Our organization is evaluating encryption key management strategies for Azure Storage Accounts as part of a compliance initiative. We need to decide between customer-managed keys (CMK) stored in Azure Key Vault versus Microsoft-managed keys (MMK) for encryption at rest. The compliance team is pushing for CMK because it gives us control over key rotation and the ability to revoke access, which they believe is necessary for regulatory requirements. However, the operations team is concerned about the additional complexity, operational overhead, and potential availability risks if Key Vault becomes unavailable. We have about 200 storage accounts across multiple regions storing sensitive customer data and financial records. The discussion has become polarized - compliance sees CMK as mandatory while ops sees it as unnecessary risk. What are the real-world operational implications of CMK? Has anyone had compliance audits accept Microsoft-managed keys? Looking for balanced perspectives on the security benefits versus operational costs.
We implemented CMK across our storage accounts last year for similar compliance reasons. The operational overhead is real but manageable. Key rotation is the biggest ongoing task - we automated it with Azure Automation runbooks that rotate keys quarterly. The availability concern is valid but can be mitigated with proper Key Vault configuration - use Premium tier with geo-replication and set up monitoring alerts for Key Vault health. We’ve had zero storage outages related to Key Vault in 18 months of running CMK. The real benefit is audit control - we can see exactly when keys are accessed, by whom, and revoke access instantly if needed. For PCI-DSS and HIPAA compliance, our auditors specifically required CMK for certain data classifications.
Data classification is key to making this decision rationally. Create a framework with clear categories: Public, Internal, Confidential, Restricted. Only Restricted data (PII, payment info, healthcare records, trade secrets) requires CMK. Everything else can use MMK. Document the framework and have legal/compliance sign off on it. We did this for a financial services client - only 15% of their storage accounts actually needed CMK based on data classification. This saved them significant operational overhead while still meeting all regulatory requirements including SOC 2 Type II and PCI-DSS. Most compliance frameworks don’t explicitly require customer-managed keys; they require encryption at rest and audit controls, both of which MMK provides. The auditor’s job is to verify controls exist, not to mandate specific implementation approaches.
One operational aspect that doesn’t get discussed enough - disaster recovery and business continuity with CMK. If you use CMK, your Key Vault becomes a critical dependency in your DR plan. We had a scenario where we needed to restore data from backup to a different region, and the Key Vault dependency complicated the recovery process. You need to ensure Key Vault is replicated to your DR region and that your runbooks account for Key Vault availability. Also, consider the impact on development and testing environments - do you replicate the CMK setup in dev/test, or accept different security postures across environments? These operational complexities add up quickly when you’re managing 200 storage accounts.
The hybrid approach is interesting. How do you classify which storage accounts need CMK versus MMK? Do you have a formal data classification framework? Our challenge is that the compliance team wants CMK everywhere “to be safe” but we don’t have clear criteria for what actually requires it from a regulatory standpoint.