Access Is Not Authority: Four Rules for the MCP Layer on Azure Functions

“You don’t pick MCP or an API. You stack them.” That line opened a LinkedIn post earlier, with a tidy picture: AI agent → MCP server → your existing API, and four rules for the MCP layer. Keep auth in the API. Build tools around tasks. Expose less. Label reads and writes.

I agreed with all four, and I had already built most of them in my MCP vs API series. What made me open an editor again was the comment thread. One reader asked what a single agent gains from MCP when the API already does the job. Another said that before authority there is provenance: is the offer the agent is about to book even genuine? A third added that access is not authority, and that a successful tool call is not a successful business outcome.

So this post does three things. It puts the four rules on Azure Functions. It adds the three concerns from the comments. And it measures the one rule the Azure Functions MCP extension cannot keep for you.

The sample is at github.com/steefjan1/mcp-layer-rules-azure.

The stack, on Azure

Two Function apps, one storage account, one Entra app registration.

The API (func-stayapi) is an HTTP-triggered .NET 8 app behind Functions built-in authentication. It owns everything that decides something: listings, quotes, bookings, cancellations, roles, idempotency, audit. The MCP server (func-staymcp) is a second Functions app with the MCP tool trigger. It owns tool names, descriptions, a confirmation flag, and one signature check. It has no business rules, and it has no table it writes to.

That split answers the first commenter. With one agent and one API, the MCP server is not improving the API. It is the door the model reads, and it is where you decide what the model may even see. The API stays the door software calls. Same kitchen, two doors, which is the whole point of the series this post belongs to.

Rule 1: the MCP server gets its own token

The infographic says the spec forbids passing the user’s token through. That is right: the MCP authorization spec is explicit that a server must not forward the token it received from the client to an upstream API. On Azure the natural way to obey is a managed identity.

The MCP app has a user-assigned identity. On every API call it asks DefaultAzureCredential for a token with the API’s app ID URI as the scope. The API app has built-in authentication switched on in Bicep, with the app registration as the audience, so the platform validates issuer, audience, signature and expiry before the function runs. The function reads roles from X-MS-CLIENT-PRINCIPAL and nothing else.

There is a detail the Functions extension makes easy. The MCP tool trigger hands your function a ToolInvocationContext with no caller identity at all. There is no user token in scope to forward by accident. Rule 1 is kept partly because the trigger does not give you the rope.

Rule 2 and rule 3 pull in opposite directions

The API has six routes. The MCP server has four tools: find_stays, quote_stay, book_stay, cancel_stay. GET /bookings/{id} and the public key endpoint are not tools. The agent gets the booking back from book_stay, and the key is something the MCP server fetches, not the model.

Then I measured, because rule 3 is a number. measure/list_tools.py runs tools/list against the server and counts the tokens of each definition the client will put in front of the model. The four task-shaped tools cost 589 tokens in this sample (cl100k_base, live tools/list from the deployed server). The same six routes as six endpoint-shaped tools with one-line descriptions cost 384.

Fewer tools did not mean fewer tokens. The task shape spends its tokens on when-to-call prose: call quote_stay before book_stay, pass the signed quote unchanged, get a yes before confirm=true. The endpoint shape leaves that sequence, and the idempotency key, to the model. I will take 205 tokens over a model that invents its own booking protocol, but it is worth knowing which rule you are paying for. The script fails CI over a budget, so the surface cannot grow quietly.

Rule 4: the label is not on the wire

This is the finding. The infographic says to label reads and writes with readOnlyHint and destructiveHint, and it is careful to add that they are hints, so keep a confirmation on anything that pays or deletes.

The Azure Functions MCP trigger attribute takes a tool name and a description. That is it. There is no parameter for annotations, and the measurement script confirms what tools/list returns: no annotations object on any of the four tools. A client that uses annotations to decide what runs without asking sees four unlabelled tools and has to assume the worst, which in fairness is what the MCP spec tells clients to do.

So the sample puts the label where this extension lets it live. The description starts with “Read-only”, “Writes” or “Destructive”. The two writing tools take a confirm argument and refuse with prose when it is not true. The host.json instructions say the same thing once for the whole server. None of that is a security control, and the comment thread is right that annotations are not either. The control is the next section.

What the comments added: authority, provenance, recovery

Authority. Three app roles on the API registration: Stays.Read, Bookings.Create, Bookings.Cancel. grant-roles.ps1 assigns them to the MCP identity, and that script is the only place where “what may the agent change” is decided. Run it with Stays.Read only and book_stay becomes a tool the agent can reach and the API refuses, every call, with a 403 the MCP server renders as prose: this action is not available through the assistant. Access is not authority. The REST door keeps working for a caller that holds the role.

Provenance. The booking commenter’s point was that nothing in MCP or the API proves the offer the agent acts on was issued by the host and not changed on the way. The sample’s API signs every quote with ECDSA P-256 over a canonical body (listing, dates, guests, total, expiry) and publishes the public key at /.well-known/stay-keys. The MCP server verifies the signature before it calls book_stay, fails closed, and caches the key for five minutes, the same revocation window the commenter’s protocol uses. The API verifies again on POST /bookings. Change the total between quote_stay and book_stay, whether the model did it or a prompt injection did, and the write call is never made.

Recovery. POST /bookings requires an Idempotency-Key. The MCP server derives it from the quote id, so a retry of the same quote is the same booking. The API claims the key in Table storage before it writes, returns the existing booking with Idempotent-Replayed: true on a repeat, and loses a race cleanly. An audit table gets a row per stage: requested, denied or rejected, authorized, attempted, completed, replayed. That is the “what was requested, approved, attempted, and actually completed” record the comment asked for, in the kitchen, keyed by quote.

What the first run against Azure taught me

Two things I did not plan for, both worth knowing before you build the same.

The MCP extension parses arguments before it binds them. I declared checkIn as a string and the model sent "2026-12-05". The function received 12/05/2026 00:00:00 +00:00, the ToString() of a DateTimeOffset the extension had helpfully made on the way in. The API, which demands yyyy-MM-dd, refused it. The fix is small (the tool normalises the date before it calls the API) but the lesson is bigger: the door is allowed to be forgiving, the kitchen is not, and you only find out where the extension is “helping” by running it.

The audit row names the agent, not the user. createdBy on a booking made through the MCP door is the object id of the MCP app’s managed identity, because that is who called the API. The user who said yes in VS Code is nowhere in the chain. That is rule 1 working exactly as written, and it is also a gap: if you need “which human approved this” in the record, the MCP server has to carry it as data (a claim from its own authenticated client, written into the request body) because the API will never see a user token. I covered what it takes to authenticate that client in the 401 post.

Where this is the wrong answer

If one deterministic system calls your API, add nothing. MCP earns its place when a model chooses the call, or when more than one agent needs the same tools with the same descriptions.

If your clients are end-user assistants that expect OAuth, the Functions system key on the MCP endpoint is the wrong door lock. Switch on built-in MCP authentication on the MCP app as well; I walked through that, and the invalid_target wall behind it, in What a 401 Means to an MCP Client.

If you need annotations on the wire today, this extension version does not give them to you. API Management’s MCP export and the MCP C# SDK hosted on your own container both can. That trade is a post of its own.

And a signed quote proves the price is the one the host issued. It does not prove the host is honest. Provenance answers “is this real”, not “is this a good deal”.

What to take away

The infographic’s four rules hold on Azure, and three of them are cheap: a managed identity, a tool-per-task layout, and a script that counts tokens. The fourth, labelling, is where the platform leaves a gap, and the comment thread had already told me what fills it. Not a hint. A role on the API, a signature on the thing being acted on, and an idempotency key on the write.

The MCP layer decides what the model sees. The API decides what happens. Keep it that way and the diagram stays small.

Sources

Azure Functions or Foundry Agent Service Is the Wrong Question

Enterprise teams keep asking me the same architecture question. Should agent work run in Azure Functions or in Foundry Agent Service? The question sounds like a choice between two products. It is not. It is a question about where you draw the Foundry Agent Service architecture boundary, and the honest answer changed in the last twelve months while most of the diagrams did not.

The Foundry Agent Service architecture boundary, as commonly drawn

Here is the version of the pattern I see repeated in decks, posts, and internal architecture docs.

Azure Functions sits below the line as the action layer. Tools, action handlers, data retrieval, API adapters. Stateless, discrete, testable, independently scalable. Foundry Agent Service sits above the line as the orchestration and reasoning layer. Thread state, tool coordination, evaluation, governance. The banner at the bottom says to keep orchestration in Foundry and actions in Functions.

Most of that diagram is still correct. One box in it is now wrong, and it happens to be the box the whole argument rests on.

The claim that stopped being true

The reasoning behind the pattern went like this. Azure Functions is a stateless runtime. If you build agent orchestration inside it, you end up hand building a state machine: persisting conversation turns yourself, tracking which tool calls already completed, writing your own resume logic after a crash, and owning every retry path end to end. That is real work, it is easy to get wrong, and Foundry Agent Service does it for you. So orchestration belongs above the line.

In 2025 that argument held. Then the Durable Task extension for Microsoft Agent Framework shipped, and Azure Functions acquired the thing it was said to lack.

Durable agents give you persistent sessions that survive process crashes, restarts, and scaling events. They checkpoint automatically, so completed steps do not re-execute on recovery. Sequential, fan out and fan in, and conditional routing across multiple agents all work, with context.GetAgent() pulling a registered agent into an orchestration. And the whole thing runs on the Flex Consumption plan and scales to zero.

That is a managed state machine, in Azure Functions, supported by Microsoft. The strongest paragraph in the received pattern now argues against a product that exists.

Preview status, read from the feed rather than the docs

Note the status carefully, because this is where enthusiasm outruns the facts. The core Microsoft Agent Framework packages are stable. The durable hosting packages are not. Microsoft.Agents.AI.Hosting.AzureFunctions and Microsoft.Agents.AI.DurableTask have never had a stable release. Neither Learn page carries a preview banner, but every documented install command passes --prerelease, and the feed agrees.

Building the sample turned up something sharper than the package labels. Microsoft.Agents.AI.Foundry 1.19.0 binds Azure.AI.Projects 2.1.0.0, and version 2.1.0 exists only as a beta. Pin the stable 2.0.1 underneath it and the compiler refuses with a version conflict. So the maturity question does not stop at the hosting packages. Today, the current Agent Framework Foundry integration cannot be assembled on top of a stable data plane SDK at all.

Say that out loud in an architecture review, and cite the package feed rather than the docs.

Three substrates above the Foundry Agent Service architecture boundary

Once you accept that Functions can orchestrate, the Foundry Agent Service architecture boundary stops being a layer cake and becomes a decision.

Foundry prompt agents. Configuration rather than runtime code. Foundry owns the thread state, the lifecycle, the tracing, the evaluation, and the retry behavior. This is the fastest route to a governed production agent, and it costs you the least code and the least control. When a team wants an agent in front of existing APIs and does not want to run anything, this is the answer.

Durable agents on Azure Functions. Your orchestration, in C#, with checkpointing supplied by the durable runtime. You own the deployment pipeline, the infrastructure as code, the tests, the alerting, and the pager. You get deterministic, inspectable control flow and the same operational tooling as the rest of your estate. When the orchestration has real branching, compensation, or long running steps that must survive a restart, this earns its keep.

Foundry hosted agents. Your Agent Framework or LangGraph code, shipped as a container image or a zip into Foundry’s runtime. Foundry supplies the endpoint, the scaling, a dedicated Microsoft Entra identity per agent, and session level state. You supply the code. This is the case that blurs the boundary the original diagram insists on keeping clean, because neither side owns the whole thing.

One action layer below the line

Below the line, nothing changes. Azure Functions remains the action and tool layer for all three. You surface tools over MCP at the Functions webhook endpoint, register them once in a Foundry toolbox (I covered how that moves tool authentication off the agent in my Foundry Toolboxes post), and let any substrate above discover them at runtime. The tool code does not know or care which orchestrator called it, and hardening it is ordinary API work of the kind I described in Azure Functions behind API Management.

The companion repo, and what it proves

I built a companion repo to check that this holds in practice rather than only in a diagram. It contains one action layer and three orchestrators over it, running the same order fulfillment task. You can find it at function-foundry-boundry.

All three substrates ran against the deployed action layer. The durable agent is deployed and measured, with the smoke suite passing twelve of twelve: the action layer, the idempotency guarantee, and a full orchestration ending in exactly one customer notification. Its prompt agent sibling was created against the live MCP endpoint and driven from the Foundry playground. And the hosted agent is registered and active in Foundry, with its container exercised end to end over the responses protocol self hosted; the one path I have not driven is invoking that container through Foundry’s own runtime. Getting all of this working took forty one documented findings, every one listed in the repo’s verification log, and several of them taught me more than the sample did. The repo states its coverage in the same words, because a sample that overstates what it proved is worse than no sample.

What actually differs, in code

Building all three surfaced a difference I did not expect to be so concrete.

