Managed identities can be used to manage Azure resources without using hardcoded credentials - removing the need to enter credentials from a VM (or other resources such as Azure Functions) that are accessing resources the managed identity has been given access to. There are two types of managed identities - User Assigned and System Assigned. User assigned can be used by multiple resources and system assigned is tied to one specific VM (resource). User assigned is created as a Managed Identity that can be assigned to multiple VMs.