The Software as a Service (SaaS) industry has seen both great expansion and notable downturns in recent years, with key market shifts redefining the landscape.As companies adapt to the shifting SaaS landscape, SOC 2 Compliance for SaaS has emerged as a key priority—not just as a checkbox for security, but as a signal of trustworthiness and a commitment to protecting customer data in an increasingly cautious market. After reaching record highs in 2021, the SaaS industry faced a major downturn in 2022, with company valuations dropping by almost 50%, according to Meritech Capital.
This downturn shook the market, creating pressures around profitability and customer retention. However, now in 2024, it is a different story. That is despite the challenges, the SaaS industry is now stabilizing, with B2B SaaS companies projected to grow at an 11% compound annual growth rate (CAGR) and B2C SaaS at 8% for the remainder of the year according to the recent report of Paddle.
This period of cautious optimism underscores an undeniable priority for SaaS companies: client trust, particularly as clients increasingly scrutinize data security and compliance practices. Getting SOC 2 (System and Organization Controls 2) compliance has become a critical step in building this trust, as it ensures that a company’s data handling and security protocols meet the appropriate standards.
In this guide, we will learn why SOC 2 for SaaS companies is essential and offer practical steps to achieve SOC 2 compliance for SaaS in 2024.
Why SaaS companies need SOC 2?
As a SaaS company, you are handling a vast number of customer data from personal information to financial records. Now data breaches and mishandling of those information cannot only impact your reputation but can also lead to the loss of your client’s trust. As we learned in the introduction, SOC 2 is an important step that helps you build trust and transparency that you will need to assure clients that their data is protected at every level.
By being SOC 2 compliant, you will be able to stand out in a competitive market expressing your serious concern and approach to data security. That will show also how much serious you are about data security and are willing to go the extra mile to safeguard your client’s trust.
Plus, many companies often need to comply with various regulations to operate securely on a global scale which often includes frameworks like ISO 27001, a widely recognized security standard. When comparing SOC 2 vs ISO 27001, the key difference lies in their specific scope and focus.
While SOC 2 emphasizes trust principles for data security, ISO 27001 provides a broader framework for information security management. This is also true for other regulations like GDPR or HIPAA, which may apply depending on your industry or location.
Once your SaaS company becomes SOC 2 compliant, you’ll not only be able to demonstrate a proactive approach to data security but also align with broader regulatory standards. This will build trust, strengthen your reputation, and position your company as a security-focused partner in an increasingly competitive marketplace.
Core Trust Principles: Building blocks of SOC 2 for SaaS
SOC 2 compliance is built around five core trust principles that serve as the framework’s foundation. Each principle addresses a crucial aspect of data protection, making SOC 2 comprehensive and adaptable to SaaS environments:
- Security: Measures to protect against unauthorized access, such as firewalls, encryption, and intrusion detection.
- Availability: Ensuring systems are accessible to users, with safeguards against downtime and disruptions.
- Processing integrity: Assuring that systems process data accurately, reliably, and free from errors.
- Confidentiality: Protecting sensitive data from unauthorized disclosure, particularly in shared environments.
- Privacy: Ensuring that personal data is collected, used, retained, and disposed of in compliance with privacy regulations.
By adhering to the above principles, your SaaS organization can build a strong security foundation that meets client expectations and supports compliance.
Which type of SOC 2 report is suitable for SaaS?
- SOC 2 Type 1: This report will assess the design of your company’s control at a specific point in time and verify whether the necessary controls are in place. If your SaaS company is just starting out with SOC 2 compliance a Type 1 report would be helpful as an ideal starting point.
- SOC 2 Type 2: This report is generally comprehensive and goes a step further in evaluating the effectiveness of those controls over a defined time period (6 to 1 year). Type 2 report is ideal if your SaaS company is looking to demonstrate sustained adherence to security practices, a requirement often favored by enterprise-level clients and partners who prioritize reliability and consistency in security measures.
Considering both options, you should first evaluate your company’s current stage in the SOC 2 compliance journey and the needs of your clients. If you’re just starting out, a SOC 2 Type 1 report is a good first step as I mentioned before, but then again if you’re working with enterprise clients who require proof of ongoing security practices, a SOC 2 Type 2 report is more appropriate.
