Can an outsider get in, and how far can they go?
External testing looks at everything you expose to the internet: firewalls, VPNs, email, remote access and public servers. It answers the first question: can an outsider get in?
Internal testing starts from inside your network, as a compromised laptop or a malicious insider would. It answers the next question: once someone is in, how far can they go? Weak Active Directory settings, open file shares and flat networks often turn a small foothold into full domain compromise.
