Hello Surya Teja Putta,
Thanks for your question.
Workload Identities are not limited to azure scope. It enables authentication from workloads running in different environments, not limited to Azure. Managed Identities are better for within Azure while the former is better for hybrid and multi-cloud scenarios.
In the link below, there is a nice video below which explains why you should use workload identity federation
Why use workload identity federation?
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Regards,
Abiola