Key steps to achieve SOC 2 compliance for SaaS companies
1. Identify the relevant SOC 2 trust principles
Determine which SOC 2 trust principles apply to your business. While SaaS providers prioritize the Security principle, client requirements may require identifying and addressing other principles such as Availability or Confidentiality.
2. Conduct a readiness assessment
Perform a SOC 2 readiness assessment or gap analysis to identify gaps in your current security practices compared to SOC 2 requirements. This helps in understanding what controls need to be added or improved.
3. Establish and document security policies and procedures
Develop detailed, documented policies and procedures addressing each selected SOC 2 principle. These should cover areas like data encryption, access control, incident response, and more, and will serve as the foundation for your compliance efforts.
4. Implement required security controls
Based on the readiness assessment, implement or strengthen controls to meet SOC 2 standards. This can include access management protocols, network monitoring, secure software development practices, and continuous vulnerability assessments.
5. Train employees on SOC 2 requirements
Conduct regular training sessions to ensure employees understand their role in achieving and maintaining SOC 2 compliance. This step is crucial to prevent insider threats and maintain a high standard of security awareness.
6.Engage in ongoing monitoring and logging
Set up logging and monitoring systems to track access, detect security incidents, and provide evidence of control operation. For SOC 2 Type 2 compliance, monitoring must demonstrate consistent control effectiveness over a period (usually 3, 6 months to a year).
7.Conduct a readiness review with an auditor
Engage a SOC 2 auditor for a readiness review, which provides an informal evaluation of your current controls and identifies areas needing improvement. This step prepares you for the official audit by allowing time to address any remaining gaps.
8. Schedule and complete the SOC 2 audit
Once ready, schedule the SOC 2 audit with a certified public accounting (CPA) firm. For a Type 1 report, the audit will assess controls at a specific point in time, while a Type 2 audit will assess controls over an extended period.
9. Address findings and achieve continuous compliance
If the audit identifies areas for improvement, address them promptly. Once compliant, continue regular monitoring, updating policies, and conducting internal audits to maintain SOC 2 standards over time.
Check out this YouTube video to learn in detail about the SOC 2 requirements and practical tips to ensure a smooth audit process.
The Best way to get your SOC 2 ready
While securing SOC 2 compliance is definitely beneficial, the process could feel quite overwhelming. This is especially true for SaaS companies that are just starting out, due to complex regulations and security standards which could make it challenging to know where to start and what to prioritize.
Plus, SOC 2 compliance requires not only the implementation of strong security measures but also an ongoing commitment to maintaining them which could be time consuming and resource intensive. Now this is where VISTA InfoSec comes in. At VISTA InfoSec, we provide SOC 2 audit and attestation services, helping SaaS providers confidently achieve and sustain SOC 2 compliance.
Our approach to SOC 2 compliance is designed to take the stress out of the process. With us you will not only meet compliance standards but will also build a solid foundation of trust with your clients, proving your dedication to protecting their data. Contact us today to start your journey to SOC 2 compliance. You can also book a FREE 1 time consultation with our expert by filling in the ‘Enquire Now’ form.
Narendra Sahoo (PCI QPA, PCI QSA, PCI SSF ASSESSOR, CISSP, CISA, CRISC, 27001 LA) is the Founder and Director of VISTA InfoSec, a global Information Security Consulting firm, based in the US, Singapore & India. Mr. Sahoo holds more than 25 years of experience in the IT Industry, with expertise in Information Risk Consulting, Assessment, & Compliance services. VISTA InfoSec specializes in Information Security audit, consulting and certification services which include GDPR, HIPAA, CCPA, NESA, MAS-TRM, PCI DSS Compliance & Audit, PCI PIN, SOC2 Compliance & Audit, PDPA, PDPB to name a few. The company has for years (since 2004) worked with organizations across the globe to address the Regulatory and Information Security challenges in their industry. VISTA InfoSec has been instrumental in helping top multinational companies achieve compliance and secure their IT infrastructure.
