Companies depend on vendors, contractors, and temporary workers more than ever, but managing their access to internal systems remains a challenge. Traditional vendor management systems (VMS) were designed to handle contracts and payments, not security. As a result, many organizations don’t have the adequate tools to track and control non-employee identities, creating security risks, compliance gaps, and operational inefficiencies.
Every additional vendor, contractor, or partner with system access increases an organization’s exposure to security threats. Nearly a third of data breaches involve non-employee access [1]. Despite this risk, many companies often fail to remove system access when contracts end. The longer an account remains active, the greater the chance it will be exploited.
Security teams also struggle to enforce compliance. Regulations like GDPR, SOC 2, and HIPAA require strict access controls, but when vendor identities are scattered across multiple systems, it becomes difficult to monitor and enforce policies. Without centralized identity governance, organizations risk audit failures, security breaches, and regulatory penalties.
Most VMS platforms were built for procurement and finance teams, not IT or security. They help companies track vendor contracts and payments but provide little visibility into who has access to what systems. This creates several problems and gaps that leave organizations vulnerable. Without automated access controls, IT teams must manually onboard, monitor, and offboard non-employees—an inefficient and error-prone process.
A vendor management system that integrates identity governance solves these problems. Organizations need tools that can provision, monitor, and revoke access automatically, ensuring that non-employees only have access when needed and lose it as soon as their engagement ends.
Managing non-employee identities is becoming just as important as managing employee identities. More companies are recognizing the risks of outdated vendor management practices and shifting toward solutions that treat vendors like internal users when it comes to security and access controls.
Moving forward, organizations that adopt identity governance for non-employees will be better positioned to minimize risk, streamline operations, and meet compliance requirements.
Vendor management systems were originally built to help businesses track contracts, payments, and procurement workflows. They were not designed to manage non-employee identities or control access to sensitive systems. As a result, most traditional VMS platforms lack the security and automation needed to support today’s workforce.
Companies now rely on a growing number of non-employees, including contractors, freelancers, and third-party service providers. Many of these workers need access to internal systems, applications, and data to perform their jobs. However, without proper identity governance, organizations struggle to monitor and control vendor access, leading to security risks and compliance issues.
Hybrid work has accelerated the shift toward remote vendor management. Organizations are engaging more offsite contractors and global vendors, which means more external identities need system access. However, traditional VMS platforms are not equipped to handle remote, dynamic, and short-term identities securely.
Some of the biggest challenges include:
While legacy VMS platforms can help businesses track vendor relationships, they don’t provide real-time access monitoring or automated identity lifecycle management. This creates security blind spots, leaving organizations vulnerable to unauthorized access and compliance failures. There is a range of problems that organizations may run into:
Without proper controls, vendors can become an easy target for attackers looking to exploit weak access policies. According to Secureframe, 98% of companies work with at least one vendor that has experienced a security breach [2].
A modern vendor management system must prioritize identity governance. Companies are moving toward automated, AI-driven, and security-first approaches to vendor management, ensuring that non-employees only have access to the systems they need—and nothing more. An identity-first approach to vendor management helps organizations:
Managing non-employee identities is more complex than managing full-time employees. Vendors, contractors, and service providers often work for multiple companies, have temporary access needs, and may not go through the same onboarding and security processes as employees. Without a structured identity management approach, organizations face serious security risks, operational inefficiencies, and compliance challenges.
Many organizations don’t have a standardized process for provisioning and deprovisioning vendor access. Unlike employees, who typically follow a defined onboarding process, non-employees often have access provisioned manually. This results in delays, misconfigurations, and access being granted beyond what is necessary.
Offboarding is even more problematic. Vendors frequently retain system access long after their contract ends, increasing the risk of insider threats and security breaches. Without automated offboarding, organizations lose control over who has access to critical systems and for how long.
Strict regulations like GDPR, SOC 2, HIPAA, and industry-specific security frameworks require businesses to control and monitor vendor access. However, many organizations lack a centralized system to track vendor identities, making compliance difficult.
