Hi,
There are multiple approach to your requirement.
1. 3rd party system could use CRM OOB Web api
For this to work, The first thing you have to do is to register application azure AD and copy client ID and Client Secret which will be used by 3rd party system to generate Access token.
Next you have to provide API permission in Azure AD registered Application. CRM Online Delegate permission will do. Next create Application user in crm and reuse application ID which you have copied.
Create Custom security role and provide basic privilege and assign this security role to application user.
Share Web API URI with 3rd party system including Client ID, Client Secret, Tenant ID and they should be able to access custom entity activated records.
2. Create Azure function to expose CRM Data in case you don't want 3rd party system to directly be accessing your CRM
Azure function is lightweight service and can be easily create and deployed from VS. Write your code to connect to CRM and fetch required data and return those data in CRM.
See below link for sample code to perform operation using C# WEB API.
https://github.com/jlattimer/CrmWebApiCSharp
If found helpful, Please mark my answer verified.
