What a SaaS Provider Should Know about SOC 2 Compliance

For SaaS companies, data security is paramount. SOC 2 Type 1 and Type 2 audits are common voluntary undertakings that ensure companies meet industry standards for data security. These audits help demonstrate a commitment to protecting consumer data and client interests. Unlike regulatory requirements such as HIPAA for healthcare data, SOC 2 audits are voluntary but crucial for maintaining high security standards and instilling trust with customers.

What is SOC 2?

SOC 2 compliance considers 5 major trust principles to establish whether a business is using best practices for maintaining data integrity and safety: privacy, security, availability, processing integrity, and confidentiality. SOC compliance can only be accomplished with the use of an outside auditor observing the present and long-term efficacy of a SaaS’s security measures. A company engaging with SOC 2 is not required to meet all 5 principles’ standards but depending on the industry a company is operating within, some principles might be more pertinent (or even required for the purposes of this auditing) than others. Let’s dive into what each of these principles looks like.

What are the 5 trust principles of SOC 2?

1. Security

Where privacy is not a primary principle being addressed, security must be processed as part of an organization’s SOC 2 audit. In general, every privacy principle connects with security in some way, and it should be a top concern for any SaaS provider as more user entities come to depend on secure data acquisition and storage. By examining the security of an organization’s services, they can establish any gaps in access controls that might leave the door open to fraudulent activity or unauthorized access. This principle can also be an incentive to implement new security measures, ahead of time or as a result of the audit, such as two factor authentication and network firewalls to better protect client data.

2. Privacy

The privacy principle is an umbrella requirement that could easily apply to any SaaS group, regardless of its sector. How a company reports its privacy policy to clients and consumers and how their privacy standards perform must line up. The way an organization both stores and distributes consumer data is also subject to the American Institute of Certified Public Accountants’ standards known as Generally Accepted Privacy Principles, or GAPP. When all users agree to a policy that meets these standards, a privacy audit through SOC 2 should be a breeze.

3. Confidentiality

Here’s where the industry an organization is servicing becomes more relevant. Certain forms of personal data and engagement require confidentiality measures to be in place, and the SOC 2 audit is a great way to assess them in more detail. If a SaaS provider is servicing groups collecting or storing certain forms of personal data, namely personal health information and personally identifiable information. Most clients agree to have their data collected and used only in very specific circumstances, and this principle should be implemented in order to confirm that that obligation is being met.

4. Processing Integrity

Another instance where a principle is most applicable in certain sectors is seen in the processing integrity SOC 2 principle. With e-commerce and financial services, it is expected that data is both processed and delivered consistently, in the contractually agreed upon way, and in a timely manner. Not to be confused with data integrity, processing integrity refers to the monitoring of data’s movement and usage, while ensuring that a provider’s ideal or required method and means of transmission is enforced. If the existing data is not accurate to begin with, processing integrity still seeks to ensure that it is protected, but this principle alone will not produce more accurate data. It will, however, be useful in establishing better practices for acquiring and transmitting useful data.

5. Availability

When SaaS providers work with user entities, their clients have a reasonable expectation for when their data will be available and accessible, and how accessible their resources really are. This principle won’t directly make an impact on functionality of the organization’s platform, but network performance and failover checks play a role in the success of their availability principle in action. SaaS groups providing hosting or data center services are the most likely to benefit from this trust principle.

SOC 2 Type 1 vs. SOC 2 Type 2: Understanding the Differences

When it comes to SOC 2 compliance, there are two types of audits that SaaS providers can undertake: SOC 2 Type 1 and SOC 2 Type 2. Understanding the differences between these two types is crucial for determining which audit best suits your organization's needs.

SOC 2 Type 1

• Scope: SOC 2 Type 1 focuses on the design and implementation of a company's systems and controls at a specific point in time.

• Objective: The primary objective is to assess whether the controls are suitably designed to meet the relevant trust principles (security, privacy, confidentiality, processing integrity, and availability).