The action layer exposes five operations: look up an order, check inventory, reserve stock, arrange delivery, and notify the customer. Two of those change state a customer can see. Reserving stock commits inventory. Notifying the customer sends a message that cannot be unsent.

In the durable agent, those two operations do not appear in the model’s tool set at all. The orchestrator calls them as activities, where the durable runtime commits them exactly once even if the surrounding agent turns replay. What the model gets is three read oriented tools and the job of producing a plan, while the runtime executes the parts that spend money.

In the prompt agent and the hosted agent, there is no activity boundary to put them behind. The model itself has to be trusted to call each one exactly once, and your protection is instructions plus an idempotency key enforced by the tool.

That asymmetry is the trade, stated in about twelve lines. It is not a bug in either approach. It is what “who owns retry and failure handling” means once you stop discussing it abstractly.

Three substrates, three failures, one shape

I did not have to wait long for the trade to show itself in data. All three substrates ran against the same action layer on the same day, with instructions that said, in each case, to notify the customer exactly once and to use the delivery slot they were given. The prompt agent fulfilled its order correctly and notified the customer twice, in two differently worded messages, because two generations each decided a message was warranted; the reservation, protected by the idempotency key rather than by instructions, did not duplicate. The hosted agent notified exactly once, and booked the delivery for the literal phrase “next available”, because with no orchestrator in the stack nobody owns the clock, so the model passed prose where a date belonged and the action layer recorded it faithfully. And the durable agent, in an early revision that let the model judge whether stock sufficed, refused a fulfillable order with twelve units on the shelf, which is why the shipped version keeps the model out of that decision entirely. Three substrates, three different failures, one shape: whatever the runtime owned, held. Whatever the model was merely instructed about, eventually did not.

One practical note for anyone following the same path. The durable types are split across three namespaces that do not follow from one another: AIAgent, AgentSession and AgentResponse<T> come from Microsoft.Agents.AI, DurableAIAgent and context.GetAgent from Microsoft.Agents.AI.DurableTask, and ConfigureDurableAgents from Microsoft.Agents.AI.Hosting.AzureFunctions. The DurableTask package is documented as the bring your own compute option, which makes it easy to leave out of a Functions project. You need it on both paths, because the hosting package does not surface the orchestration types.

The one control that survives the decision

Which brings up the idempotency key. Every substrate can retry a tool call, and every substrate can replay. So the action layer refuses to care which one is calling and enforces safety itself. reserve_stock takes a reservation key and returns the existing reservation rather than holding stock twice. The key derives from the order, never from the run. A run derived key is indistinguishable from no key at all, because every retry invents a fresh one. I measured that exact failure in an earlier sample, and it produced two authorizations against a balance that only had room for one.

Put the idempotency key in the action layer regardless of which substrate you pick. It is the one control that survives the architecture decision.

What the durable orchestration looks like

The reason this is worth showing rather than describing is that the code contains almost no plumbing. Here is the middle of the fulfillment orchestration, trimmed for length.

[Function(nameof(FulfilOrder))]
public static async Task<FulfilmentOutcome> FulfilOrder(
[OrchestrationTrigger] TaskOrchestrationContext context)
{
var request = context.GetInput<FulfilOrderRequest>();
DurableAIAgent agent = context.GetAgent(AgentName);
AgentSession session = await agent.CreateSessionAsync();
// Facts come from activities, never from the model.
var order = await context.CallActivityAsync<Order?>(
nameof(ToolActivities.LookupOrder), request.OrderId);
if (order is null) { /* unknown order, return */ }
// The key derives from the order, never from the run. And there is no stock
// pre-check: reserve_stock IS the stock check, enforced atomically by the
// action layer, which is the only answer that cannot go stale between
// checking and reserving.
var reservationKey = $"resv-{request.OrderId}";
var reservation = await context.CallActivityAsync<ReservationResult>(
nameof(ToolActivities.ReserveStock),
new ReserveArgs(order.Sku, order.Quantity, reservationKey));
if (reservation.Reservation is null) { /* notify once with the action layer's reason, return */ }
// Only now does the model get a turn: book the slot the orchestrator computed,
// and write the customer message. Checkpointed: on replay this returns from
// history without calling the model.
AgentResponse<FulfilmentPlan> plan = await agent.RunAsync<FulfilmentPlan>(
message: $"Stock is held for {request.OrderId}. Call arrange_delivery with " +
$"the slot exactly as '{slot}'. Then write one short message " +
"telling the customer what happens next.",
session: session);
// ...
}

Count what is absent. There is no thread table, no bookkeeping to work out which steps already ran, no resume logic, and no retry loop. context.GetAgent pulls in an agent registered at startup, each RunAsync is a checkpoint, and CallActivityAsync marks the operations that must commit exactly once.

When the model judged a fact

An earlier revision opened this orchestration with a triage turn: the agent was told to look the order up, check inventory, and decide whether there was enough free stock. It worked all day, and then, with twelve units free and two wanted, it returned canFulfil false with the reason “Free stock is lower than the order quantity”. The tools had been called, and the inventory tool had answered twelve. Yet the model fumbled a comparison a CPU does perfectly, the orchestrator took its word for it, and a customer was told an order could not be fulfilled while eleven spare units sat on the shelf. The division of labour above is the correction: activities fetch facts, the action layer enforces constraints, and the model plans and writes, which is the work only a model can do. It never decides whether.

Registration is equally short. In Program.cs you build an ordinary Agent Framework agent against the Foundry project, then hand it to the durable host.

AIAgent agent = new AIProjectClient(new Uri(foundryEndpoint), new DefaultAzureCredential())
.AsAIAgent(model: modelDeployment, instructions: Instructions, name: AgentName,
tools: [ /* the read oriented tools only */ ]);
builder.ConfigureDurableAgents(options => options.AddAIAgent(agent));

Compare that against what the same behavior cost in 2025, and you can see why the received pattern needs updating rather than repeating.

What deploying it actually cost

I would not have found any of the following by reading documentation, and three of them would sink a production build.

The preview and stable halves of one product are on different trains. Microsoft.Agents.AI is stable at 1.19. Microsoft.Agents.AI.DurableTask and Microsoft.Agents.AI.Hosting.AzureFunctions are preview at 1.16. The durable packages hook into internals of the core package, nothing declares an upper bound, and NuGet pairs them without a word. It restores, compiles, deploys and starts. The agent answers in eighteen seconds. Then the orchestrator fails a determinism check, gets retried forever, and reports Running until you go looking. No compiler error, no restore warning, no startup error.

The fix is to pin the whole family to the older train, which means pinning the stable package down to match the previews. That is worth saying out loud in a review, because it is backwards from how anyone manages versions.

Failures that look like working systems

Two Azure Functions apps must not share a deployment container. Flex Consumption keeps the deployed package in the container you name. Point two apps at the same one and the second deployment overwrites the first, so an app runs the other app’s code. It does not fail. The host starts cleanly, registers whatever it found, and every route you wrote returns 404. The only reliable tell is comparing the registered function list against what you wrote.

A client that turns failures into nulls defeats the whole point of a durable activity. My first tool client returned null on any non-success status. When a function key went missing, the agent received “no such order” and reasoned confidently about a fabricated premise, while the notification activity returned success having done nothing. Exactly-once is only a guarantee if a failed call is allowed to look like one. An activity that swallows a transport error is worse than one that crashes, because neither the runtime’s retry nor the orchestration’s error handling ever engages.

Two smaller ones worth carrying. In-process state in the action layer is simply wrong on a platform that scales out, and moving reservations to Table Storage made the idempotency key stronger than the lock it replaced, because a duplicate row key returns 409 atomically across every instance. And the delivery date belongs in the orchestrator, not the prompt: an orchestrator must be deterministic, so time comes from the replay-safe clock. Ask a model for “the earliest weekday morning slot” and you will get a booking reference containing the literal phrase, which is funny once and then a determinism bug forever.

Where the platform enforces the Foundry Agent Service architecture boundary

One thing I expected to argue for turned out not to need arguing. Flex Consumption allows exactly one site per plan, so the action layer and the orchestrator cannot share one. The received diagram calls the action layer “independently scalable” as a design aspiration you could honour or skip. On this platform you have no choice: the two sides of the boundary scale on separate plans by construction and cannot starve each other of instances.

That is a better argument for drawing the line than any of mine, because it is a constraint rather than an opinion.

The four questions that settle it

When teams argue about this, they argue about product features. The argument ends faster if you ask four operational questions instead.

Who owns retry and failure handling when a tool call dies? With a prompt agent, Foundry does. With a durable agent, you do, and you decide the policy. And finally, with a hosted agent, it splits, and the split is the thing to write down.

Where does session state live, and in whose subscription? All three substrates support bring your own resources for conversation state, using Azure Storage, Cosmos DB, or Azure AI Search inside your own subscription and under your own retention policy. This matters enormously for data residency, and it is also why residency alone cannot pick a substrate for you. It used to be the deciding argument. It is now available on every path.

Which control plane does the on call engineer open at three in the morning? This question ends more debates than the other three combined. If the answer is “it depends which agent”, you have not drawn a boundary, you have accumulated one.

Is the topology documented, or improvised per team? Teams that struggle operationally are rarely the ones that picked the wrong substrate. They are the ones that picked different substrates for different agents without recording why, and inherited the failure modes of both with the runbook of neither.

Where the Foundry Agent Service architecture boundary is the wrong frame

I have made this sound tidier than it is. Several situations break the framing above.

When the orchestration is genuinely trivial. A single agent, three tools, no branching, no long running steps. Reaching for a durable orchestrator here buys you preview packages, a Durable Task backend, and a deployment pipeline in exchange for checkpointing you will never exercise. Use a prompt agent and move on.

When your team has no .NET or Python depth. The durable path is code. It rewards a team that already runs Functions, already has infrastructure as code, and already reviews pull requests. It punishes a team that wanted an agent and got a distributed systems project.

Constraints that make the decision for you

When the preview status is disqualifying. Some regulated programs cannot take a dependency on packages with no stable release, whatever the docs imply. That constraint is legitimate and it makes the decision for you. Prompt agents and hosted agents are generally available. Say so in the review and let the constraint do its work.

Do not soften this one. The train skew above is exactly the class of failure that preview status is warning you about, and it cost most of a day to find in a sample with four files of orchestration.

When you actually need multi agent collaboration across organizational boundaries. The Agent2Agent protocol appears in a lot of diagrams, including the one at the top of this post, positioned as a settled capability alongside thread state and tool coordination. It is still preview. Design for it if you like, but do not commit a program to it this quarter.

When you are migrating rather than starting. If you are on Agents classic, the deprecation deadline is doing your planning for you. Classic retires on 31 March 2027, and the migration guide makes clear it is not a rename. That is not far away for an enterprise program with a change freeze and a release train.

Draw the Foundry Agent Service architecture boundary before anyone writes code

The original pattern got the important thing right. There is a boundary, it matters, and architectures fail when nobody draws it. What it got wrong was assuming the Foundry Agent Service architecture boundary always falls in the same place.

It does not. You now have three legitimate substrates above the line and one action layer below it. The action layer stays where it is, and the tools you write for it survive every one of these decisions, which is a good reason to build that layer first and pick the substrate second.

Pick one orchestration substrate per workload. Write down which one and why. Then let the four questions above, rather than a diagram, decide the next one.

Foundry Model Ledger: Which Model, at What Price, Until When, and Which of Mine

Every model conversation with a team ends with the same four questions. Is the model available in our region? What can it do? What does it cost per million tokens? And when does Microsoft retire it? Then the platform team asks a fifth: which of our own deployments are affected? Microsoft’s Foundry Model Explorer answers the first question well. However, it does not answer the other four. It cannot, because the answers live in your subscription and in a price list that was never meant to be read by software. So I built the Foundry Model Ledger to read them together. The interesting part is what the data looks like once you do.

What the Foundry Model Explorer already does

Microsoft’s explorer is a region availability reference. It shows one row per model and version, with lifecycle status, deployment SKUs, retirement date, and the list of regions that carry it, exportable to CSV. If your question is “where can I deploy gpt-5.6-terra”, it is the fastest answer there is. However, it is a periodic snapshot rather than a live read. It shows no prices in any currency. And it knows nothing about what you have deployed. Those three gaps are the Foundry Model Ledger.

Three sources, one Foundry Model Ledger

The model catalog lives in Azure Resource Manager. A single call, GET /subscriptions/{id}/providers/Microsoft.CognitiveServices/locations/{region}/models, returns every model and version a region carries. Each entry has its capabilities (chat completion, tool calling, embeddings, context window), its lifecycle status, its deployment SKUs, and its retirement date under deprecation.inference. This is the same data the Foundry portal shows. Moreover, it needs nothing more than Reader on the subscription.

Prices live in the Azure Retail Prices API. It is public, needs no authentication, and returns every meter Azure bills. Filter on serviceName eq 'Foundry Models' and a region, and you get the list prices for tokens, images, and hours, in any currency the API knows.

