Modern organizations are relying more and more on external parties. Contractors, vendors, partners, and temporary workers now play key roles across industries—from healthcare and finance to manufacturing and technology. Yet, despite their access to internal systems and sensitive data, these users often lie outside the boundary of traditional identity and access management (IAM) solutions.
IAM systems were initially built with standard employees in mind. They are supposed to have static roles, predictable hierarchies, and centralized HR management. On the other hand, non-employee identities are decentralized and dynamic. They may join mid-project, change tasks frequently, or work across multiple departments without reporting to any specific individual.
This mismatch has real-world consequences. Visibility gaps, enforcement gaps, and lifecycle management gaps all increase the risk of security breaches. Compliance mandates around data access and user accountability are harder to meet. And operational delays occur when onboarding or offboarding processes don't account for how non-employee identities actually work.
This blog goes into why IAM systems struggle with non-employee identities. It also explores recent incidents that underscore the problem and outlines what a purpose-built third-party identity governance model must include.
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Non-employee identities can include vendors, partners, consultants, temp workers, contractors, interns, and affiliate employees. Though they may not appear in HR systems or pass through standard onboarding procedures, they typically still require extensive access to corporate systems.
Examples:
• A cloud services vendor supporting infrastructure for a bank
• A mobile app developer, who is freelance, working alongside full-time engineers
• A nurse, temporarily employed through a staffing agency, who has access to patient records
• An insurance company broker on a temporary contract
These users are valuable to today's operations but don't typically belong in today’s identity governance systems.
According to the 2025 Ponemon Institute report, 47% of breaches were due to third-party access, with some being through unnecessary or redundant permissions. This aligns with findings in the 2025 Verizon DBIR that third-party involvement in breaches has doubled year to year from 15% to 30%. In another case, a Coinbase freelance worker at TaskUs compiled sensitive client data over a period of several months. The incident went unnoticed until there was a extortion threat. The whole situation ended up costing the company hundreds of millions of dollars.
IAM wasn't the only failure—but it failed to catch the abuse too. That's the problem.
As external collaboration becomes more normalized, firms are sharing more and more of their system access with people they do not directly employ. This is where old IAM systems fall short.
They never had to deal with such a wide range of identity types. This deficiency poses risks not just for security, but also for compliance, productivity, and trust.
Legacy IAM systems were designed to support full-time employees. The software assumes that identities are provisioned in HR, access needs are determined by job roles, and approvals flow through established management channels.
That model worked when workers stuck around for decades in static roles. It doesn’t work as well for today's dynamic non-employee workforce—contractors, vendors, and partners who are not in HR systems and may not even have managers in the company.
Non-employee identities don't always support assigned roles or reporting lines. Their access needs shift based on projects, rather than job titles. IAM systems fail in this regard because they make the assume all identities have:
• Centralized ownership
• Predefined roles for provisioning
• Linear onboarding and offboarding paths
What companies have to do then is employ workarounds that include manual processes:
• Business units request access on an ad hoc basis
• IT personnel create accounts manually without a specified process
• Offboarding is avoided or occurs late
This results in inconsistent oversight, excess access, and account sprawl.
Third-party identities all too frequently fall outside of the role-based models applied in IAM platforms. A contractor will need more permissions for a specific task but regular access elsewhere. A vendor may need to do work across multiple departments.
IAM systems can't easily enforce policy for that level of granularity. The result: too much access, or too little—each with its own set of risks.
When the controls don't match the use case, users bypass them. Teams share credentials. Admins grant "temporary" excessive access that never gets revoked.
Most IAM products can't provide an aggregate view of non-employee accounts. Identities may be duplicated between systems, unmanaged, or simply forgotten.
Accounts remain open long past contract expiration dates. Audit trails become out of sync so it gets hard to prove who viewed what, and when.
These are not edge cases—they’re simply outcomes of applying IAM to situations it wasn’t created to serve.
It’s possible that the IAM system can meet internal access needs, but it’s more difficult for it to meet external audit needs for third-party identities. By relying on manual workarounds, access information is often lost or fragmented across email and spreadsheets, with no easy way of finding them. The 2025 Ponemon Report cited 34% of third-party breaches as resulting from overprivileged access—not malware or external attacks, but rather fundamental governance failure.
These failures illustrate that IAM is not enough. There needs to be a different identity governance model—a model that:
• Allows business user-delegated management
• Enables contract-based lifecycle triggers
• Centralizes audit records, documents, and access logs
This isn't about replacing IAM. It's about filling in the gaps. Simply put, traditional IAM was created for your typical employee. Non-employee identity management needs a different platform. Without it, risks lurk—quietly, until they are discovered.
