If you are currently using the Identity Service 1.2 you must first modify the First Broker Login authentication before upgrading to version 1.7.
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Log into the Keycloak administration console and select the Alfresco realm.
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Select Authentication from the menu on the left to open the authentication configuration page.
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Select First Broker Login from the dropdown menu.
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Ensure Create User If Unique (create unique user config) flow is set to ALTERNATIVE.
Result: You can now upgrade directly to version 1.7.