Your own deployments live under each Cognitive Services or Foundry account. At first I reached for Azure Resource Graph, which is the natural place to list resources across a subscription. It returned zero rows against a subscription with twelve accounts. Resource Graph does not index the accounts/deployments child type. So the Ledger lists the accounts through ARM and then calls each account’s /deployments endpoint, six at a time.

How the Foundry Model Ledger is built

The Foundry Model Ledger is a .NET 8 isolated Azure Function on Flex Consumption with a single-page UI. It deploys with azd up, in the same shape as the [INTERNAL LINK: RAG in 8 Steps on Azure] sample. A user-assigned managed identity with Reader on the subscription reads the first and third source. The second source needs no identity at all.

Pick a region and a currency, and the table shows model, version, lifecycle, capabilities, and retirement date with a days-left bar. Next to those sit the input and output prices per million tokens. Click a row for every SKU with its capacity range, every capability ARM reports, and every price meter the tool matched. The same panel has a button that checks every other region for the same model and version.

Finally, a second tab joins your deployments to the catalog of their own region and sorts them by soonest retirement.

What the data says

Sweden Central, on the day I took these screenshots, carried more than 300 catalog entries from 11 publishers. 216 were generally available, 66 in preview, and 16 marked as deprecating. 70 versions retire within 90 days. Furthermore, 30 are already past their retirement date but still listed. That last group matters. The catalog endpoint tells you what the region knows about, not what you can still deploy. For example, gpt-4o-mini has been closed to new deployments for a long time and still appears. The SKU list and the retirement date are the better signals.

The same model and version often appears twice, once for account kind OpenAI and once for AIServices, each with its own SKU list. The Foundry Model Ledger merges those into one row. If you script against the endpoint yourself, expect the duplicates.

The Retail Prices API returned 1,727 meters for Foundry Models in that one region. None of them carries a model identifier.

Prices are written for invoices

A meter name is a billing label, not a key. The same model, gpt-5.6-sol, is spread across meters such as 5.6 sol ShortCo Inp Std Gl 1M Tokens, 5.6 sol LongCo Cd Wr PP DZ 1M Tokens, and 56sol ShCo Cd Wr Fl Gl 1M Tokens. Older meters read gpt 4.1 nano cached Inp glbl Tokens and bill per 1K tokens; newer ones bill per 1M. Similarly, grok-4.6 appears as 4.6 Inp DZ Tokens under the product Azure Grok Models, with no “grok” in the meter name at all.

The abbreviations are their own dialect. Input is Inp, inpt, or in. Output is Outp, opt, outpt, or out. Cached input is Cd. Global, data zone, and regional are Gl, DZ, and regnl. Batch, priority, and flex tiers have their own tokens.

How the matcher works

So the Foundry Model Ledger has a matcher. First, it narrows meters to the model’s publisher. Then it tokenizes both sides the same way and requires every token of the model name (minus the family prefix) to appear in the meter, in order. It also rejects meters that carry a sibling variant such as mini or pro the model does not have. When a meter carries a date token, o3 0416 or chat-latest 08062026, it pins the version. Next, it classifies direction, deployment type, tier, and context length, and normalizes the unit to a price per million tokens. Finally, it picks a headline: global standard, short context, uncached. Every price in the table carries a confidence label, exact, name, or loose. In addition, the detail panel shows every matched meter, so the headline number is never the only evidence.

What the first live run got wrong

On the first live run it priced 204 of the entries in Sweden Central. The misses were instructive. FLUX image models came out at “40,000 per million” because their meters bill per 1K images, and I had treated every 1K unit as tokens. Qwen sits under product Qwen models, which the publisher map did not know. Moreover, most of its meters are fine-tuning meters that must never become a headline price. And the Anthropic models, plus Cohere rerank and parse, are in the catalog with no Foundry Models meter in the region at all. The model exists; the public price does not.

Two tabs that came from using it

The first version stopped at the tabs above. Two more followed within a day, because the first questions people asked were not the ones I had built for.

Where else is this model available

The region check in the detail panel gives a list of names. That is correct and hard to read. So the Foundry Model Ledger now has an availability map. Every Azure region is plotted from the subscription’s own location metadata, on a world outline from Natural Earth. Type a model name, pick a version, and the regions that carry it light up in the brand blue. Regions without Azure AI services show as a dashed ring, and regions that host the service but not the model stay grey. Zoom presets for Europe, North America, Asia Pacific, the Middle East and Africa, and South America keep the labels readable where regions cluster. In Europe alone there are twenty. The data behind the map is one lightweight catalog call per region, cached, so a check across every region takes a few seconds the first time and is instant after that.

What else does the same job for less

The second question is the one that decides budgets. If we use this model for that workload, what else in the region can do the same job, and what would it cost instead? The Alternatives tab answers it with the data the Ledger already has. Pick the model you use or consider. Its capability flags from the catalog, such as chat completion, tool calling, JSON schema output, and image input, become chips, and every chip is required by default. Click one off if you do not need it and the list widens. Every other model in the region that reports all remaining capabilities is listed with its list price, what your monthly workload would cost on it, and the delta against your model, cheapest first. Enter the workload as millions of input and output tokens per month. Filters restrict the list to the same publisher or to generally available models, and retired versions are excluded. Other versions of the same model are listed last, so they do not pose as alternatives.

The comparison is on capabilities, not on quality. A nano model will always look like a 99 percent saving next to a frontier model, and the table does not know whether it would pass your evaluation set. What it does give you is the shortlist and the price gap in one view, which is the part that used to take an afternoon with the pricing page open in three tabs.

Where the Foundry Model Ledger is the wrong answer

Do not budget on it. These are list prices, matched heuristically, in whatever currency you pick. The matcher will be wrong somewhere the day Microsoft renames a meter. It also cannot price provisioned throughput, which is billed per hour per unit rather than per model. Use it to see the shape of a decision, then confirm on the pricing page.

Do not put it on the internet as is. The Function has no authentication, and it exposes your deployment list to anyone with the URL. Keep it internal, or put Easy Auth with Entra ID in front of it. If you already run model endpoints behind API Management, the same gateway can front the Ledger, with the policies from the APIM for AI Workloads series.

And do not read the catalog as an availability promise. Listed does not mean deployable, and a retirement date is a floor, not a schedule. For a plain “where is it available” question, Microsoft’s explorer remains the quicker tool.

What I would build next

The tab I did not plan is the one people ask about: my deployments, joined to the catalog, sorted by retirement. That is a governance question, not a browsing question. It sits next to the routing questions from Don’t Build Around Today’s Model. Build for the AI Control Plane. Consequently, the natural next steps are all on that side. All subscriptions in a tenant instead of one. An alert when a deployment sits on a version retiring within 90 days. A history, so you can see what appeared and what closed in a region since last month, which is a changelog Microsoft does not publish. And a cost delta for moving each deployment to its successor, which the Alternatives tab now does for one model at a time and should do for the whole deployment list.

The Foundry Model Ledger repo is at github.com/steefjan1/foundry-model-ledger. azd up deploys it; scripts/run-local.ps1 runs it against your az login; node tools/mock-server.mjs runs the UI on a sample snapshot without .NET or Azure. If the matcher misprices a model in your region, the detail panel shows why. An issue with that screenshot is the fastest way to get it fixed.

Azure Functions Behind API Management: What the Happy Path Diagram Leaves Out

Recently, I noticed another Azure architecture infographic on LinkedIn. Four boxes, left to right: clients, API Management, Function App, backend services. Underneath it, a tidy line. Function App handles the code, API Management handles the control. Together they deliver powerful and secure APIs.

(Source: LinkedIn post)

Nothing in that diagram is wrong. However, it’s not the whole story.

I have reviewed this pattern several times, in reference architectures, in project designs, and in my own work. The four boxes are always right and the design behind them is often not. The gap sits in what the arrows imply rather than in what the boxes say. So let us redraw it, and then walk through the six things the four box version quietly leaves out.

What the original gets right

Credit where it belongs. The separation of concerns in that infographic is sound, and plenty of teams still get it backwards.

API Management owns the contract. It publishes the API, applies policy, meters consumption, and gives consumers something stable to build against. Azure Functions owns the work. It runs your business logic, scales with demand, and bills for execution rather than for uptime.

That split matters because the alternative is worse. Teams that skip the gateway end up implementing authentication, throttling, and versioning inside every function, in slightly different ways, maintained by whoever touched it last. I wrote about a related boundary problem in Azure Functions, Logic Apps, and Power Automate: choosing the right tool, and the same principle applies here. The value of a gateway is not the features it lists. The value is the code it lets you delete.

So the boxes are right. Now for the arrows.

Gap one: a gateway is not a firewall

The original diagram lists “Security (OAuth, API Key)” inside the API Management box and leaves it there. That single bullet does a lot of quiet work, because it invites you to treat the gateway as your perimeter.

API Management applies policy. It validates tokens, enforces quotas, transforms payloads, and rejects malformed requests against a schema. It does not run an OWASP rule set, and it is not designed to absorb a volumetric attack aimed at your public hostname.

For anything internet facing, put Azure Front Door Premium or Application Gateway in front, with a WAF policy attached. Then lock the origin so the gateway only accepts traffic that arrived through the edge. Otherwise you have bought a policy engine and called it a perimeter.

This is also the cheapest gap to close, which makes it the most annoying one to find missing during a penetration test.

Gap two: subscription keys meter, tokens authenticate

Here is the conflation that causes the most damage in practice. A subscription key and an access token appear side by side in most diagrams, as if they were two ways of doing the same thing.

They are not. A subscription key identifies a product. It answers the question “which consumer agreement does this call belong to”, which is a billing and quota question. It does not tell you who the caller is, it travels in a header that ends up in scripts and log files, and it is shared across everyone using that product.

Authentication happens in the validate-jwt policy. That is where you check the signature, the audience, the issuer, and the claims that decide whether this particular caller may create an order.

<validate-jwt header-name="Authorization" failed-validation-httpcode="401">
<openid-config url="https://login.microsoftonline.com/{{entra-tenant-id}}/v2.0/.well-known/openid-configuration" />
<audiences>
<audience>{{orders-api-audience}}</audience>
</audiences>
<required-claims>
<claim name="roles" match="any">
<value>Orders.Write</value>
</claim>
</required-claims>
</validate-jwt>

Once that is in place, the rate limit should follow the same identity. Throttling by IP address punishes everyone behind a corporate NAT and protects you from nobody who has a laptop and patience. Throttling by a claim from the validated token gives you a quota per caller, which is what the consumer actually agreed to.

<rate-limit-by-key calls="60" renewal-period="60"
counter-key="@(context.Request.Headers.GetValueOrDefault("Authorization","").AsJwt()?.Claims.GetValueOrDefault("oid", "anonymous"))" />

Gap three: the arrow nobody draws

Now for the one that matters most.

Every version of this diagram shows one arrow into the Function App. That arrow implies the gateway is the way in. It is not. It is a way in.

An HTTP triggered function sits on a public hostname by default. Anyone holding that hostname and a function key can call it directly, and that call skips the WAF, the token validation, the rate limit, the audit trail, and every policy you carefully wrote. The gateway becomes a convention rather than a control, and conventions do not survive contact with an incident.

Teams close this in three stages, usually in this order.

Layer one, the function key. Store the host key as a secret named value in API Management, backed by Key Vault, and let the backend inject it as x-functions-key. The key never appears in your policy file or your repository. This stops crawlers and casual discovery. It does not stop anyone who has ever seen the key, and keys have a way of ending up in Postman collections, log files, and support tickets.

Layer two, token validation on the function itself. Turn on the built-in authentication, point it at the app registration that represents your API, and an untokened call now fails at the platform before your code runs. Better. Still not closed, because a valid token replayed straight at the function hostname bypasses everything the gateway added on top.

Layer three, take it off the internet. Set publicNetworkAccess to Disabled, put a private endpoint in front of the app, and integrate the gateway into the same virtual network. The hostname stops resolving from outside. Now there is genuinely one route in.

resource functionApp 'Microsoft.Web/sites@2023-12-01' = {
properties: {
publicNetworkAccess: networkIsolation ? 'Disabled' : 'Enabled'
virtualNetworkSubnetId: networkIsolation ? functionSubnetId : null
}
}

Layer three is the only one that turns your architecture diagram into a statement about reality. It also has a prerequisite that catches people out, which is the next gap.

Gap four: the tier decides the architecture

Private networking is not a checkbox you add at the end. It is gated by the API Management tier and by the Functions hosting plan, and those two choices constrain everything else in the design.

The v2 tiers changed the arithmetic here. Outbound virtual network integration used to mean Premium, which put private connectivity out of reach for a lot of internal APIs. Standard v2 brought it within reach of an ordinary project budget. On the compute side, the Flex Consumption plan brought virtual network integration to a consumption billing model, which used to mean choosing between cost and connectivity.

