External Identity Management: How to Secure Third-Party and Non-Employee Identities

Introduction 

When most organization consider external identity management, the immediate consideration is B2C – managing customer experiences and access at scale.  Customer Identity and Access Management (CIAM) is a critical component of any external identity management strategy.  However, in today’s hyper-connected digital landscape, organizations are no longer defined by their internal workforce alone.  Suppliers, vendors, partners, contractors, and even machines interact with enterprise systems daily. This growing ecosystem of interactions means that external identity management for third parties has become more than a technical concern—it’s a strategic imperative. Businesses that fail to properly manage external identities risk security breaches, regulatory penalties, and erosion of customer trust. Conversely, those that embrace B2B identity management can enable secure collaboration with business partners, improve the organization's security posture, strengthen compliance efforts and improve operational efficiency.   

What is External Identity Management? 

External identity management refers to the processes, policies, and technologies that govern how non-employees access enterprise resources. This includes both B2C and B2B relationships: 

• B2C (Customers): Individuals who engage with a business to purchase products and/or services. Their identities need seamless, personalized, secure, and user-friendly access experiences. 

• B2B (Partners, Vendors, Suppliers, Contractors, Consultants): External stakeholders who require controlled access to systems, data, and applications to collaborate effectively. Their identities require more stringent governance, auditability, and lifecycle management. Unlike B2C, B2B is an entire ecosystem of external business relationships.  Not just vendors and suppliers.  B2B users are anyone and everyone that is connected to your enterprise from the “outside” that isn’t either a customer or employee.    

Unlike B2C, where the goal is to create a highly personalized frictionless user experience,  B2B identity management focuses on enabling business users through security, compliance, risk reduction and operational efficiency.   

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Why External Identity Management Matters Today 

The explosion of digital ecosystems means enterprises must now manage tens of thousands—even millions—of external users.  
Across industries, third parties and non-employees play a pivotal role in business success.  Managing third-party identities requires a multi-dimensional solution.  Organizations must support a diverse range of identity sub-types (contractors, consultants, interns, board members, etc.).  Each of these identities have unique lifecycle events, onboarding requirements, credentialing, access needs and compliance considerations.  Consider the vast range of identities that your organization already interacts with: 

• Contractors and Consultants: Engaged to fill talent gaps. 
• Board Members: Need access to sensitive information, but only on a part-time or limited basis. 
• Vendors and Suppliers: Integrated into the supply chain and back-office applications.   
• Interns and Residents: Require access to business or compliance relevant data on a short-term or limited basis. 
• Facility Staff: Require an identity for badging systems and limited physical access.   

While all these user groups represent a B2B external identity, their management and governance requirements could not be more different.  However, B2B external identity management is not just about risk mitigation and identity security.   

B2B external identity management provides measurable business outcomes: 

• Reduce the Burden on IT/IAM Teams: Automating the identity lifecycle and routing approvals to users with the business context to make the right decision for each external B2B identity type 
• Improve Operational Efficiency: Faster time to productivity enables contractors and consultants to hit the ground running in hours instead of days or weeks. 
• Stay Audit Ready: Automated reporting ensures compliance with PCI, GDPR, HIPAA, and SOX among other compliance mandates. 
• Improve Security Posture: By applying closing the compliance gaps, organizations minimize and shrink the attack surface.   

Human vs. Non-Human External Identities 

External identities aren’t limited to people. APIs, service accounts, machine identities and AI agents all require access to enterprise resources. These non-human identities often outnumber human users by a magnitude of 60:1, yet they are frequently unmanaged. Proper external identity management ensures both human and non-human identities are subject to the same governance principles—preventing misuse and closing security gaps. 