• Duration: This audit provides a snapshot of the organization's controls and their effectiveness at a single point in time.

• Use Case: Ideal for companies that want to quickly demonstrate their commitment to security and compliance. It is often used as an initial step before moving on to a Type 2 audit.

SOC 2 Type 2

• Scope: SOC 2 Type 2 is more comprehensive and evaluates the operational effectiveness of the company's systems and controls over a period of time, typically a minimum of six months.

• Objective: The primary objective is to assess whether the controls are not only suitably designed but also operating effectively over the audit period.

• Duration: This audit provides a more in-depth look at how well the controls are functioning and whether they are consistently applied over time.

• Use Case: Ideal for companies that want to demonstrate sustained compliance and security practices. It provides a higher level of assurance to clients and stakeholders about the long-term effectiveness of the controls.

Key Differences

• Time Frame: Type 1 is a point-in-time assessment, while Type 2 covers a period of time (usually at least six months).

• Depth of Analysis: Type 1 focuses on the design and implementation of controls, whereas Type 2 evaluates both the design and operational effectiveness over time.

• Assurance Level: Type 2 offers a higher level of assurance as it demonstrates that controls are not only in place but are also functioning effectively over an extended period.

How Does the Process Work?

SaaS companies looking to participate in a SOC 2 audit should follow these steps:

1. Assemble a Team:
   • Form a team responsible for all audit-related issues.
   • Ensure the team has the time and resources to prepare.
2. Define the Scope:
   • Plot out the intended scope of the audit.
   • Determine which trust principles are most relevant to your business.
3. Identify Assets and Data:
   • Identify your assets and where your sensitive data is hosted.
   • Understand the types of data you handle and their locations.
4. Identify Security Gaps:
   • Conduct a thorough assessment to identify security gaps.
   • One effective way to do this is through a penetration test (pentest).
5. Preparation:
   • Add measures to fill in any security gaps identified.
   • Improve network performance.
   • Secure the physical space that an auditor would be touring, if applicable.
6. Audit Duration:
   • SOC 2 Type 1:
     • Focuses on a specific point in time.
     • Does not contextualize previous or future performance.
   • SOC 2 Type 2:
     • Considers a minimum of six months’ worth of performance.
     • Gauges the long-term efficacy of the implementation of SOC 2 principles.
7. Timeline:
   • Preparation can take a couple of months.
   • The audit itself could take between a few weeks and six months, depending on the type of SOC 2 audit.

The audit process will depend on your business specifics, the assets you have, and the auditor you choose. By following these steps, SaaS companies can ensure they are well-prepared for a SOC 2 audit and can effectively demonstrate their commitment to data security and compliance.

Why Should SOC 2 Compliance Matter to a SaaS Provider?

Security matters to customers. To attract new clients, SaaS providers need to demonstrate they are secure and well-performing. While SOC 2 audits are voluntary, they provide a credible reference point that many businesses rely on. These audits can be the best way to show prospective clients that your company meets high standards for data security and operational integrity.

Top 3 SaaS Provider Certifications

With so many compliance frameworks within the digital economy, each business must determine the necessary compliance frameworks most applicable and more importantly, those required for their business operations. With this in mind, here are the top 3 certifications to consider as a SaaS provider.

1. SOC 2

2. ISO 27001

3. OWASP ASVS

While this post focuses on SOC 2, the other two compliance frameworks offer businesses the opportunity to have a more robust approach to their security program. Read more about Cobalt’s SOC 2 Type II certification.

Achieving SOC 2 compliance is a significant step for any SaaS provider. It not only demonstrates a commitment to maintaining high standards of data security and operational integrity but also builds trust with clients and stakeholders. 

By understanding the differences between SOC 2 Type 1 and Type 2, and preparing adequately for the audit process, SaaS companies can ensure they meet the necessary requirements and maintain a competitive edge in the market.

Learn more about how Cobalt’s Pentest as a Service Platform can help you fulfill your company’s SOC 2 Compliance needs.