The same is true of time. Both the gateway and the function cap how long a request may run, and those caps differ by tier and plan. If your design assumes a two minute synchronous call, you have made a tier decision without realising it.

Pick the tier and the hosting plan before you pick the features, and verify the current limits on Microsoft Learn rather than trusting a diagram. Both sides of this moved several times during 2025 and 2026, and anything I write here has a shelf life.

Gap five: the dashed response arrow assumes synchronous

Look at the original infographic again. The response arrow is dashed and runs straight back to the client. It quietly assumes every call finishes inside the request.

Plenty do not. Bulk imports, report generation, anything that fans out to a slow downstream system. The instinct is to raise the timeout, first on the function, then on the gateway, until the whole chain waits for the slowest possible caller. That is not a fix. It is a queue with worse ergonomics, and it fails under load rather than under test.

The pattern that works is the asynchronous HTTP API. Accept the request, start the work, and answer immediately.

var instanceId = await durableClient.ScheduleNewOrchestrationInstanceAsync(
nameof(BulkImportOrchestrator), orders);
var response = request.CreateResponse(HttpStatusCode.Accepted);
response.Headers.Add("Location", $"{request.PublicBaseUrl()}/bulk/{instanceId}");
response.Headers.Add("Retry-After", "5");

One detail deserves attention, because it connects back to gap three. Durable Functions ships a helper called CreateCheckStatusResponse that builds the polling URLs for you. Those URLs point at the function hostname. That leaks your backend to every caller, and it breaks the moment you disable public network access.

So build the status URL from a setting that holds the gateway address instead. Callers should never learn the name of your function app, and they certainly should not be given it in a header.

Gap six: one request, two telemetry stores

Both boxes in the diagram write to Application Insights, usually to two separate resources with two separate sampling configurations. Neither picture shows that, because telemetry is drawn as a property rather than as a system.

The result shows up during your first real incident. You have a gateway trace that ends at the backend call and a function trace that starts somewhere in the middle, and no reliable way to join them. Then somebody discovers that the gateway sampled at one rate and the function at another, so half the pairs do not exist at all.

Two habits fix this. Set a correlation id at the gateway when the caller did not supply one, and propagate it through the function into every log line.

<set-variable name="correlationId"
value="@(context.Request.Headers.GetValueOrDefault("x-correlation-id", context.RequestId.ToString()))" />
<set-header name="x-correlation-id" exists-action="override">
<value>@((string)context.Variables["correlationId"])</value>
</set-header>

Then align the sampling on both sides, and write the query that joins them before you need it rather than during an outage. I made a similar argument about governed telemetry in the Foundry Citadel Platform series, where an SDK routed its calls around the gateway entirely and the only reason we noticed was that the traces did not add up.

Where this is the wrong answer

Everything above assumes you need API Management. Often you do not.

A gateway earns its place when there is a portfolio to govern. Several APIs, consumers outside your own team, versions that have to coexist, quota that differs per consumer, one place where policy and audit live. Under those conditions API Management pays for itself in the coordination it removes.

For a single internal API with one consumer, it is a monthly bill wrapped around a proxy. Built-in authentication with Entra ID on the function, a private endpoint if it is internal, and you are done. Add the gateway when the second consumer actually appears, because that is when versioning and per consumer quota start to matter.

There is also a middle answer that gets skipped. One public API that needs a WAF but has no consumer lifecycle should sit behind Front Door and nothing else. You get the perimeter without buying governance you are not using yet.

A sample you can deploy

I put the whole thing in a repository, because policy fragments in a blog post are easy to agree with and harder to run.

One azd up deploys API Management Standard v2, a Flex Consumption function app on .NET 8 isolated, a storage account with shared key access disabled, and a shared Application Insights resource. The Orders API has a synchronous endpoint, an asynchronous bulk import built on Durable Functions, and a health endpoint the gateway can probe.

The three layers from gap three are deployment switches rather than prose:

SettingWhat it turns on
defaultLayer one, function key held as a secret named value
ENTRA_TENANT_ID and API_AUDIENCELayer two, validate-jwt and quota by oid claim
NETWORK_ISOLATION=trueLayer three, private endpoint and public access disabled

Deploy it with the default settings, then call the function hostname directly and watch it answer. That single curl makes the argument better than this whole post does.

Closing

The four box diagram is a good summary and a bad specification. Function App handles the code, API Management handles the contract, and neither of them handles the network. That last part is where these designs usually fail, and it is the part no infographic ever draws.

Production Readiness: Closing the Execution Gap

Every post in this series so far has covered a layer: compute, messaging and orchestration, data patterns, governance and identity, observability and FinOps. This one isn’t a layer. It’s a question that cuts across all of them: when is the platform actually ready for production?

That question is harder than it looks, because “we built it” and “we can run it” are different claims. I’ve watched more than one integration platform pass every technical checkpoint and still fall short of production-ready, not because the design missed anything, but because nobody had turned that design into something enforceable, operable, and provable. So this post is about the gap between those two states, and how you close it. It’s the through-line under every layer, and it’s the thing that turns a strong architecture into a platform you can responsibly put load on.

The shift: from “is it built?” to “can we operate it?”

Here’s the single most useful reframe I know for this stage. Stop asking “is the platform technically built?” and start asking “can we operate it safely, recoverably, auditably, and predictably?”

Those are not the same question. The first is about whether the components exist and connect. The second is about whether, when something goes wrong at 2 am, someone can see what happened, understand it, recover from it, and prove afterward that they handled it correctly. A platform can pass the first test comfortably and fail the second completely. And the second test is the one that actually determines whether you should go live. So the moment you catch yourself saying “it works,” push on: does it work in a demo, or does it work under a failure you didn’t plan for?

The core move: make the implicit explicit

Most integration platforms at this stage share the same shape. The design is good, and someone has largely written it down. But a lot of what matters lives in documentation, in code that’s still evolving, or in the heads of the people who built it. That works fine while a small team builds the foundation. It stops working the moment the first real production use case lands, because implicit choices become whatever the first team happens to decide.

The fix is a production baseline: an explicit, enforceable statement of what production use demands. It names the mandatory components and patterns, pins down the environment profiles, fixes the security controls and monitoring standards, and settles the recovery agreements and release criteria. Its job is to pull those decisions out of documents and habits and into something the platform enforces, so the first production use case inherits the decisions rather than reinventing them.

Without that baseline, every early integration is free to make its own choices, and you accumulate inconsistency, technical debt, and a future re-platforming you didn’t budget for.

Design versus demonstrable: the recurring gap

The same gap shows up in every layer, and once you see it, you can’t unsee it. On security, the design names Zero Trust, least privilege, and pipeline-driven change, yet permanent broad access rights sit in the environment, quietly contradicting it. Observability design specifies OpenTelemetry and required fields, but the alert rules and dashboards never make it into the infrastructure. And the CI/CD design describes a full release chain with quality gates, while the pipelines really only cover the dev environment.

In each case the design is right and the demonstrable working is missing. That’s the pattern to hunt for when you assess readiness: not “did someone design this?” but “does the platform actually enforce this design somewhere it can prove?” Anything that lives only as intent is a gap, however good the intent.

What operational readiness actually covers

Technical function is necessary but not sufficient. Operational readiness asks a distinct set of questions, and that set decides go-live. In practice, it comes down to whether you can demonstrably answer these:

Can you see what’s happening: monitoring, chain-level tracing, message-level insight? When an incident hits, does someone triage it, and do they have the information they need to do so? For recovery, can the platform handle errors, replay from a known point, and fall back on a real Business Continuity and Disaster Recovery plan rather than an RTO written in a document? Afterward, can you prove what happened through an audit trail, an access log, and change history? On access control, do you separate permanent from elevated rights, and dev from production? For cost, can you attribute it, budget against it, and tier retention? And finally, can you hand it over — have you defined operational ownership, or does every incident route back to the people who built it?

If any of those answers is “only in the design,” please fix it before go-live, not after the first incident teaches you the hard way.

The boundary that decides scale: central versus decentral

The other thing production-readiness has to settle is a boundary, not just a checklist. Most modern integration platforms want value-stream teams to deliver independently within central guardrails. That’s the right ambition. But it only works when you draw the line between central platform ownership and team autonomy deliberately, because that line runs through every layer: API governance, messaging configuration, RBAC, pipeline use, monitoring, error handling, lifecycle, support.

Get the line wrong and you recreate the exact problem the platform set out to solve. The platform team becomes the bottleneck again — the single point through which every change, approval, and incident has to pass. So team autonomy isn’t just a tooling question. It needs explicit ownership agreements, release paths, access models, quality controls, and operational responsibilities. The tooling enables autonomy; the agreements make it safe.

Shared components are where this bites hardest. A shared API gateway, a shared message broker, a shared logging workspace these touch technology, security, governance, operations, cost, and autonomy all at once. They make the platform economical, and they carry the biggest scaling risk. For each one, decide deliberately: why does it stay shared rather than isolated, who owns it, who may change it, how do you monitor it, and how do you attribute its cost? Leave those implicit and the shared component quietly becomes everyone’s dependency and no one’s responsibility.

Readiness isn’t one moment — it’s three

The last reframe worth making: “ready” isn’t a single bar. It’s three different bars at three different moments, and conflating them is how platforms either over-build early or under-prepare for scale.

First go-live. The bar here is the minimum production baseline and demonstrable operational readiness. Not every capability has to be complete, but the ones that are preconditions for running safely in production do. This is where the baseline, the recovery plan, and the release criteria have to be real.

First team onboarding. The bar shifts to whether the federated model actually works in practice. Can one real team deliver independently within the central guardrails, without quality, security, or consistency buckling under the first real use? This is a practice test, and it’s better, even, to let some things get concrete here rather than designing them fully in the abstract.

Scaling to many teams. Now the bar is repeatability. Anything that worked at one team through direct conversation now has to become standardised, documented, and reproducible: lifecycle policy, cost allocation, onboarding, support model, versioning, exception handling. Direct alignment doesn’t scale; product-steering does.

Naming which moment a given concern belongs to is half the battle. It stops you from demanding scale-grade rigour before first go-live, and from discovering at team five that nobody built the repeatable version.

Where this thinking gets over-applied

Consistent with the series, the honesty section. “Production baseline” thinking is right, but it can tip into paralysis.

Not everything has to be complete before first go-live. The three-moments split exists precisely so you don’t. Demanding full lifecycle policy, mature FinOps, and a complete federation model before a single use case runs is how a platform never ships. Match the rigour to the moment.

A baseline that only flags is a baseline that gets ignored. The whole point of the production baseline is that the platform enforces it. A pile of documented-but-unenforced standards manufactures the appearance of readiness without the substance, which is more dangerous than an honest gap, because it invites false confidence.

You can make a decision deliberately without making it central. Drawing the central-versus-decentral line carefully doesn’t mean pulling everything central. Sometimes the deliberate call is “this is team-owned,” and recording that reasoning is the point, not the direction.

The shape of it

For an integration architect, production-readiness isn’t a technical checkpoint; it’s the shift from a platform that’s built to one you can operate responsibly. Make the implicit explicit in a production baseline. Hunt the gap between what’s designed and what’s demonstrable. Answer the operational-readiness questions before go-live, not after. Draw the central-versus-decentral line deliberately, especially for shared components. And treat “ready” as three moments, not one. Do that, and the layers from this series stop being a good architecture on paper and become a platform you can actually run.

This is the lens that ties the series together. The Azure PaaS map has the layer-by-layer foundation; this post is the question you hold every layer up against before you put production load on it.

Azure Functions vs. Logic Apps vs. Power Automate: When to Use What

If you work anywhere near the Microsoft ecosystem, you have probably run into all three of these services. You have probably also run into the confusion around them. They all “automate” something. They all show up in architecture conversations. On the surface, their marketing pages sound almost interchangeable.

This post continues the Cloud Perspectives Azure PaaS series. It follows recent entries on Azure Functions as a serverless agents runtime and managed identity in Logic Apps Standard. Those posts went deep on one service. This one steps back and compares all three. The usual shorthand, Functions for code, Logic Apps for integration, Power Automate for business users, is cleaner than reality.

In practice, Functions is a capable integration tool in its own right. Logic Apps’ headline B2B/EDI capability comes bundled with an extra resource and its own bill. Power Automate is not even an Azure product. Picking the wrong tool does not just produce a clunkier solution either. It can mean months of maintenance pain, licensing costs nobody budgeted for, or a workflow that cannot scale. Here is a more honest breakdown of how the three differ, and when each one earns its place in your architecture.

Where each service actually lives

Before comparing capabilities, it helps to see where these tools sit organizationally. That placement drives billing, governance, and who owns the resource day to day.

Azure Functions and Logic Apps are Azure resources. You provision them in the Azure portal, under an Azure subscription, next to your virtual machines and storage accounts. Platform teams building governance models, like the ones described in Azure governance and identity for integration architects, treat them accordingly.

Power Automate is different. It is licensed through Microsoft 365 and the Power Platform admin center. That difference is not a footnote. It determines which admin center you open when something breaks, and which budget line absorbs the cost.