Third-party identity governance isn't just a matter of tweaking existing IAM infrastructures. It requires capabilities designed specifically for managing external users—tools that simulate how contractors, vendors, and partners actually work with your organization.
A solution designed specifically for the job should fill the gaps that conventional IAM leaves open.
The following are the key capabilities to look for:
1. Delegated identity management
Have features that allow business users—who are actually working with third parties—to ask for, approve, and own access. This reduces friction and keeps identity ownership close to where decisions are actually being made.
2. Project-based access provisioning
Provide access based on a specific project role or phase. This provides more granular control and reduces overprovisioning risk.
3. Built-in onboarding workflows
Standard, customizable forms avoid inconsistent data collection. Integration with background checking, identity verification, and credit checks also ensures that the process is auditable and seamless.
4. Lifecycle tracking and triggers
Link access to tangible events like contract start/end dates or project milestones. Automatically terminate accounts when work is complete or accounts become inactive.
5. Centralized document management
Store NDAs, training certificates, and vendor contracts in one repository. Link them to identity records to enable compliance audits.
6. Audit-ready reporting
Create who, what, when, and why access logs. This simplifies auditing and attests to regulatory compliance.
Without third-party identity governance, or with third-party identity governance that is improvised, risk can accumulate without notice. Accounts are left open. Tasks are passed between departments. Instead of access being granted with reason, they’re handed out "just in case”.
As mentioned previously, in early 2025, Coinbase was hacked by a third-party support contractor. The contractor was able to collect sensitive customer data, like partial SSNs and ID photos, over several months, resulting in a multi-million dollarextortion attempt.
A more robust governance model, with project-based access and lifecycle visibility, would have prevented or alerted on the misuse sooner.
Third-party identities shouldn’t be a second thought—they're active participants in your systems, and the tools that manage them should treat them that way.
Read more about how to mitigate third-party identity risks.
In 2024, the Snowflake data breach impacted over 165 organizations. Hackers took advantage of third-party service provider credentials that hadn't enabled multi-factor authentication. This meant that the vendors had prolonged access to customer environments. The breach result: unauthorized access to data in multiple companies and cloud environments.
This breach exposed an industry-wide weakness—third-party accounts routinely fall outside security policies enforced on internal users.
The 2025 FINRA Annual Oversight Report discovered that firms consistently failed to remove vendor access at contract termination. In some cases, vendor inventories were either nonexistent or incomplete.
Such breakdowns violated FINRA Rule 3110 and Regulation S-P, which require firms to safeguard customer information and manage third-party relationship.
Compliance isn't merely difficult without organized lifecycle management—it's undermined.
At the end of 2024, a third-party IT vendor that provided services to Allegheny Health Network was breached. The breach exposed names, Social Security numbers, and insurance data for over 294,000 patients.
The vendor hosted critical clinical and billing applications, so even limited access provided broad exposure. While business associate agreements were in place, breach response and notification expenses devolved to the health system.
These situations cross industries, but the root issue is identical: third-party identities are not governed. Without systems natively engineered to control their access, visibility, and lifecycle, each external relationship constitutes a potential failure point.
Legacy IAM systems were never built to handle the growing number of contractors, vendors, and partners organizations are increasingly relying on. They work great with standard, full-time employees—but fail in handling identities that don't fit predefined roles, hierarchies, or schedules.
Recent breaches, hacks, and compliance events make the risks blatant. Non-employee identities require a governance model to match their level of complexity. That means project-based access workflows, delegated management, and integrated lifecycle control.
It's not just a security decision to adopt and implement a third-party identity governance solution—it's a practical one. It brings discipline to what is probably an ad hoc process and reduces the likelihood of overlooked access, policy vulnerabilities, or audit exposure.
Non-employee identities cannot be an afterthought. It's high time that these identities are approached with the same discipline that is being given to internal identity management.
Managing non-employee identities require more than role-based provisioning or one-size-fits-all access policies. It calls for purpose-built governance—solutions that account for how external users are onboarded, monitored, and offboarded across departments and systems.
Anomalix helps organizations establish clarity and control over third-party identities through delegated access, project-based provisioning, and automated lifecycle management—all in one platform.
Need help evaluating your current approach to non-employee identity management? Contact us at info@anomalix.com to start a conversation.
