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Configure cross-tenant customer-managed keys for a new storage account

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Azure Storage encrypts all data in a storage account at rest. By default, data is encrypted with Microsoft-managed keys. For additional control over encryption keys, you can manage your own keys. Customer-managed keys must be stored in an Azure Key Vault or in an Azure Key Vault Managed Hardware Security Model (HSM).

This article shows how to configure encryption with customer-managed keys at the time that you create a new storage account. In the cross-tenant scenario, the storage account resides in a tenant managed by an ISV, while the key used for encryption of that storage account resides in a key vault in a tenant that is managed by the customer.

To learn how to configure customer-managed keys for an existing storage account, see Configure cross-tenant customer-managed keys for an existing storage account.

Note

Azure Key Vault and Azure Key Vault Managed HSM support the same APIs and management interfaces for configuration of customer-managed keys. Any action that is supported for Azure Key Vault is also supported for Azure Key Vault Managed HSM.

About cross-tenant customer-managed keys

Many service providers building Software as a Service (SaaS) offerings on Azure want to offer their customers the option to manage their own encryption keys. Customer-managed keys allow a service provider to encrypt the customer's data using an encryption key that is managed by the service provider's customer and that isn't accessible to the service provider. In Azure, the service provider's customer can use Azure Key Vault to manage their encryption keys in their own Microsoft Entra tenant and subscription.

Azure platform services and resources that are owned by the service provider and that reside in the service provider's tenant require access to the key from the customer's tenant to perform the encryption/decryption operations.

The image below shows a data encryption at rest with federated identity in a cross-tenant CMK workflow spanning a service provider and its customer.

Screenshot showing a cross-tenant CMK with a federated identity.

In the example above, there are two Microsoft Entra tenants: an independent service provider's tenant (Tenant 1), and a customer's tenant (Tenant 2). Tenant 1 hosts Azure platform services and Tenant 2 hosts the customer's key vault.

A multitenant application registration is created by the service provider in Tenant 1. A federated identity credential is created on this application using a user-assigned managed identity. Then, the name and application ID of the app is shared with the customer.

A user with the appropriate permissions installs the service provider's application in the customer tenant, Tenant 2. A user then grants the service principal associated with the installed application access to the customer's key vault. The customer also stores the encryption key, or customer-managed key, in the key vault. The customer shares the key location (the URL of the key) with the service provider.

The service provider now has:

  • An application ID for a multitenant application installed in the customer's tenant, which has been granted access to the customer-managed key.
  • A managed identity configured as the credential on the multitenant application.
  • The location of the key in the customer's key vault.

With these three parameters, the service provider provisions Azure resources in Tenant 1 that can be encrypted with the customer-managed key in Tenant 2.

Let's divide the above end-to-end solution into three phases:

  1. The service provider configures identities.
  2. The customer grants the service provider's multitenant app access to an encryption key in Azure Key Vault.
  3. The service provider encrypts data in an Azure resource using the CMK.

Operations in Phase 1 would be a one-time setup for most service provider applications. Operations in Phases 2 and 3 would repeat for each customer.

Phase 1 - The service provider configures a Microsoft Entra application

Step Description Minimum role in Azure RBAC Minimum role in Microsoft Entra RBAC
1. Create a new multitenant Microsoft Entra application registration or start with an existing application registration. Note the application ID (client ID) of the application registration using Azure portal, Microsoft Graph API, Azure PowerShell, or Azure CLI None Application Developer
2. Create a user-assigned managed identity (to be used as a Federated Identity Credential).
Azure portal / Azure CLI / Azure PowerShell/ Azure Resource Manager Templates		 Managed identity contributor None
3. Configure user-assigned managed identity as a federated identity credential on the application, so that it can impersonate the identity of the application.
Graph API reference/ Azure portal/ Azure CLI/ Azure PowerShell		 None Owner of the application
4. Share the application name and application ID with the customer, so that they can install and authorize the application. None None

Considerations for service providers

  • Azure Resource Manager (ARM) templates aren't recommended for creating Microsoft Entra applications.
  • The same multitenant application can be used to access keys in any number of tenants, like Tenant 2, Tenant 3, Tenant 4, and so on. In each tenant, an independent instance of the application is created that has the same application ID but a different object ID. Each instance of this application is thus authorized independently. Consider how the application object used for this feature is used to partition your application across all customers.
    • Application can have a maximum of 20 federated identity credentials, which requires a service provider to share federated identities among its customers. For more information about federated identities design considerations and restrictions, see Configure an app to trust an external identity provider
  • In rare scenarios, a service provider might use a single Application object per its customer, but that requires significant maintenance costs to manage applications at scale across all customers.
  • In the service provider tenant, it isn't possible to automate the Publisher Verification.