Azure Functions: built for developers who want full control

What it is

Azure Functions is Microsoft’s serverless compute service. You write code in C#, Python, JavaScript, TypeScript, Java, PowerShell, and more. It runs in response to an event. That event might be an HTTP request, a new file landing in Blob Storage, a message hitting a queue, or a timer firing. You never manage the underlying servers. You simply ship functions and let Azure handle the scaling.

It is also a first-class integration tool

Functions gets typecast as “the compute one” while Logic Apps gets credited with “integration.” That framing sells Functions short. Its HTTP triggers and rich set of bindings include Service Bus, Event Grid, Cosmos DB, and Blob Storage. Those let a function sit in the middle of a system-to-system exchange just as naturally as a Logic App can.

For stateful, long-running orchestration across multiple systems, the exact scenario people usually reach for Logic Apps for, Durable Functions provides that same pattern in code. You get full testability and source control with it. For developers building the kind of serverless orchestration covered in Azure Functions as a serverless agents runtime, Functions is a legitimate path for integration work, not a fallback.

When to use it

Reach for Functions when you need custom logic, complex calculations, or heavy data transformation that a visual designer cannot express cleanly. Reach for it when you want total control over code, dependencies, and third-party libraries. It also fits when you are building microservices and APIs that must perform well under load. It also fits when you are doing systems integration and would rather express it in code than in a visual designer.

Typical use cases: processing images uploaded to Blob Storage, powering a custom REST API for a mobile or web app, running scheduled jobs, handling real-time IoT telemetry, and orchestrating multi-step integration workflows through Durable Functions.

Trade-offs

Functions requires real programming skills. Cold starts on the Consumption plan can add latency to infrequent workloads. You also own more of the maintenance and security surface than a managed workflow tool would give you.

On the upside, Functions is usually the cheapest of the three at scale. The Consumption plan includes a substantial monthly free grant, around one million executions and 400,000 GB-seconds. You only pay for what you actually run.

Logic Apps: built for enterprise-grade integration

What it is

Logic Apps is Azure’s platform-as-a-service for orchestrating workflows across systems. Think of it as the enterprise integration layer. It gives you a visual designer, so it sits at a lower code level than Functions. Even so, it targets IT and integration teams rather than casual business users. Logic Apps shines when you need to connect many systems reliably, at scale, with proper DevOps practices wrapped around it. That is the kind of governance discussed in Azure data patterns for integration architects.

When to use it

Reach for Logic Apps when you need to integrate multiple systems, spanning cloud, on-premises, and SaaS, with formal reliability and monitoring requirements. It also fits B2B or EDI-style exchanges over AS2, X12, or EDIFACT. And it fits any scenario where you want a pay-per-execution model that supports high-volume enterprise workflows without managing infrastructure yourself.

Typical use cases: syncing a CRM like Salesforce with an on-premises SQL database, exchanging invoices with trading partners using industry-standard protocols, and orchestrating responses to Azure alerts or resource deployments.

The Integration Account catch

One nuance is easy to gloss over. The B2B/EDI capability is not something a plain Logic App gives you out of the box. It requires provisioning a separate resource, an Integration Account, to store trading partners, agreements, schemas, and certificates. You then link that account to your Logic App.

Integration Accounts carry their own tiered pricing across Free, Basic, Standard, and Premium levels. In other words, “use Logic Apps for B2B/EDI” really means “use Logic Apps plus an Integration Account.” That adds both cost and an extra resource to manage, something a lot of comparisons leave out entirely.

Trade-offs

Logic Apps requires an active Azure subscription and has a steeper learning curve than Power Automate. Unlike Power Automate, it also has no built-in desktop or RPA automation. Billing runs on trigger, action, and connector executions, which can add up faster than an equivalent Functions workload.

Still, you get native Visual Studio and Git integration, strong monitoring, and no hard execution limits. All of that matters at enterprise scale.

Power Automate: built for business users who need speed

What it is

Power Automate is the low-code, no-code member of the trio, built for productivity rather than infrastructure. It lets business users, not developers, automate day-to-day tasks such as approvals, notifications, report generation, and data syncing between Microsoft 365 apps.

It is not actually Azure

Here is a distinction worth making explicit, since the three tools so often get lumped together as “Azure services.” Power Automate is not an Azure service. It belongs to the Microsoft Power Platform, licensed alongside Power Apps, Power BI, and Copilot Studio. That licensing typically runs through Microsoft 365 plans, standalone per-user or per-flow licenses, or a free tier, not an Azure subscription.

The one exception is pay-as-you-go licensing, which lets you bill Power Automate usage against an Azure subscription as an alternative payment mechanism. Even so, that is a billing convenience, not evidence that Power Automate lives in Azure.

Functions and Logic Apps are Azure resources you provision in the Azure portal, under an Azure subscription, alongside your VMs and storage accounts. Power Automate, by contrast, is a Microsoft 365 offering that happens to interoperate with Azure resources through connectors. That is a real architectural distinction, not just a licensing footnote. It affects who owns the resource, where governance sits, and which admin center you troubleshoot in when something breaks.

When to use it

Reach for Power Automate when you want to boost individual or team productivity without writing code. It also fits when you need to automate UI-based tasks on legacy software through desktop flows, essentially RPA. It fits too when your workflow lives mostly inside Microsoft 365, across Outlook, Teams, SharePoint, and similar apps.

Typical use cases: routing document approvals through Teams and Outlook, using desktop flows to pull data out of an old legacy application, and automatically saving email attachments to a SharePoint folder.

Trade-offs

Power Automate is the fastest option to deploy for non-developers, and it integrates tightly with the Power Platform. That said, licensing can get expensive at scale, debugging and version control stay limited compared to code-first tools, and performance throttles kick in on high-volume runs.

A quick rule of thumb, caveats included

  • If the job needs raw coding power, fine-grained control, or code-first integration, reach for Azure Functions. That includes integration work. Do not rule it out just because Logic Apps carries the “integration” label.
  • If the job needs visual, governed workflow orchestration across systems, reach for Logic Apps. Budget for an Integration Account on top if EDI or B2B is involved.
  • If the job needs a fast, no-code fix for a Microsoft 365-centric business process, reach for Power Automate. Account for it as Power Platform or M365 licensing rather than an Azure cost.

The real power comes from combining them

These three are not really competitors. They are layers. A common pattern looks like this: Power Automate handles the front-end business process, say a Teams approval flow. That triggers a Logic App to orchestrate the broader integration across systems. The Logic App, in turn, calls an Azure Function to run the custom logic or heavy computation that neither low-code tool expresses well.

Used this way, each tool does the part it is actually good at. Power Automate handles speed and accessibility. Logic Apps handles governed integration at scale. Azure Functions handles anything that needs real code. The mistake is not choosing one of these. It is assuming you have to choose only one.

Building RAG Pipelines with Azure Functions: Event-Driven Data Retrieval at Scale

This is the fifth and final post in the series on AI and Azure Functions. The first post mapped all four AI-enabled patterns. Posts two through four went deep on MCP server hosting, the serverless agents runtime, and Durable Functions for directed agentic workflows. This post covers the fourth pattern: retrieval-augmented generation.

RAG is where Azure Functions earns its place through a capability that is easy to underestimate: the ability to handle multiple events from multiple data sources simultaneously. A RAG pipeline is only as good as its retrieval layer, and retrieval latency in production comes down to two things: how fast you can query your data sources, and how fast you can scale when demand spikes. Azure Functions on Flex Consumption handles both.

What RAG on Azure Functions actually looks like

The Microsoft Learn documentation is deliberately brief on this pattern: “RAG systems require fast data retrieval and processing. Functions can interact with multiple data sources simultaneously and provide the rapid scale required by RAG scenarios.”

That one-liner contains three architectural decisions worth unpacking.

Multiple data sources simultaneously. A retrieval layer that queries one source at a time is a bottleneck. A function app can fan out — trigger parallel calls to Azure AI Search, a Cosmos DB vector store, a blob-indexed knowledge base, and a case history API — collect all results, and pass the aggregated context to the language model in a single call. This is the fan-out/fan-in pattern from the Durable Functions post, applied to retrieval rather than to a directed workflow.

Event-driven. The most common RAG pattern in tutorials is synchronous: the user sends a query, retrieval runs, and the LLM responds. But production RAG often has an asynchronous dimension — new documents arrive, get processed, get indexed. Azure Functions handles both sides: HTTP-triggered retrieval for the synchronous path, and blob/Event Hubs/Cosmos DB change feed triggers for the ingestion pipeline that keeps the index current. The same function app can serve both.

Rapid event-driven scaling. The Azure OpenAI binding extension adds stateful chat session support — the function maintains conversation history across turns without you writing session management code. Combined with Flex Consumption’s scale-to-zero billing, that means a RAG-enabled chat endpoint costs nothing when idle and scales in seconds when traffic arrives.

The Azure OpenAI binding extension

The binding extension is the most concrete piece of infrastructure the docs call out for RAG. It provides three bindings relevant to RAG scenarios:

Text completion input binding — calls an Azure OpenAI deployment and returns the response. Used for one-shot prompt/response patterns.

Chat completion input binding — maintains a stateful chat session across function invocations. The session history is stored externally (Azure Table Storage by default) and automatically injected into each prompt. This is what the “Custom chat bot” sample in the docs demonstrates.

Embeddings input binding — generates vector embeddings from text. Used in the ingestion pipeline to embed documents before writing them to a vector store.

A simple RAG function using the chat completion binding looks like this in C#:

[Function(nameof(RagChat))]
public static async Task<IActionResult> RagChat(
[HttpTrigger(AuthorizationLevel.Function, "post")] HttpRequestData req,
[TextCompletion(
"{query}",
Model = "%OPENAI_DEPLOYMENT%",
SystemPrompt = "You are a helpful assistant. Answer using only the context provided."
)] TextCompletionResponse completion)
{
return new OkObjectResult(completion.Content);
}

The binding handles the Azure OpenAI call, authentication via managed identity, and response parsing. You write the retrieval logic — what context to inject into {query} — and the binding handles the LLM call.

The production version adds a retrieval step before the binding executes. In practice, this means the HTTP trigger extracts the user query, a call to Azure AI Search (or your vector store of choice) retrieves relevant passages, those passages are injected into the prompt template, and then the binding submits the augmented prompt to the LLM.

APIM as the LLM gateway layer

The binding extension simplifies the function code, but it routes directly to Azure OpenAI — there is no governance layer between the function and the model by default. For production RAG pipelines, that matters: you need rate limiting per client, token quota management, cost attribution across tenants or use cases, and a single point for monitoring and logging LLM calls.

APIM fills that role. Place it between the function app and Azure OpenAI, configure an inbound policy to validate the request and apply per-subscription token quotas, and configure an outbound policy to log usage. The function app calls the APIM endpoint rather than the Azure OpenAI endpoint directly.

One practical constraint from real deployment experience: if you use the Azure AI Foundry Agent Service SDK alongside Azure Functions, the SDK routes LLM calls directly to Azure OpenAI and bypasses APIM entirely. The standard OpenAI SDK doesn’t behave this way—calls flow through APIM as expected. The Citadel Platform series covers this in detail, including how to structure APIM policies for the token quota patterns that matter in production.

For RAG pipelines specifically, two APIM policies are worth implementing:

Token quota by subscription key. Set a per-day or per-hour token budget for each API consumer. RAG queries are often significantly larger than simple completions because the retrieved context inflates the prompt — a query with 2,000 tokens of retrieved passages consumes far more quota than a direct LLM call. Factor this into your quota design.

Semantic caching. APIM’s semantic caching policy stores LLM responses and returns cached results for semantically similar queries. For a RAG pipeline serving a knowledge base that changes infrequently, this can dramatically reduce token consumption and latency.

The ingestion pipeline

The retrieval side of RAG gets most of the attention, but the ingestion pipeline- how documents get into the index is where Azure Functions adds less-discussed value.

When a new document arrives in blob storage, the function extracts text, generates a vector embedding, and writes the result to Azure AI Search. An Event Hubs trigger handles high-throughput ingestion where many documents arrive simultaneously. A Cosmos DB change feed trigger keeps a vector index in sync with a transactional database.

The key advantage over a dedicated ingestion service is that the same managed identity, Application Insights workspace, and azd deployment pipeline cover both retrieval and ingestion. Operational complexity stays low even as the pipeline grows.

One constraint to know before building: blob triggers on Flex Consumption require EventGrid as the source. Standard polling blob triggers are not supported on the Flex Consumption plan. This means you must configure an EventGrid system topic and event subscription after provisioning — a two-step post-provision operation that cannot be included in the same Bicep deployment as the function app.