Common compliance challenges include:
Failing to manage vendor access properly can result in regulatory fines, reputational damage, and legal consequences.
Most companies manage vendor identities across multiple disconnected systems. Procurement teams use a VMS for contracts and payments, IT teams use an identity and access management (IAM) system for provisioning, and compliance teams maintain separate audit records. Without integration between these systems, security teams have no single source of truth for vendor access.
This fragmentation leads to:
Traditional VMS platforms were not designed to manage non-employee identities securely. Their primary function is tracking vendor contracts and payments, not enforcing security policies, monitoring access, or automating offboarding.
The result? Security gaps that put organizations at risk:
Managing non-employee identities is more than just a security concern—it is a business necessity. An identity governance framework helps organizations track, control, and automate the entire vendor identity lifecycle. Instead of treating vendor management and security as separate processes, identity governance integrates them into a single, automated system that ensures only the right people have access, at the right time, for the right reasons.
Identity governance and administration (IGA) is a structured approach to managing who has access to what systems and under what conditions. It applies the same principles of employee identity management to vendors, contractors, and other non-employees.
A strong identity governance strategy includes:
Traditional vendor management systems operate on implicit trust, assuming that once a vendor is onboarded, their access remains valid until manually revoked. This is an outdated approach. A Zero Trust vendor model ensures that no vendor is automatically trusted. Instead, access is continuously verified using:
Organizations that implement identity governance for non-employees benefit from stronger security, improved compliance, and increased operational efficiency.
Traditional vendor management systems were designed for contract tracking, not for securing non-employee identities. As vendor relationships become more complex, organizations need a centralized, automated, and security-driven approach to managing vendor access. A modern vendor identity lifecycle strategy ensures that vendors receive the right access at the right time—and lose it the moment it’s no longer needed.
A vendor identity governance model should integrate security, automation, and compliance to provide full visibility and control over non-employee access. The most effective approach includes:
1. Centralized identity governance
Vendor identities are often scattered across multiple systems, making it difficult to track access or enforce security policies. A single source of truth for vendor identities gets rid of gaps, redundancies, and security blind spots.
A centralized identity governance system:
2. Automated workflows for onboarding and offboarding
Manual vendor onboarding and offboarding increase security risks and operational inefficiencies. Automating these processes ensures vendors receive access only when they need it—and that access is removed as soon as their engagement ends.
3. Zero Trust and AI-driven security
A Zero Trust approach assumes that no vendor should be trusted by default. Every access request is verified, and access is continuously monitored. AI-powered tools analyze vendor behavior, detect anomalies, and enforce risk-based authentication to minimize insider threats.
4. Compliance-focused vendor management
Industries regulated by GDPR, SOC 2, HIPAA, and other frameworks must ensure vendor access aligns with security and privacy standards. An effective vendor identity lifecycle management strategy should include:
Traditional vendor management systems were designed to handle contracts, invoices, and payment processing. They were not built to manage non-employee identities or secure vendor access to company systems. As organizations rely on more contractors, service providers, and external partners, the limitations of legacy VMS platforms have become clear
A modern VMS goes beyond administrative tracking. It integrates identity governance, automated access control, and security monitoring to ensure that vendors only have the access they need—and lose it the moment they no longer require it.
Legacy vendor management systems focus on contracts and payments, not security. As a result, many organizations:
A modern VMS with integrated identity governance ensures that vendor access is controlled, monitored, and revoked automatically when no longer needed. Key benefits include:
Managing non-employee identities is no longer just an administrative task—it is a core security function. As organizations rely more on vendors, contractors, and service providers, traditional vendor management systems are proving inadequate. A modern, identity-first approach is necessary to reduce security risks, improve compliance, and streamline vendor access management.
Companies that fail to modernize vendor identity management will continue to face data breaches, compliance violations, and inefficiencies. The shift toward automated, identity-driven vendor management is already underway, and organizations that adopt these practices early will have a competitive advantage in security, compliance, and operational efficiency.
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