Phase 2 - The customer authorizes access to the key vault

Step Description Least privileged Azure RBAC roles Least privileged Microsoft Entra roles
1.
  • Recommended: Send the user to sign in to your app. If the user can sign in, then a service principal for your app exists in their tenant.
  • Use Microsoft Graph, Microsoft Graph PowerShell, Azure PowerShell, or Azure CLI to create the service principal.
  • Construct an admin-consent URL and grant tenant-wide consent to create the service principal using the application ID.
    		•  None Users with permissions to install applications
    2. Create an Azure Key Vault and a key used as the customer-managed key. A user must be assigned the Key Vault Contributor role to create the key vault

    A user must be assigned the Key Vault Crypto Officer role to add a key to the key vault    		 None
    3. Grant the consented application identity access to the Azure key vault by assigning the role Key Vault Crypto Service Encryption User To assign the Key Vault Crypto Service Encryption User role to the application, you must have been assigned the User Access Administrator role. None
    4. Copy the key vault URL and key name into the customer-managed keys configuration of the SaaS offering. None None

    Note

    To authorize access to the Managed HSM for encryption using CMK, see example for Storage Account here. For more information about managing keys with Managed HSM, see Manage a Managed HSM using the Azure CLI

    Considerations for customers of service providers

    • In the customer tenant, Tenant 2, an admin can set policies to block non-admin users from installing applications. These policies can prevent non-admin users from creating service principals. If such a policy is configured, then users with permissions to create service principals need to be involved.
    • Access to Azure Key Vault can be authorized using Azure RBAC or access policies. When granting access to a key vault, make sure to use the active mechanism for your key vault.
    • A Microsoft Entra application registration has an application ID (client ID). When the application is installed in your tenant, a service principal is created. The service principal shares the same application ID as the app registration, but generates its own object ID. When you authorize the application to have access to resources, you might need to use the service principal Name or ObjectID property.

    Phase 3 - The service provider encrypts data in an Azure resource using the customer-managed key

    After phases 1 and 2 are complete, the service provider can configure encryption on the Azure resource with the key and key vault in the customer's tenant and the Azure resource in the ISV's tenant. The service provider can configure cross-tenant customer-managed keys with the client tools supported by that Azure resource, with an ARM template, or with the REST API.

    Configure cross-tenant customer-managed keys

    This section describes how to configure a cross-tenant customer-managed key (CMK) and encrypt customer data. You learn how to encrypt customer data in a resource in Tenant1 using a CMK stored in a key vault in Tenant2. You can use the Azure portal, Azure PowerShell, or Azure CLI.

    Sign in to the Azure portal and follow these steps.

    The service provider configures identities

    The following steps are performed by the service provider in the service provider's tenant Tenant1.

    The service provider creates a new multi-tenant app registration

    You can either create a new multi-tenant Microsoft Entra application registration or start with an existing multi-tenant application registration. If starting with an existing application registration, note the application ID (client ID) of the application.

    To create a new registration:

    1. Search for Microsoft Entra ID in the search box. Locate and select the Microsoft Entra ID extension.

    2. Select Manage > App registrations from the left pane.

    3. Select + New registration.

    4. Provide the name for the application registration and select Account in any organizational directory (Any Microsoft Entra directory – Multitenant).

    5. Select Register.

    6. Note the ApplicationId/ClientId of the application.

      Screen shot showing how to create a new multi-tenant application registration.

    The service provider creates a user-assigned managed identity

    Create a user-assigned managed identity to be used as a federated identity credential.