A minimal ingestion function using the Azure OpenAI SDK for embeddings — the recommended approach until the embeddings binding extension reaches GA:

[Function(nameof(IngestDocument))]
public async Task Run(
[EventGridTrigger] EventGridEvent eventGridEvent,
CancellationToken cancellationToken)
{
// Read blob from storage, generate embedding, write to Azure AI Search
var blobContent = await ReadBlobAsync(eventGridEvent.Subject, cancellationToken);
var embeddingClient = openAiClient.GetEmbeddingClient(embeddingsDeployment);
var embedding = await embeddingClient.GenerateEmbeddingAsync(
blobContent, cancellationToken: cancellationToken);
var document = new SearchDocument { ContentVector = embedding.Value.ToFloats().ToArray() };
await searchClient.IndexDocumentsAsync(
IndexDocumentsBatch.Upload([document]), cancellationToken: cancellationToken);
}

The EventGrid trigger fires on MicrosoftStorage.BlobCreated events; the function reads the blob, generates the vector, and writes to the index. EventGrid delivery includes retry logic —failed events are retried with exponential backoff for up to 24 hours.

Connecting the four patterns

This is the final post in the series, so it is worth mapping how the four AI patterns relate to each other in a production architecture. They are not mutually exclusive.

A realistic enterprise RAG system might use all four:

  • Azure Functions RAG pipeline handles retrieval — HTTP-triggered queries fan out to multiple sources, ingestion functions process new documents via blob and Event Hubs triggers.
  • MCP binding extension exposes the retrieval function as an MCP tool, so AI agents and Copilot can call it directly
  • Durable Functions orchestrates multi-step retrieval workflows, including approve-before-index, parallel ingestion with fan-out, andandlong-running document processing with human-in-the-loop review.
  • Serverless agents runtime wraps the whole thing in an agent that decides which data sources to query based on the user’s intent, using the retrieval function as one of its tools

APIM sits in front of the Azure OpenAI calls regardless of which pattern makes the LLM request. The function app’s managed identity authenticates to both APIM and the downstream Azure services. Application Insights provides a unified view across all four patterns.

The spectrum from the Durable Functions post applies here too: RAG retrieval is mostly directed (the function knows which sources to query), but the agent layer that decides what to retrieve and how to use the results is autonomous. Azure Functions provides the event-driven, scalable retrieval infrastructure for both ends of that spectrum.

What to know before building

Choose your vector store before choosing your binding. The Azure OpenAI binding extension integrates cleanly with Azure AI Search. If you are using Cosmos DB for MongoDB vCore, a Postgres pgvector extension, or an external vector database, you write the retrieval logic directly using the SDK — the binding handles the LLM call, not the retrieval.

The embeddings binding and the chat completion binding have different cost profiles. Embeddings are cheap per token; completions are expensive. The ingestion pipeline (embeddings) can run at high volume with low cost. The retrieval + completion path (chat) is where token costs accumulate. Design your APIM quota policies accordingly.

Stateful chat sessions need external storage. The chat completion binding stores session history in Azure Table Storage by default. For multi-tenant RAG, partition session keys by user or tenant — the default key scheme does not enforce isolation automatically.

Retrieval quality determines output quality. Azure Functions handles the retrieval infrastructure; what you retrieve is your responsibility. This distinction matters more than it might seem.

With keyword search alone, a query like “List all Metallica albums” retrieves documents based on term frequency across the index. An index containing Radiohead (48 releases) and Porcupine Tree alongside Metallica will surface Radiohead and Porcupine Tree documents ahead of Metallica ones, because those bands have more indexed content matching common terms. The LLM then filters the irrelevant context and may miss albums that simply did not appear in the retrieved passages.

Hybrid search combining keyword retrieval with vector retrieval addresses this directly. Generate an embedding for the user query, add a VectorizedQuery targeting the content_vector field, and Azure AI Search fuses both signals using reciprocal rank fusion. Semantically relevant documents surface regardless of term frequency:

var vectorQuery = new VectorizedQuery(queryVector)
{
KNearestNeighborsCount = 20,
Fields = { "content_vector" }
};
var searchOptions = new SearchOptions
{
Size = 20,
VectorSearch = new VectorSearchOptions { Queries = { vectorQuery } }
};
// Hybrid: keyword query string + vector query sent together
var results = await searchClient.SearchAsync<MusicDocument>(
userMessage, searchOptions, cancellationToken);

The companion repo implements hybrid search in MusicChatAgent.cs. Chunk size, embedding model choice, and whether you use keyword, semantic, or hybrid search have more impact on output quality than any infrastructure decision.

Testing the RAG pipeline

The companion repo supports several query patterns that exercise different aspects of the pipeline. These are worth running after ingesting a few bands to verify both the retrieval and the grounding behaviour.

Artist-specific ranking — tests hybrid search surfacing the right band:

{"message": "List all Metallica albums with their ratings, ordered highest to lowest"}

Date filtering via LLM reasoning — the index has no date filter; the model reasons over retrieved content:

{"message": "What albums did Tool release in the 1990s?"}

Cross-band comparison — tests whether retrieval surfaces relevant documents from multiple bands:

{"message": "Compare Opeth and Porcupine Tree — which has more critically acclaimed albums?"}

Rating threshold query:

{"message": "Which albums across all bands have a rating above 4.5?"}

Not-in-index grounding test — the agent should say it does not have information rather than hallucinate:

{"message": "Tell me about a band called Coldplay"}

Validation — should return HTTP 400:

{"message": ""}

The hybrid search implementation means artist-specific queries return only that artist’s documents. With keyword-only search, a query for Metallica in an index containing Radiohead (48 releases) would return mostly Radiohead documents — the vector component ensures semantic relevance wins over term frequency.

The companion repo — Music RAG Agent

The music-rag-agent companion repo implements the full two-pipeline RAG system described in this post. It scrapes band and album data from SputnikMusic, generates embeddings with the Azure OpenAI SDK, indexes into Azure AI Search, and exposes an HTTP chat endpoint that retrieves relevant passages and returns grounded answers.

After ingesting Tool, Opeth, Porcupine Tree, and Radiohead you can ask questions like:

“Which band has the highest rated albums — Tool, Opeth, Porcupine Tree or Radiohead?”

The retrieval correctly surfaces Sputnik ratings and vote counts for each album. The ingestion pipeline handles special characters in album titles (Ænima, Opiate²) via URL-safe Base64 document keys, and the EventGrid trigger ensures reliable delivery with 24-hour retry backoff.

Known Sputnik artist IDs: Tool = 83, Opeth = 932, Porcupine Tree = 328, Radiohead = 86.


Series wrap-up

This post completes the series on AI and Azure Functions. The five posts covered:

  1. The four AI-enabled patterns and how to choose between them
  2. Hosting MCP servers — binding extension (GA), self-hosted SDK (preview), and queue-based tools
  3. The serverless agents runtime — markdown agents, the three configuration files, and dynamic workflows
  4. Durable Functions for directed agentic workflows — five patterns with working C# samples verified on Azure
  5. RAG pipelines — event-driven retrieval, the Azure OpenAI binding extension, and APIM governance

The companion code repositories are at github.com/steefjan1.

Durable Functions as the Orchestration Layer for Directed Agentic Workflows

Not all AI orchestration should be autonomous. Some scenarios need predictable, directed steps, and that is where Durable Functions fit in the Azure Functions AI stack.

The previous post in this series covered the serverless agents runtime, where you give the agent instructions and tools and Microsoft Agent Framework determines the execution path. This post covers the opposite end of the spectrum: Durable Functions agentic workflows, where you define the steps and the model executes them in a known sequence. The workflow is deterministic. The AI is a participant, not the orchestrator.

If your AI-driven process has fixed, ordered steps and you need auditability, fault tolerance, and long-running execution, Durable Functions is the right tool. If you want a model to determine the steps dynamically, go back to the serverless agents runtime.

What Durable Functions brings to agentic scenarios

Durable Functions is an extension of Azure Functions that lets you build stateful workflows in a serverless environment. The runtime manages state, checkpoints, retries, and recovery so workflows can run reliably for long periods minutes, hours, or days.

The doc positions it clearly for agentic use: “Some scenarios require a higher level of predictability or well-defined steps. These directed agentic workflows orchestrate separate tasks or interactions that agents must follow.”

Three capabilities make Durable Functions particularly well-suited for AI orchestration:

  • State persistence across steps. A workflow that calls an LLM, waits for a human decision, calls another service, and then writes a result can span hours or days without holding a connection open or burning compute. Durable Functions checkpoints state after every activity function completes.
  • Built-in retry and fault tolerance. LLM calls fail. External services time out. Durable Functions handles retries at the activity level with configurable backoff. You define the retry policy once, and every step in the workflow inherits it.
  • Human-in-the-loop support. The external events pattern lets a workflow pause and wait for human input — an approval, a correction, a classification decision. The workflow resumes when the event arrives, with full state intact.

The four patterns that map to agentic AI

Durable Functions has several application patterns documented in the Microsoft Learn docs. Four map directly to common agentic AI scenarios.

The patterns below are illustrated in Python, which maps clearly to the Durable Functions programming model. The companion repository implements all five patterns in C# (.NET 8, isolated worker). The orchestrator and activity structure are identical, but the syntax differs.

Function chaining — sequential AI pipeline

The simplest pattern: step A completes, then step B runs, then step C. Each step takes the previous step’s output as input.

In agentic terms, this is the document processing pipeline: extract text → classify intent → call LLM with classification context → write structured result. Each activity function is independently retryable. If the LLM call fails, Durable Functions retries it without re-running extraction.

@app.orchestration_trigger(context_name="context")
def document_pipeline_orchestrator(context: df.DurableOrchestrationContext):
text = yield context.call_activity("extract_text", context.get_input())
classification = yield context.call_activity("classify_intent", text)
result = yield context.call_activity("call_llm", {
"text": text,
"classification": classification
})
yield context.call_activity("write_result", result)
return result

The orchestrator function contains no business logic; it coordinates. The activity functions contain the work. This separation makes each step independently testable and observable.

Fan-out/fan-in — parallel retrieval and aggregation

The orchestrator starts multiple activity functions simultaneously and waits for all to complete before continuing. This is the RAG retrieval pattern: query multiple data sources in parallel, collect all results, and pass the aggregated context to the LLM.

@app.orchestration_trigger(context_name="context")
def parallel_retrieval_orchestrator(context: df.DurableOrchestrationContext):
query = context.get_input()
# Fan out — all three retrieval calls run in parallel
tasks = [
context.call_activity("search_knowledge_base", query),
context.call_activity("search_policy_documents", query),
context.call_activity("search_case_history", query),
]
results = yield context.task_all(tasks)
# Fan in — aggregate and call LLM once with full context
response = yield context.call_activity("call_llm_with_context", {
"query": query,
"context": results
})
return response

The Durable Functions tutorial in the Learn docs demonstrates this pattern with parallel text file analysis: multiple files are processed simultaneously, results are aggregated, and a single output is returned.

Human interaction — approval and correction loops

The external events pattern lets a workflow pause indefinitely waiting for human input. This is the compliance review pattern: the AI produces a draft or classification, a human reviews it, and the workflow continues with the human’s decision.

@app.orchestration_trigger(context_name="context")
def approval_orchestrator(context: df.DurableOrchestrationContext):
input_data = context.get_input()
# AI produces initial classification
ai_result = yield context.call_activity("classify_with_ai", input_data)
# Notify reviewer and wait — the workflow pauses here
yield context.call_activity("notify_reviewer", {
"result": ai_result,
"instance_id": context.instance_id
})
# Wait for human decision — could be minutes or days
human_decision = yield context.wait_for_external_event("ReviewDecision")
# Continue with human-approved or corrected result
final_result = yield context.call_activity("process_decision", {
"ai_result": ai_result,
"human_decision": human_decision
})
return final_result

The workflow pauses at wait_for_external_event without consuming resources. When the reviewer submits their decision, the Durable Functions client sends the event and the workflow resumes immediately.

Monitor — polling until a condition is met

The monitor pattern runs a check on a schedule until a condition is satisfied, then exits or escalates. In agentic terms: poll an external system until a document is processed, a model inference job completes, or a status changes.

@app.orchestration_trigger(context_name="context")
def monitor_orchestrator(context: df.DurableOrchestrationContext):
input_data = context.get_input()
expiry = context.current_utc_datetime + timedelta(hours=24)
while context.current_utc_datetime < expiry:
status = yield context.call_activity("check_processing_status", input_data)
if status == "completed":
return yield context.call_activity("retrieve_result", input_data)
elif status == "failed":
return yield context.call_activity("handle_failure", input_data)
# Wait before next poll — no compute consumed during wait
next_check = context.current_utc_datetime + timedelta(minutes=5)
yield context.create_timer(next_check)
return yield context.call_activity("handle_timeout", input_data)

A real pattern: risk-class-driven routing

A pattern I work with in integration architecture is risk-class-driven routing — an AI classification step followed by different downstream workflows depending on the risk class assigned.

