaces is key to retaining top talent. 

To that end, a FIM solution that enables Single Sign-On (SSO) and minimizes login prompts is critical to reducing workplace friction. 

And employers are taking note. The global market for SSO is projected to reach US$8.4 Billion by 2030. 

FIM also centralizes the authentication process in identity and access management (IAM), enabling consistent, secure access to multiple platforms. 

Perhaps one of the greatest benefits of FIM lies in its cost savings. By consolidating identity management into a single framework, FIM reduces the costs of managing multiple IAM authentication systems.  

Finally, FIM helps organizations comply with identity governance and data protection laws. With its robust auditing and reporting capabilities, businesses can easily meet compliance standards and enjoy secure-by-design identity access management.  

How Does Federated Identity Management Work? 

Authentication and authorization process 

In an FIM system, a user must go through an authentication and authorization process to access resources: 

• First, the user logs in to an application or portal managed by the service provider (SP) 
• The SP redirects the user to a trusted identity provider (IdP). 
• The IdP presents an authentication page to the user. 
• Next, the user verifies their identity using advanced methods like behavioral biometrics, MFA, and/or FIDO2 hardware keys.  
• The IdP then verifies the user against its user directory (Microsoft Entra ID, for example). 
• Upon successful authentication, the IdP creates an assertion (SAML assertion or OAuth token) and sends it to the SP. 
• The SP validates the assertion, extracts user identity data (such as roles and permissions), and evaluates it against its access control policies. 
• Finally, the SP grants or denies access to resources based on its evaluation.

Identity providers, service providers, and relying parties 

Identity Providers (IdP) issue identity assertions (such as SAML assertions, OAuth tokens, or OpenID Connect tokens) that Service Providers and Relying Parties use to grant or deny access to resources. IdPs include Microsoft Azure AD, Okta, and Microsoft Active Directory.  

Service Providers (SP) provides services based on the identity data received from IdPs. They validate tokens and assertions to ensure they are from trusted sources. SPs enforce access control policies based on identity data in assertions and tokens. An SP can be any application, platform, or cloud service. 

Relying Parties (RP) are like SPs. However, they rely on OpenID Providers to authenticate users. 

Technical protocols and standards 

The most common protocols and standards in FIM are: 

• OAuth 2.0, which facilitates token-based authentication and authorization. Here, some of you may ask, “Is OAuth a federated identity?” The answer is no. Instead, OAuth provides the authorization framework that enables FIM. 
• SAML (Security Assertion Markup Language), which uses security assertions to authenticate users for SPs 
• OpenID Connect (OIDC), which is layered with OAuth 2.0 for user verification. OIDC is increasingly adopted due to its simpler JSON token format versus the more complex XML (Extensible Markup Language) format in SAML.

Common Use Cases of FIM 

Integration of FIM in enterprise environments 

An enterprise environment generally encompasses the IT infrastructure and ecosystems that support business operations. This includes: 

• Servers, workstations, database management systems, and VPNs 
• Security infrastructure such as firewalls, intrusion detection systems, identity access management tools, and endpoint security. 
• Collaboration tools such as Asana, Notion, Trello, Slack, and Google Workspace 

Integrating FIM into an enterprise environment involves: 

• Identifying the applications and services that will participate in the identity management ecosystem 
• Choosing an established federated identity provider (IdP) 
• Choosing and implementing the right FIM protocols 
• Configuring the IdP to authenticate users for the SP 
• Ensuring security measures like MFA are in place 
• Testing to ensure that SSO works as expected and the federated identity infrastructure is secure 
• Training staff on using the federated identity management system 

Benefits in cloud computing 

Cloud computing offers flexibility, affordability, and scalability:  

• 87% of businesses say that they experienced high growth after cloud adoption.
• The global cloud computing market is expected to rise to US$ 376 billion by 2029. 

With the rise in cloud computing, identity access management (IAM) is more critical than ever. Due to its dynamic nature, IAM can respond in real-time and adjust access permissions based on changing conditions and contexts. 

A key component of IAM is, of course, FIM. With FIM, cloud services can authenticate by using the organization’s chosen IdP.  

In Google Cloud, for example, you can configure Google Workspace to accept authentications from an IdP such as Microsoft Entra ID or Active Directory Federation Services (ADFS). 

Application in cross-domain collaborations 

So, what are common federated identity management use cases?  

One example is a collaboration between researchers studying food insecurity on different continents. FIM allows them to collaborate on a joint research project across a shared platform like ORCID.  

With federated SSO (single sign-on) on ORCID, researchers can use their institutional credentials to access all documents, databases, and research materials relating to their project. 

