Discover the importance of SOC 2 compliance for SaaS providers, including the differences between Type 1 and Type 2 audits and key steps to prepare for them.
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.
SOC 2 compliance considers 5 major trust principles to establish whether a business is using best practices for maintaining data integrity and safety:
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.
The SOC 2 audit is always performed by an independent, third-party auditor to ensure an unbiased assessment of a SaaS provider's security controls. While an organization doesn't need to meet all five criteria, security is a mandatory one for any SOC 2 report. The other criteria are chosen based on the services a company provides. Let's explore each of these criteria in more detail.
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.
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.
Here’s where the industry that 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.
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.
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.
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.
SaaS companies looking to participate in a SOC 2 audit should follow these steps:
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.
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.
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.
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.