The AI classifies an incoming request as low, medium, or high risk. The orchestrator branches based on the classification:

  • Low risk — automated processing, result written directly
  • Medium risk — automated processing with human notification and override window
  • High risk — human review required before any processing continues
@app.orchestration_trigger(context_name="context")
def risk_routing_orchestrator(context: df.DurableOrchestrationContext):
request = context.get_input()
# AI classification step
risk_class = yield context.call_activity("classify_risk", request)
if risk_class == "LOW":
return yield context.call_activity("process_automated", request)
elif risk_class == "MEDIUM":
result = yield context.call_activity("process_automated", request)
yield context.call_activity("notify_supervisor", {
"result": result,
"override_window_minutes": 30
})
try:
override = yield context.wait_for_external_event(
"SupervisorOverride",
timeout=timedelta(minutes=30)
)
return override
except TimeoutError:
return result
else: # HIGH
yield context.call_activity("notify_reviewer", request)
human_decision = yield context.wait_for_external_event("ReviewDecision")
return yield context.call_activity("process_with_decision", {
"request": request,
"decision": human_decision
})

This pattern appears in healthcare authorization, financial transaction review, and any domain where the cost of an incorrect automated decision varies by risk level. Durable Functions is the right runtime because it handles the human-in-the-loop wait without consuming compute, and it checkpoints state so a mid-workflow restartdoesn’t lose the AI classification result.

The companion repository implements all five patterns in C# with full azd deployment. The TESTING.md file contains the exact curl commands to exercise each pattern, including submitting external events for the approval and risk-routing workflows, all verified on Azure.

When Durable Functions is not the right answer

The directed vs autonomous distinction is the primary decision. But two other constraints matter.

  • Avoid it for very short workflows. If your workflow completes in under a second and has no human-in-the-loop steps, the Durable Functions overhead storage writes and checkpoint reads adds latency you don’t need. A simple function chain without orchestration is faster and cheaper.
  • Avoid it when the steps are not known in advance. If the AI needs to decide dynamically which tools to call and in what order, Durable Functions cannot model that. That is the serverless agents runtime; the AI is the orchestrator, not a participant.
  • Consider Logic Apps Agent Loop for low-code scenarios. If the workflow involves mostly connector-based integrations rather than custom code, Logic Apps with its Agent Loop pattern may be the right choice. Durable Functions earns its place when you need custom code logic at each step, tight control over retry behavior, or the ability to unit test each activity function independently.

The storage backend — Durable Task Scheduler

One operational detail worth knowing before you deploy: Durable Functions needs a storage backend to persist workflow state. The recommended option is Durable Task Scheduler, a managed service that handles task hub storage without requiring you to manage Azure Storage queues and tables manually.

For agentic workflows, which may run for hours and involve many checkpoints, the Durable Task Scheduler is worth the setup once it is fully available. At the time of writing, the azureManaged storage provider requires a preview extension bundle that isn’t included in the current release. The default Azure Storage backend works correctly for all patterns and is what the companion repo uses. Check the Durable Task Scheduler quickstart for the current availability status before planning a production deployment.

Dynamic workflows — the bridge between the two runtimes

The spectrum diagram at the top of this post places Durable Functions on the directed end and the serverless agents runtime on the autonomous end. Dynamic workflows, an experimental feature in the serverless agents runtime, sits between the two, and it is worth knowing about before you commit to one pattern.

The concept: flip workflows.enabled: true in a .agent.md file’s front matter, and the agent gains five built-in tools, including start_workflow. When the agent decides the work is workflow-shaped, a multi-step plan, a fan-out across data sources, a wait; it calls start_workflow with a DAG of tasks. The runtime validates the DAG and launches it as a Durable Functions orchestration. The agent gets back a workflow_id immediately and ends its turn. The Durable orchestration runs the plan in the background.

The AI authors the plan. Durable Functions guarantees the execution

This is a meaningful architectural shift. With the patterns in this post, you write the orchestrator code; you define the steps. With dynamic workflows, the LLM authors the DAG at runtime based on the task it is given. The execution is still deterministic and fault-tolerant because Durable Functions is running it, but the plan itself is emergent. Three concrete advantages the docs cite over chaining tool calls in conversation:

  • Lower token cost. Intermediate task results stay inside the orchestration. The agent sees only the final completion envelope, not every fan-out result. The docs reference roughly a 10× reduction on multi-tool workflows.
  • Lower latency. Each direct tool call is a model round-trip. A 20-step plan is one model turn to author the workflow, not 20.
  • Context-window discipline. Hundreds of kilobytes of intermediate data log lines, search hits, and line items never reach the model’s context. The agent reasons over the summary.

How it works in practice. Workflow tools are Python functions decorated with @workflow_tool rather than the standard @tool. The agent authors a DAG of tool tasks and wait tasks with depends_on edges for sequencing. ${node_id.result} templates let upstream outputs flow into downstream task arguments; the resolution happens inside the orchestrator, not in the agent’s context.

{
"tasks": [
{ "id": "fetch_a", "type": "tool", "tool": "fetch_logs", "args": {"service": "auth"} },
{ "id": "fetch_b", "type": "tool", "tool": "fetch_logs", "args": {"service": "api"} },
{ "id": "summarize", "type": "tool", "tool": "summarize",
"args": {"sources": ["${fetch_a.result}", "${fetch_b.result}"]},
"depends_on": ["fetch_a", "fetch_b"] }
]
}

The incident triage sample in the azure-functions-agents-runtime repo shows this working end to end: an agent that fans out log fetches across multiple services, waits, then summarises the evidence.

What to know before using it. Dynamic workflows are experimental v1 with real constraints:

  • workflows.enabled: true is currently only honored on main.agent.md — dedicated agents can’t use it yet. That is flagged as a v2 constraint to lift.
  • v1 handlers must be synchronous. No per-task retry or timeout policies yet — those are v2.
  • The plan cap is 50 nodes, 10 parallel tasks, and a 24-hour maximum wait duration.
  • Completion is poll-based. The chat UI polls GET /agents/{slug}/workflows and injects a synthetic user message when a workflow reaches a terminal state, which triggers the agent to call get_workflow_status and summarise.

What comes next

The next post covers the fourth AI pattern: building RAG pipelines with Azure Functions, event-driven data retrieval at scale, the Azure OpenAI binding extension, and where APIM fits as the LLM gateway layer.

Up next: Building RAG Pipelines with Azure Functions: Event-Driven Data Retrieval at Scale

Agentic AI Design Patterns on Azure

Like a lot of people on LinkedIn right now, I have seen no shortage of infographics laying out agentic AI design patterns: tidy boxes and arrows for Tool Use, ReAct, Reflection, Planning, Orchestrator, Sequential Chain, Parallel Fan-out/Fan-in, Hierarchical, and P2P Mesh. These diagrams are a fine way to get the shape of an idea across. However, a diagram cannot tell you whether the thing actually works, or what breaks when you try to stand it up for real. So I spent the last stretch actually building agentic AI on Azure: all nine patterns, for real, on Azure’s PaaS offerings. That meant writing Bicep IaC, running azd up, making actual HTTP calls against the deployed endpoints, and running actual Application Insights queries when things went wrong. In the end I had nine independently deployable reference samples, not nine slides.

Writing the Bicep was the easy part. Getting all nine actually to stand up and respond correctly was where the real lessons were. This is a retrospective on what broke, why, and what I’d tell someone else to do to avoid it.

Lesson 1: model availability is regional, and the error message won’t always tell you clearly

The first failure mode hit me repeatedly, across multiple patterns. azd up would warn that gpt-4.1 “was not found” in the target region, then fail validation outright with InvalidResourceProperties: The specified SKU 'Standard' for model 'gpt-4.1' is not supported in this region.

This is not a bug in the Bicep. It is genuinely true that not every Azure OpenAI model and SKU combination is available in every region, and availability also varies by subscription. centralus and westeurope both rejected gpt-4.1 for me at different points, while swedencentral consistently worked across every pattern in the repo. So if you are scripting or templating Azure OpenAI deployments, do not hardcode a region and assume it will work everywhere. Instead, treat azd env set AZURE_LOCATION swedencentral as a reflexive first move whenever a fresh pattern’s deploy attempt fails.

Lesson 2: Logic Apps Standard is powerful, and standing it up correctly is its own skill

The Sequential Chain pattern (input → extract → draft → validate → output, a fixed pipeline) is a textbook fit for a low-code workflow engine. So I built it on Logic Apps Standard first, and it ended up costing me, by a wide margin, the most debugging time of the whole project. Here is what went wrong, roughly in order:

  • ServiceProvider-type triggers cannot have a recurrence property. If you copy a recurrence block over from an ApiConnection-style trigger example, you get a WorkflowProcessingFailed error, and the message does not obviously point at the fix.
  • Connector parameter names are not always what you would guess. Azure literally names the built-in OpenAI connector’s connection parameter openAIEndpoint, not endpoint. I only discovered this from Azure’s own runtime error message, not by guessing at the schema.
  • Windows versus Linux hosting changes what app settings you need, and not symmetrically. Windows-hosted Premium plans require WEBSITE_CONTENTAZUREFILECONNECTIONSTRING and WEBSITE_CONTENTSHARE, but carrying those same settings over to a Linux plan actively breaks content sync.
  • WorkflowStandard (WS1) is a hard requirement, not a suggestion. Azure explicitly rejects an ElasticPremium (EP1) substitution with “Logic Apps can be deployed only to ‘WorkflowStandard’ Sku or App Service Environments,” even though the two SKUs share the same underlying compute family.
  • Regional SKU quota is real, and it will not show up until you deploy. SubscriptionIsOverQuotaForSku for “WS1 VMs” hit me in two different regions. I eventually fixed it by decoupling the Logic App’s region from the rest of the pattern’s resources through a separate Bicep parameter, which let it land somewhere with quota headroom.
  • Deterministic role-assignment names collide across resource recreation. If you name a role assignment with guid(scope, resourceId, roleName) and then delete and recreate the resource whose managed identity receives that role, Azure refuses to update the existing assignment to point at the new principal ID. So you first have to find and delete the stale assignment by its exact resource ID.
  • Finally, after fixing all of the above, I ran into a Logic App instance that had simply wedged itself: Sequence contains no elements on startup, Kudu unreachable or crawling, and no combination of RBAC or config fixes helping. The only real fix was deleting and recreating the whole site resource.

Durable Functions

After all that, I rebuilt the same pattern on Durable Functions instead. An orchestrator calls three sequential activities, each a plain Azure OpenAI chat completion call, and the built-in RetryOptions does the retry work that Logic Apps’ declarative retry policies would otherwise have done. It deployed in under two minutes and worked on the first real test. The conceptual case for a low-code workflow engine still holds here, since a fixed sequence of stages is exactly what that kind of tool is for. However, if you want to move fast while building agentic AI on Azure, and you already have a working Durable Functions convention elsewhere in your stack, do not underestimate how much extra surface area Logic Apps Standard adds compared with staying in code you already know how to debug.

Lesson 3: RBAC is not one system, and Cosmos DB has its own

The P2P Mesh pattern (three Azure Functions reacting to each other’s events through Event Grid, with Cosmos DB tracking completion state) threw a 403 Forbidden: "Request blocked by Auth... does not have required RBAC permissions to perform action Microsoft.DocumentDB/databaseAccounts/readMetadata". This happened even though the function app’s managed identity already had every role I expected under Microsoft.Authorization/roleAssignments.

Here is the catch: Cosmos DB runs its own, separate, native RBAC system. A normal Azure role assignment against a Cosmos account grants control-plane access, but it does nothing for data-plane operations like reading or writing items. Instead, you need a Microsoft.DocumentDB/databaseAccounts/sqlRoleAssignments resource, scoped specifically to one of Cosmos’s own built-in role definitions. (The “Cosmos DB Built-in Data Contributor” role has a fixed, well-known GUID: 00000000-0000-0000-0000-000000000002.) So if your Bicep only includes the generic role-assignment resource type pointed at a Cosmos account, it silently grants nothing useful.

(Once I fixed that, the very next error was a 404 reading “Owner resource does not exist” on the database and container the app code expected. Provisioning the Cosmos account is not the same as provisioning the database and container inside it. Remember that if your Bicep stops at the account level.)

Lesson 4: pick the “native” endpoint type when Azure offers one

Still on P2P Mesh: wiring Event Grid subscriptions to Azure Functions endpoints through a raw webhook URL (https://<app>.azurewebsites.net/runtime/webhooks/eventgrid?functionName=X&code=<key>) produced a persistent 401 Unauthorized, Webhook endpoint validation failed. It survived two fixes I tried first: swapping the master key for the eventgrid_extension system key, and then directly inspecting the deployed function, which confirmed its eventGridTrigger binding matched what Event Grid expected. Neither fix mattered, because a plain authenticated GET against that same URL came back 400 Bad Request. That proved the key itself was fine, so the actual problem had to be something specific to Event Grid’s own validation handshake against a webhook-typed endpoint.

