To create a TFS environment in Azure, AAD can be used with Corporate AD as explained here. The other option is setting up the AD as a Azure VM or use AAD. For the TFS demonstration & training environment purpose, setting up AD as Azure VM is described in this post.
In Server manger in the Azure VM created click on Add roles and features.
Select Role –based or feature-based installation.
Select the server. Note the static IP set in “Adding Static Internal IP to Azure VM”.
Select Active Directory Domain Services.
Click on Promote this server to a domain controller.
In Deployment Configuration select Add a new forest and provide a root domain name.
Skip DNS options by clicking next. This can be set up later.
Provide a NetBIOS name.
Review and Install. Ignore DNS warnings as it can be setup later.
Once setup completed and restarted can be logged in to the server using Administrator password provided for the machine, which will be valid for the domain administrator.
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