Security and compliance qualifications, like SOC 2 and ISO/IEC 27001, demonstrate you apply good practices in your business.
They’re often classified as “security” and thought of as the technical security of your systems. However, they’re broader, focusing on organizational practices that support your security AND other objectives. That includes availability (system resilience), confidentiality of data, privacy for your users, integrity of the system processing objectives, scalable process design, and operational readiness to support large business customers.
What are the 5 reasons Startups Go for Security and Compliance Certifications?
There are five reasons we see our clients pursue these certifications, in order of the prevalence we see them.
- Enterprise sales: Large businesses looking to use your software consider your product AND your capabilities as an organization. These qualifications play an important role in demonstrating that your business is “enterprise ready,” providing a reliable service, and keeping their data secure.
- Tick-the-box for compliance mandates: Following enterprise sales, these qualifications often become mandates. They can also be used to demonstrate compliance with regulations (e.g., GDPR), satisfy regulatory requirements, or participate in certain schemes (e.g., Consumer Data Right’s data sharing economy).
- Reduce due diligence: A major pain point for software companies is the relentless due diligence required to serve enterprise customers. Hundreds, even thousands, of “security questions” and vendor audits are common. Standards like SOC 2 and ISO/IEC 27001 are designed to have a single independent audit process that satisfies broad end-user requirements.
- Improve operations: Standards are a means of improving business operations. They’re based on “good” or “best” industry practices. Auditors have extensive experience seeing these applied in different environments and can guide you in applying them in your context.
- Satisfy other stakeholders: Last but not least is a myriad of other stakeholders that are satisfied for similar reasons above. Investors, regulators, partners, boards, the management team, and even employees benefit from implementing and validating your alignment to standards. It provides peace of mind that you are secure, compliant, and clarifies your key operational practices.
SOC 2 vs. ISO/IEC 27001
Each standard has different requirements, nuances in how they are applied, and perceptions in the market. This impacts which may be best for your business and how they help you achieve the goals above. When deciding between SOC 2 and ISO/IEC 27001, your primary goal often dictates the best choice. Let’s break down the key considerations:
Meeting Customer and Industry Preferences
If your goal is enterprise sales or ticking the box on a mandate, it’s important to consider your customers’ preferred standard(s). In general, more regulated industries (such as finance or healthcare) prefer the SOC standards. Less regulated customers generally prefer the ISO family of standards. SOC 2 is more prevalent in the U.S., while ISO/IEC 27001 is more common in Europe.
Streamlining Due Diligence
For reducing due diligence, the best standard is often linked to the last point. However, it’s also important to consider that ISO/IEC 27001 provides a certificate only. SOC 2 reporting has a system description including the controls specific to your organization, your system scope, third-party responsibilities, e.g., AWS shared responsibility model, and your end users’ responsibilities when using your system.
This reporting approach in SOC 2 helps answer more “questions” for the due diligence process. It helps your customers’ vendor risk teams understand what’s relevant, the associated risks of using your services, and how those risks are addressed in your specific practices.
Enhancing Operational Practices
When improving operational practices, it’s up to your organization to pick the approach that “fits” best. The SOC 2 criteria-based approach is more flexible and focused on how the criteria are practically met in your specific context. Tech companies often see this as a better way to align operating practices with their company’s culture, size, scale, and unique nature.
ISO/IEC 27001 is a more prescriptive approach aligned to a higher standard of practice, focusing on policies and procedures. While some businesses feel this is more rigid and restrictive on their business, it can be advantageous and, in some ways, easier to follow a cross-industry, “best-practice” methodology.
Satisfying Other Stakeholders
Meeting the needs of other stakeholders will depend on the specifics of what they are looking for assurance over. Regulators that require an “independent audit” of your technology generally steer towards SOC 2. Partners often prefer the standard they have adopted themselves or their customers care more about. Employees’ and management’s preferences are based on what they feel “fits” best.
The Common Path: Doing Both
Whichever standard you choose initially, it’s very common for tech companies to do both. The good news is there’s a lot of overlap. Customers generally accept if you have one of these, even if it’s not their preferred one. If they do require their preferred standard, they typically accept what you have in the immediate term and agree on a period to achieve the other.
To learn more about choosing the best standard or frameworks for your compliance and reporting needs, contact us.