The actual fix was switching az eventgrid event-subscription create from a raw webhook URL to --endpoint-type azurefunction --endpoint <function-resource-id>. That is the native destination type Event Grid offers for Azure Functions, and it authenticates through the ARM resource ID instead of a function key embedded in a URL. It worked immediately. So the broader lesson: if a platform offers a first-class integration type for a specific target, prefer it over hand-rolling the equivalent with a generic webhook. That way, you inherit the platform’s own handling of edge cases you would not think of yourself.

Lesson 5: “Azure AI Foundry” isn’t one resource type

The Orchestrator pattern, a central agent hosted on Azure AI Foundry Agent Service that delegates to specialist tools, failed with a raw DNS error: Name or service not known, against a hostname the app was trying to reach. This was not an auth failure or a permissions failure. The hostname genuinely did not exist.

The root cause: the Bicep provisioned the older Azure AI Foundry resource model, a Microsoft.MachineLearningServices/workspaces hub plus a project workspace, which is the original Azure AI Studio approach. Meanwhile, the app code used Azure.AI.Projects.AIProjectClient, which only understands the newer, unified Foundry resource model: a Microsoft.CognitiveServices/accounts resource with kind: 'AIServices' and allowProjectManagement: true, plus a projects child resource. That newer model is reachable at a https://<account>.services.ai.azure.com/api/projects/<project> URL that only exists for that resource type. So two things share the “Azure AI Foundry” name, yet neither is a drop-in substitute for the other from an SDK’s point of view. As a result, it is worth explicitly checking which resource model your SDK version actually expects before wiring up IaC for it, because the error you get when you guess wrong will not obviously point at “you deployed the wrong kind of resource.”

The smaller stuff that added up

A few recurring, less dramatic gotchas worth a line each:

  • Double-check the resource group you think you are querying. More than once I pulled exceptions from the wrong pattern’s Application Insights instance, either because I was still in the wrong working directory, or because I grabbed the first App Insights component Azure CLI happened to return rather than the one for the resource group I actually cared about. So always sanity-check the resource group name before trusting a KQL result.
  • A previous session’s PowerShell variable can look like a fresh result. If a command throws partway through an assignment, the variable keeps its old value. Then, if that old value happens to look plausible (in my case, a valid-looking Durable Functions status payload from an entirely different pattern), it becomes easy to mistake it for real output from the command you just ran.
  • “No results” and “the backing store does not exist yet” are different failure modes. Code that gracefully handles an empty index or table does not automatically handle a missing one. For example, one specialist service in the Orchestrator pattern caught SqlException broadly and degraded gracefully when its sample table lacked seed data. By contrast, the AI Search-backed specialist had no equivalent guard for a 404 on a not-yet-created index, so it took the whole request down with it. Therefore, if you document “unseeded stores degrade gracefully,” actually test the unseeded case for every specialist, not just the one you happened to build first.

The takeaway: what building agentic AI on Azure actually requires

None of these were exotic failures. In fact, every one of them turned out to be a documented, well-understood Azure behavior once I found the right doc page. What made them expensive was that the error messages, on their own, rarely pointed straight at the fix: a DNS failure that was actually a resource-model mismatch, a 401 that was actually about endpoint type rather than credentials, and a 403 that was actually a second, unrelated RBAC system. So the practical lesson is not “Azure is fragile.” Instead, building agentic AI on Azure means dealing with more independently moving parts than the getting-started docs suggest, and the fastest way through is treating every unexplained error as worth one layer deeper of investigation before you assume the obvious fix is the real one.

I have now deployed and tested all nine patterns end to end. If you want the full breakdown of each one, including what it is for, the Azure architecture, and when to reach for it, start with the design patterns overview and go from there. The repo itself is public, so you can see exactly what each pattern provisions.

Hosting MCP Servers on Azure Functions: GA vs. Preview

The Model Context Protocol (MCP) has become the standard way AI agents and models interact with external systems. If you are building something on Azure and need to expose tools to an AI client, the question is no longer whether to use MCP; it is which hosting option to choose.

Azure Functions supports three distinct approaches. Two of them host MCP servers directly. The third uses message queues instead of MCP calls altogether. Each reflects a different set of trade-offs. This post maps them out so you can pick the right one before you write any code.

Why use Azure Functions for hosting MCP servers?

The doc makes the case concisely: Functions scales efficiently to handle demand and provides binding extensions that simplify AI integration. Both matter for MCP hosting specifically.

MCP servers are called on demand. An AI client sends a request, the server responds, and then goes quiet. That is a bursty, event-driven pattern. Flex Consumption and Elastic Premium both handle it well. Flex Consumption gives you scale-to-zero billing for bursty tool workloads. Elastic Premium gives you pre-warmed instances, predictable latency, and VNet integration for tools that need to reach internal APIs and databases.

Managed identity is the other key piece. Your MCP server likely needs to call downstream Azure services: blob storage, Cosmos DB, and Azure AI Search. With managed identity, you do not need to manage credentials inside your function code, and you do not need to pass secrets through your MCP configuration.

The three ways to host MCP servers on Azure Functions

Option 1: MCP binding extension (GA)

This is the right default for most teams. The binding extension lets you build an MCP server using the standard Functions programming model triggers, bindings, local development with Core Tools, and deployment via azd. You annotate a function with McpToolTrigger, and it is automatically exposed as an MCP tool.

The comparison table from the Microsoft Learn documentation makes the feature set clear:

FeatureMCP binding extension
Support levelGA
Programming modelFunctions, triggers and bindings
Stateful executionSupported
LanguagesC# (isolated), Python, TypeScript, JavaScript, Java
Other requirementsNone
ImplementationMCP binding extension

Stateful execution support is the binding extension’s meaningful advantage over the self-hosted SDK option. If your MCP server needs to maintain session state across tool calls, for example, a multi-turn data retrieval scenario, only the binding extension handles that today.

The quickstart template (remote-mcp-functions-dotnet) is a useful starting point. It scaffolds the project via azd init, runs locally with the Azurite storage emulator, and includes a .vscode/mcp.json file that wires the local endpoint directly into GitHub Copilot’s agent mode for testing. That local-to-Copilot loop is genuinely quick; you can test a tool call from Copilot chat without deploying anything.

Before you build: a toolchain issue to know about

There is a confirmed bug in Microsoft.Azure.Functions.Worker.Sdk (all versions to 2.0.7) where the auto-generated WorkerExtensions.csproj is hardcoded to net6.0. The MCP extension package requires net8.0, so the build fails out of the box with NU1202: Package is not compatible with net6.0. The Microsoft Learn quickstart does not mention this.

The workaround that actually works has three parts: add an extensionBundle to host.json so the host loads MCP support at runtime rather than through the build-time generator; mark all extension PackageReference entries with PrivateAssets="all" so their build targets don’t re-trigger the generator; and use 1.0.0-preview.3 rather than 1.0.0 or later preview versions, because the generated project still targets net6.0 and needs a package version it can restore against that framework. The companion repo has all three changes applied and a detailed explanation in the README.

The McpToolTrigger attribute is the core mechanism. Here is what the minimal C# version looks like from the quickstart:

[Function(nameof(SayHello))]
public string SayHello(
[McpToolTrigger(HelloToolName, HelloToolDescription)] ToolInvocationContext context
)
{
logger.LogInformation("C# MCP tool trigger function processed a request.");
return "Hello I am MCP Tool!";
}

The trigger attribute registers the function as an MCP tool and handles the protocol negotiation. You write the tool logic; the extension handles the MCP wire format.

Use this when: you are building a new MCP server and do not have an existing codebase using MCP SDKs. It is the fastest path from zero to a deployed, governed MCP server on Azure.

Avoid it when: you already have an MCP server built with an official MCP SDK and want to lift it into Azure without rewriting it in the Functions model.


Note: Microsoft has samples for this option. You can find all the MCP extension samples at aka.ms/remote-mcp

Option 2: Self-hosted MCP servers via official MCP SDKs (preview)

This option lets you take an existing MCP server built with the official MCP SDKs and host it on Azure Functions without rewriting it as a binding-extension-style function app. Functions acts as the hosting runtime; your MCP SDK code runs via custom handlers.

FeatureSelf-hosted MCP servers
Support levelPreview
Programming modelStandard MCP SDKs
Stateful executionNot currently supported
LanguagesC# (isolated), Python, TypeScript, JavaScript, Java
Other requirementsStreamable HTTP transport
ImplementationCustom handlers

Two constraints define whether this option is viable for you right now.

  • First: Streamable HTTP transport is required. The self-hosted option does not support Server-Sent Events (SSE) transport. Suppose your existing MCP server relies on SSE, which many early implementations did; you need to migrate to Streamable HTTP before hosting on Functions. That is a non-trivial change for an established codebase.
  • Second: stateful execution is not supported during preview. If your MCP server is stateless most tool servers are this is not a problem. But if you need session continuity across calls, stay with the binding extension.

The documentation also flags that configuration details for self-hosted MCP servers change during the preview period. That means operational overhead: you may need to adjust configuration as the feature evolves. Factor that into a production timeline.

The sample (Weather server) shows the self-hosted pattern working correctly for a stateless tool. It is a useful reference for understanding the custom handler wiring, but it does not represent a feature-complete production deployment yet.

Use this when: you have an existing MCP server built with official MCP SDKs, it uses Streamable HTTP transport, it is stateless, and you want to run it on Functions without adopting the binding extension model.

Avoid it when: you need stateful execution, you rely on SSE transport, or you are building from scratch. In those cases, the binding extension is the better path.

Note: There is another approach for hosting official MCP SDK-based servers. This approach is about hosting MCP in Connector Namespace, which was announced in public preview at Build.


Option 3: Queue-based Azure Functions tools

This is the option that gets overlooked because it does not follow the MCP pattern at all, and that is sometimes exactly what you want.

Instead of an AI agent calling your function via the MCP protocol, the agent sends a message to a queue (Service Bus or Azure Storage Queue), and a queue-triggered function picks it up asynchronously. Foundry provides Azure Functions-specific tooling for this pattern.

The Microsoft Learn documentation lists the scenarios where this is the right choice:

  • Reliable message delivery and processing
  • Decoupling between AI agents and function execution
  • Built-in retry and error handling
  • Integration with existing Azure messaging infrastructure

That last point is often what decides it in enterprise contexts. If your integration platform already uses Service Bus for order processing, claims workflows, or event-driven pipelines, the queue-based tool pattern slots into that infrastructure without adding a new protocol layer. Your AI agent becomes another message producer; your function is another consumer. Operations teams already know how to monitor and manage it.

The decoupling is also genuinely useful for long-running tool operations. An MCP call is synchronous from the agent’s perspective: it sends a request and waits for a response. A queue-based call lets the agent fire and move on; the function processes in the background and the result arrives via a separate callback or polling mechanism. For operations that take seconds or minutes document processing, batch retrieval, report generation that asymmetry matters.

Use this when: the tool operation is long-running, you need reliable delivery with built-in retry, you are integrating with existing Azure messaging infrastructure, or you want to decouple the agent from function execution timing.

Avoid it when: the agent needs a synchronous response immediately, or you are connecting to AI clients that expect the MCP protocol specifically.

Note: For long-running processes or multi-step workflows, you might also want to consider Durable Functions instead of “vanilla” Functions. Durable Functions provides built-in state persistence and automatic retries, which is helpful when long-running or multi-step workflows fail mid-execution because of things like unreliable network connectivity. Because state is persisted during execution, Durable Functions can rebuild local state up to the point of failure and continue executing from there instead of from scratch. 


How to choose

SituationOption
Building a new MCP server from scratchBinding extension
Need stateful tool executionBinding extension
Have an existing SDK-based MCP server (Streamable HTTP, stateless)Self-hosted SDK
Need async, decoupled, fault-tolerant tool executionQueue-based
Integrating with existing Service Bus infrastructureQueue-based
Building for GitHub Copilot or VS Code agent modeBinding extension
Production deadline in the next quarterBinding extension or queue-based (avoid preview)
I need pre-warmed instances and predictable latencyElastic Premium plan

The preview constraint is the most important practical point here. If you are building for production and your timeline does not allow for configuration changes mid-project, self-hosted MCP servers are not ready. The binding extension and queue-based options are both GA and stable.

APIM as the governance layer

Whichever option you choose, consider putting APIM in front of your MCP server endpoint. This gives you rate limiting, authentication policy, token quota management, and a single point for logging and monitoring across all MCP tool calls.

One practical caveat from real deployment experience: the Azure AI Foundry Agent Service SDK routes LLM calls directly to Azure OpenAI, bypassing APIM entirely. Tool calls to your MCP server do pass through APIM, but model calls do not unless you use the standard OpenAI SDK instead. The Citadel Platform series covers this in detail, including how to structure your APIM policies to handle the tool-call traffic that does flow through it.

What comes next

The next post goes deeper into the serverless agents runtime, the preview programming model that lets you define event-triggered agents as function apps, with .agent.md files, agents.config.yaml, and remote MCP server connections declared in mcp.json.

Up next: The Azure Functions Serverless Agents Runtime: What It Is and When to Use It