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B2B External Identities Have Distinct Governance Requirements 

Some organizations tend to categorize external identities as one user constituency in the same category as customers.  Or third-party/non-employee identities are sometimes treated as temporary employees in HR repositories.  This approach is flawed and creates blind spots in security, compliance and governance.  Rather, a deliberate governance framework is required: 

• Third-Party/Non-Employees often derive from Third-Party Organizations that are tied by business contracts, license agreements and master service agreements.  Those users are bound by the contractual obligations signed by their parent organizations.   
• Diverse Identity Types: Each identity type requires various access that must be tied to business processes and approvers. 
• Ownership: Ensure every identity has a clear business owner accountable for its lifecycle. 
• Lifecycle Management Complexity: Unlike employees, all non-employees must have an expiration date that is reviewed in advance and afforded an opportunity for extension (with the appropriate oversight and approval).  Many breaches are related to access that was never properly revoked. 
• Third-Party Risk: According to the 2025 Global Third-Party Breach Report by Security Scorecard over 35% of all breaches in 2024 were third-party related. (https://securityscorecard.com/company/press/securityscorecard-2025-global-third-party-breach-report-reveals-surge-in-vendor-driven-attacks/).  Imprivata, in collaboration with the Ponemon Institute found that 47% of organizations experienced a breach or cyberattack in the last 12 months involving third-parties. (https://www.imprivata.com/company/press/imprivata-study-finds-nearly-half-organizations-suffered-third-party-security)                                   

Key Pillars of External Identity Management 

1. Establish Visibility: Inventory and classify all third-party organizations.  Inventory and associate all non-employee identities (contractors, consultants, vendors, suppliers, managed services providers, interns, board members, etc.) to their parent organizations. 

2. Lifecycle Management and Automation: Create tailored onboarding workflows for each external identity subtype.  Automate onboarding and offboarding aligned with business events, such as contract start and end-dates and project completion dates.  Clearly define who in the organization is responsible for ownership and approvals.   

3. Identity Verification: Ensure that users are who they say they are.  Employ identity verification tools to ensure user identity and geographic locations. 

4. Document Management: Consider contracts (that define access policies and credential responsibilities), documents that require centralization, signatures and consent management.   

5. Sensitive Data Storage and Data Retention Policies: Most IAM/IGA tools do not support storing or managing Personally Identifiable Information (PII).  Much like an HR solution, external identity management for B2B users often requires storing Social Security Numbers, copies of government issued IDs, professional certifications and financial information.   

6. Risk-Based Governance: Apply contextual policies that govern access by role, contractual relationship, access needs and the duration of the engagement. 

7. Access Reviews: Review external identities on a periodic basis to ensure the identity is still required.  Prior to the defined expiration date, ensure the proper approvers review the identity to allow for confirmation or access extension.   

8. Delegated Administration: Allow external organizational liaisons to collaborate in managing users from their organization with central oversight and governance. 

9. Monitoring and Analytics: Continuously monitor external access for anomalies.  Not only track who is an external user, but what resources they access, when and how and how often.  Access monitoring should be applied to both human and non-human identities.   

10. Audit Readiness: Maintain logs and reports to prove compliance at any time.  Always be prepared to show evidence of when user access is granted, the duration access was granted, and when access was revoked.  Staying audit ready not only helps to avoid fines but also safeguards the brand and builds customer trust. 

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Conclusion 

External identity management is no longer optional—it’s mission-critical. As enterprises embrace digital ecosystems, they must balance security, compliance, and user experience for both customers and business partners. With Anomalix’s proven approach to identity governance, organizations can achieve secure collaboration, stronger compliance, and greater resilience.  Proper B2B Identity Management will close compliance gaps, reduce risk and improve overall operational efficiency.   

B2B focused external identity management should include: 

• Taxonomy of all external organizations and identities.  Establish who is responsible for them.  Leverage Identity Verification techniques to ensure identities and locations 
• Apply risk-based governance including access policies, access reviews, monitoring and automated lifecycle management 
• Centralize contracts, documents, signatures and consent agreements 
• Leverage monitoring tools and stay audit ready 

Contact us at info@anomalix.com to learn how we can help you build a stronger, more resilient external identity management strategy. 

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