    1. Search for Managed Identities in the search box. Locate and select the Managed Identities extension.

    2. Select + Create.

    3. Provide the resource group, region, and name for the managed identity.

    4. Select Review + create.

    5. On successful deployment, note the Azure ResourceId of the user-assigned managed identity, which is available under Properties. For example:

      /subscriptions/tttttttt-0000-tttt-0000-tttt0000tttt/resourcegroups/XTCMKDemo/providers/Microsoft.ManagedIdentity/userAssignedIdentities/ConsotoCMKDemoUA

      Screen shot showing how to create a resource group and a user-assigned managed identity.

    The service provider configures the user-assigned managed identity as a federated credential on the application

    Configure a user-assigned managed identity as a federated identity credential on the application, so that it can impersonate the identity of the application.

    1. Navigate to Microsoft Entra ID > App registrations > your application.

    2. Select Certificates & secrets.

    3. Select Federated credentials.

      Screen shot showing how to navigate to Certificate and secrets.

    4. Select + Add credential.

    5. Under Federated credential scenario, select Customer Managed Keys.

    6. Click Select a managed identity. From the pane, select the subscription. Under Managed identity, select User-assigned managed identity. In the Select box, search for the managed identity you created earlier, then click Select at the bottom of the pane.

      Screen shot showing how to select a managed identity.

    7. Under Credential details, provide a name and optional description for the credential and select Add.

      Screen shot showing how to add a credential.

    The service provider shares the application ID with the customer

    Find the application ID (client ID) of the multi-tenant application and share it with the customer.

    The customer grants the service provider's app access to the key in the key vault

    The following steps are performed by the customer in the customer's tenant Tenant2. The customer can use the Azure portal, Azure PowerShell, or Azure CLI.

    The user executing the steps must be an administrator with a privileged role such as Application Administrator, Cloud Application Administrator, or Global Administrator.

    Sign in to the Azure portal and follow these steps.

    The customer installs the service provider application in the customer tenant

    To install the service provider's registered application in the customer's tenant, you create a service principal with the application ID from the registered app. You can create the service principal in either of the following ways:

    The customer creates a key vault

    To create the key vault, the user's account must be assigned the Key Vault Contributor role or another role that permits creation of a key vault.

    1. From the Azure portal menu, or from the Home page, select + Create a resource. In the Search box, enter Key vaults. From the results list, select Key vaults. On the Key vaults page, select Create.

    2. On the Basics tab, choose a subscription. Under Resource group, select Create new and enter a resource group name.

    3. Enter a unique name for the key vault.

    4. Select a region and pricing tier.

    5. Enable purge protection for the new key vault.

    6. On the Access policy tab, select Azure role-based access control for Permission model.

    7. Select Review + create and then Create.

      Screen shot showing how to create a key vault.

    Take note of the key vault name and URI Applications that access your key vault must use this URI.

    For more information, see Quickstart - Create an Azure Key Vault with the Azure portal.

    The customer assigns Key Vault Crypto Officer role to a user account

    This step ensures that you can create encryption keys.

    1. Navigate to your key vault and select Access Control (IAM) from the left pane.
    2. Under Grant access to this resource, select Add role assignment.
    3. Search for and select Key Vault Crypto Officer.
    4. Under Members, select User, group, or service principal.
    5. Select Members and search for your user account.
    6. Select Review + Assign.

    The customer creates an encryption key

    To create the encryption key, the user's account must be assigned the Key Vault Crypto Officer role or another role that permits creation of a key.

    1. On the Key Vault properties page, select Keys.
    2. Select Generate/Import.
    3. On the Create a key screen, specify a name for the key. Leave the other values to their defaults.
    4. Select Create.
    5. Copy the key URI.

    The customer grants the service provider application access to the key vault

    Assign the Azure RBAC role Key Vault Crypto Service Encryption User to the service provider's registered application so that it can access the key vault.

    1. Navigate to your key vault and select Access Control (IAM) from the left pane.
    2. Under Grant access to this resource, select Add role assignment.
    3. Search for and select Key Vault Crypto Service Encryption User.
    4. Under Members, select User, group, or service principal.
    5. Select Members and search for the application name of the application you installed from the service provider.
    6. Select Review + Assign.

    Now you can configure customer-managed keys with the key vault URI and key.

