You will use both Veeam Backup account and Azure AD application for authentication if you add an organization using the modern authentication method with legacy protocols allowed. Veeam Backup for Microsoft 365 uses Veeam Backup account and an application to establish a connection to your Microsoft 365 organizations with disabled security defaults and maintain data transfer during backup and restore sessions.
When you add an organization using the modern app-only authentication method, you are required to provide Azure AD application settings. Please reference following link to create and configure Azure AD Application permissions.
Veeam Backup for Microsoft 365 Modern Authentication and Legacy Protocols Authentication requires that you grant permissions to Azure AD applications to back up and restore data from/to your Microsoft 365 organizations.
When you add organization using the modern app-only authentication method, the permissions for Azure AD applications that are granted automatically by Veeam Backup for Microsoft 365.
Anyway, if you prefer to use a custom application of your own, make sure to grant all the permissions as below.
