- A
A system-assigned managed identity on the build server.
Why wrong: System-assigned managed identities are only available on supported Azure resources, not on an on-premises server.
- B
A user-assigned managed identity attached to the on-premises server.
Why wrong: User-assigned managed identities can be shared across Azure resources, but they still must be attached to Azure-supported resources.
- C
A service principal for the pipeline, with certificate-based or federated authentication.
An on-premises build server cannot use Azure managed identity directly, so the correct approach is to create a service principal and grant it the required RBAC permissions. Using certificate-based or federated authentication avoids storing a user password and supports secure non-interactive deployment from outside Azure.
- D
A shared access signature for the target resource group.
Why wrong: A SAS applies to storage resources and does not provide deployment access to Azure Resource Manager.
Quick Answer
The answer is a service principal with certificate-based or federated authentication. This is correct because an on-premises build server cannot use Azure managed identities, which are tied to Azure resources like VMs or App Services. Instead, a service principal acts as a secure, passwordless identity registered in Azure AD, allowing the pipeline to authenticate and deploy ARM templates without a user password. On the AZ-104 exam, this scenario tests your understanding of authentication methods for non-Azure workloads, often appearing as a trap where candidates mistakenly choose managed identity or a shared secret. A common memory tip is: "No Azure resource? No managed identity—use a service principal with a cert." This reinforces that certificate-based or federated credentials are the go-to for passwordless, secure automation from outside Azure.
AZ-104 Implement and Manage Storage Practice Question
This AZ-104 practice question tests your understanding of implement and manage storage. The scenario asks you to isolate a root cause — eliminate options that address a different problem before choosing. After answering, compare your reasoning against the explanation and wrong-answer breakdown below. Once you have made your selection, read the full explanation to reinforce the concept and understand why each distractor is designed to mislead on exam day.
A DevOps pipeline runs on an on-premises build server and must deploy ARM templates to a resource group in Azure without using a user password. The server is not in Azure, so managed identity is not available. What should the administrator create?
Answer choices
Why each option matters
Answer the question above first, then reveal the full breakdown to understand why each option is right or wrong.
Correct answer & explanation
A service principal for the pipeline, with certificate-based or federated authentication.
Option C is correct because the on-premises build server cannot use Azure managed identities (which require an Azure resource). Instead, a service principal with certificate-based or federated authentication provides a secure, passwordless identity for the pipeline to authenticate to Azure AD and deploy ARM templates. This aligns with the principle of using Azure AD application credentials for non-Azure workloads.
Key principle: Answer the scenario, not the keyword: identify the specific constraint before choosing the most familiar-sounding option.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
- ✗
A system-assigned managed identity on the build server.
Why it's wrong here
System-assigned managed identities are only available on supported Azure resources, not on an on-premises server.
- ✗
A user-assigned managed identity attached to the on-premises server.
Why it's wrong here
User-assigned managed identities can be shared across Azure resources, but they still must be attached to Azure-supported resources.
- ✓
A service principal for the pipeline, with certificate-based or federated authentication.
Why this is correct
An on-premises build server cannot use Azure managed identity directly, so the correct approach is to create a service principal and grant it the required RBAC permissions. Using certificate-based or federated authentication avoids storing a user password and supports secure non-interactive deployment from outside Azure.
Related concept
Read the scenario before looking for a memorised answer.
- ✗
A shared access signature for the target resource group.
Why it's wrong here
A SAS applies to storage resources and does not provide deployment access to Azure Resource Manager.
Common exam traps
Common exam trap: answer the scenario, not the keyword
The trap here is that candidates assume managed identities can be used on any server, but Azure restricts them to Azure-hosted resources, forcing the use of service principals for on-premises scenarios.
Detailed technical explanation
How to think about this question
A service principal with certificate-based authentication uses X.509 certificates for token acquisition via the OAuth 2.0 client credentials grant flow, avoiding password exposure. Federated authentication (e.g., with OpenID Connect) allows the pipeline to exchange tokens from an external identity provider (like GitHub Actions or Jenkins) for Azure AD tokens, enabling secure, passwordless deployments. This approach is critical for CI/CD pipelines that must rotate credentials automatically and comply with zero-trust security models.
KKey Concepts to Remember
- Read the scenario before looking for a memorised answer.
- Find the constraint that changes the correct option.
- Eliminate answers that are true in general but not in this case.
TExam Day Tips
- Watch for words such as best, first, most likely and least administrative effort.
- Review why wrong options are wrong, not only why the correct option is correct.
Key takeaway
Answer the scenario, not the keyword: identify the specific constraint before choosing the most familiar-sounding option.
Real-world example
How this comes up in practice
A company's IT admin needs to give a contractor read-only access to production logs without sharing account credentials. Using role-based access control (RBAC) and temporary scoped permissions — not a permanent shared password — is the correct pattern. Questions like this test whether you can apply least-privilege access across cloud identity services.
What to study next
Got this wrong? Here's your next step.
Identify which exam domain this question belongs to, review the core concept, then practise similar questions from the same domain.
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FAQ
Questions learners often ask
What does this AZ-104 question test?
Implement and Manage Storage — This question tests Implement and Manage Storage — Read the scenario before looking for a memorised answer..
What is the correct answer to this question?
The correct answer is: A service principal for the pipeline, with certificate-based or federated authentication. — Option C is correct because the on-premises build server cannot use Azure managed identities (which require an Azure resource). Instead, a service principal with certificate-based or federated authentication provides a secure, passwordless identity for the pipeline to authenticate to Azure AD and deploy ARM templates. This aligns with the principle of using Azure AD application credentials for non-Azure workloads.
What should I do if I get this AZ-104 question wrong?
Identify which exam domain this question belongs to, review the core concept, then practise similar questions from the same domain.
What is the key concept behind this question?
Read the scenario before looking for a memorised answer.
About these practice questions
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Last reviewed: Jun 11, 2026
This AZ-104 practice question is part of Courseiva's free Microsoft certification practice question bank. Courseiva provides original exam-style practice questions with explanations, topic-based practice, mock exams, readiness tracking, and study analytics to help learners prepare for the AZ-104 exam.
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