Another example is a car manufacturer allowing parts suppliers from anywhere in the world to access its inventory portal. Federated SSO allows suppliers to collaborate with the car manufacturer on all aspects of the automotive supply chain. 

Single Sign On (SSO) vs Federated Identity Management (FIM) 

Comparison of SSO and federated identity management 

An important question we get asked is: What’s the difference between SSO and federated identity management? 

Although many people use the terms interchangeably, there’s a slight difference. While SSO authenticates a single credential across various platforms for ONE organization, federated identity management provides access to multiple resources across a community of organizations. 

Pros and cons of each 

While SSO offers convenience and enhanced security, it’s only limited to one domain and isn’t ideal if your business needs cross-organization access. 

Meanwhile, FIM provides cross-organization access but comes with two main challenges:  

• Ensuring compliance with regulatory standards across organizations can be prohibitively challenging. 
• Establishing trust relationships between multiple domains involves the use of significant financial and personnel resources.

Choosing the right identity management approach 

Choosing between SSO and FIM will depend on several factors: 

SSO 

• Scope and simplicity: SSO is easier to implement than FIM. 
• Affordability: SSO tends to have lower setup and maintenance costs. 
• Operational considerations: SSO is a great choice if you’re primarily concerned with managing internal access rather than relationships with multiple external partners.

FIM 

• External collaborations: If your business collaborates with multiple suppliers and partners across geographic boundaries, FIM is your best bet. 
• Multiple IdP and SP partnerships: If you have multiple IdPs and SPs, FIM allows you to authenticate through a single federation layer. 
• Reporting and auditing capabilities: FIM provides enhanced reporting so you can meet global security and compliance standards.

Benefits and Drawbacks of Federated Identity Management 

Advantages of implementing federated identity management

Here are four ways federated identity management can benefit your business: 

• Scalability: your business can scale identity access management as it grows without significant infrastructure changes. 
• Operational efficiency: your IT team can focus on higher order tasks because they no longer need to manage credentials for each application separately. 
• Improved workplace morale: With FIM, you can enforce strong password and account lockout policies without overwhelming your employees. 
• Enhanced security: FIM’s centralized authentication and authorization process contributes to a more positive security posture for your business.

Potential challenges and considerations 

Despite its benefits, there exist several challenges in FIM: 

• Privacy concerns: For FIM to work, user identities must be shared with third parties. How and what information is shared will impact the safety and privacy of your employees.  
• IdP dependence: Depending on a single IdP can create a single point of failure. If the IdP experiences an outage, all services relying on it will be affected. 
• Integration complexity: Integrating FIM into an existing infrastructure can be challenging, due to the need to ensure compatibility across all elements of the infrastructure.   

Best practices for successful deployment and management 

The importance of successful deployment and management of FIM can’t be overstated. Follow these best practices to ensure a successful FIM implementation: 

• Establish clear protocols and access management guidelines to manage relationships between IdPs and SPs. 
• Ensure interoperability by choosing widely adopted protocols such as OpenID Connect. 
• Implement robust encryption and authentication mechanisms to protect sensitive user data such as PII. Look for an IdP with minimal data sharing practices. 
• Remove abandoned or orphaned accounts. 
• Provide employee training to raise awareness about potential security risks. 
• Regularly assess the integrity of your FIM system by gathering user feedback. 
• Implement solutions that can adapt to evolving security threats.

Ensuring Security in Federated Identity Management 

Overview of security measures and protocols 

Some top security measures to consider in implementing FIM include: 

• Adding MFA for an extra layer of security 
• Leveraging AI and machine learning to detect anomalies in real-time 
• Implementing role-based access control to provide JIT (just-in-time) access. 
• Treating identity, not the network, as the primary perimeter for security.

Addressing common security concerns and vulnerabilities 

One of the main concerns about FIM is that it doesn’t address insider threats from negligence, malice, or unintentional user errors. 

Another concern is that threat actors can steal tokens on OAuth 2.0 identity platforms via an Adversary-in-the-Middle (AitM) phishing attack. 

Threat actors can also perpetrate a pass-the-cookie attack by stealing session cookies which contain tokens or other authentication credentials. Once they acquire the tokens, they can perform actions with the same privileges as legitimate users. 

In addition, FIM systems often use long-lived sessions for convenience, which means attackers can compromise more resources without reauthenticating.  

Implementing secure authentication and authorization mechanisms 

To address token thefts, Microsoft recommends enforcing location, device compliance, and session lifetime controls for: 

• Highly privileged users such as global administrators, authentication administrators, and billing administrators 
• Finance and treasury type applications that are attractive to financially motivated threat actors 
• Human capital management (HCM) applications that contain PII

Microsoft Azure AD also provides the ability to revoke refresh tokens.  

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