    Create a new storage account encrypted with a key from a different tenant

    Up to this point, you've configured the multi-tenant application on the ISV's tenant, installed the application on the customer's tenant, and configured the key vault and key on the customer's tenant. Next you can create a new storage account on the ISV's tenant and configure customer-managed keys with the key from the customer's tenant.

    You must use an existing user-assigned managed identity to authorize access to the key vault when you configure customer-managed keys while creating the storage account. The user-assigned managed identity must have appropriate permissions to access the key vault. For more information, see Authenticate to Azure Key Vault.

    When you configure encryption with customer-managed keys for an existing storage account, you can choose to automatically update the key version used for Azure Storage encryption whenever a new version is available in the associated key vault. To do so, omit the key version from the key URI. Alternately, you can explicitly specify a key version to be used for encryption until the key version is manually updated. Including the key version on the key URI configures customer-managed keys for manual updating of the key version.

    Important

    To rotate a key, create a new version of the key in Azure Key Vault. Azure Storage does not handle key rotation, so you will need to manage rotation of the key in the key vault. You can configure key auto-rotation in Azure Key Vault or rotate your key manually.

    Azure Storage checks the key vault for a new key version only once daily. When you rotate a key in Azure Key Vault, be sure to wait 24 hours before disabling the older version.

    To configure cross-tenant customer-managed keys for a new storage account in the Azure portal, follow these steps:

    1. In the Azure portal, navigate to the Storage accounts page in the ISV's tenant, and select the Create button to create a new account.

    2. Follow the steps outlined in Create a storage account to fill out the fields on the Basics, Advanced, Networking, and Data Protection tabs.

    3. On the Encryption tab, indicate for which services you want to enable support for customer-managed keys in the Enable support for customer-managed keys field.

    4. In the Encryption type field, select Customer-managed keys (CMK).

    5. In the Encryption key field, choose Enter key from key vault, and specify the key URI. Omit the key version from the URI if you want Azure Storage to automatically check for a new key version and update it.

    6. For the User-assigned identity field, search for the user-assigned managed identity that you created previously in the ISV's tenant.

    7. Expand the Advanced section, and select the multi-tenant registered application that you previously created in the ISV's tenant.

      Screenshot showing how to configure cross-tenant customer-managed keys for a new storage account in Azure portal.

    8. Select the Review button to validate and create the account.

    You can also configure customer-managed keys with manual updating of the key version when you create a new storage account. To do so, include the key version when you specify the key URI.

    Change the key

    You can change the key that you are using for Azure Storage encryption at any time.

    Note

    When you change the key or key version, the protection of the root encryption key changes, but the data in your Azure Storage account remains encrypted at all times. There is no additional action required on your part to ensure that your data is protected. Changing the key or rotating the key version doesn't impact performance. There is no downtime associated with changing the key or rotating the key version.

    To change the key with the Azure portal, follow these steps:

    1. Navigate to your storage account and display the Encryption settings.
    2. Select the key vault and choose a new key.
    3. Save your changes.

    Revoke access to a storage account that uses customer-managed keys

    To temporarily revoke access to a storage account that is using customer-managed keys, disable the key currently being used in the key vault. There is no performance impact or downtime associated with disabling and reenabling the key.

    After the key has been disabled, clients can't call operations that read from or write to a blob or its metadata. For information about which operations will fail, see Revoke access to a storage account that uses customer-managed keys.

    Caution

    When you disable the key in the key vault, the data in your Azure Storage account remains encrypted, but it becomes inaccessible until you reenable the key.

    To disable a customer-managed key with the Azure portal, follow these steps:

    1. Navigate to the key vault that contains the key.

    2. Under Objects, select Keys.

    3. Right-click the key and select Disable.

      Screenshot showing how to disable a customer-managed key in the key vault.

    Switch back to Microsoft-managed keys

    You can switch from customer-managed keys back to Microsoft-managed keys at any time, using the Azure portal, PowerShell, or the Azure CLI.

    To switch from customer-managed keys back to Microsoft-managed keys in the Azure portal, follow these steps:

    1. Navigate to your storage account.

    2. Under Security + networking, select Encryption.

    3. Change Encryption type to Microsoft-managed keys.

      Screenshot showing how to switch to Microsoft-managed keys for a storage account.

    See also