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With single sign-on configured, a user created by hand is now external
automatically - the checkbox is ticked and locked, with the reason shown.
Once SSO is on, staff accounts arrive from your identity provider at first
sign-in or over SCIM, so anyone still being typed into the create form is by
definition someone outside your directory: a contractor or a client contact.
Role and password are unchanged - external users sign in with a password, so
they still need both. Enforced server-side, not just in the form.