Ensuring Data Security in IT Outsourcing: Your Essential Guide

Identifying the Main Data Security Risks in IT Outsourcing

The cooperation between an organization and third-party providers introduces certain outsourcing data security risks.

Data Breaches and Unauthorized Access

A data breach happens when hackers gain unauthorized access to sensitive information. This can occur if an outsourcing partner doesn’t have strong protection measures in place.

In 2018, Marriott discovered that hackers had been accessing their Starwood guest reservation database since 2014, exposing the sensitive information of over 383 million guests. The breach included names, addresses, passport numbers, and even payment card details. The root cause of the breach was weak access controls and inadequate monitoring of their outsourced IT infrastructure.

This incident resulted in heavy fines (around $24 million) and dealt a massive blow to Marriott’s reputation, emphasizing the importance of thoroughly vetting and securing outsourced IT services.

Insecure Data Transmission

When sensitive data is transmitted without encryption, it becomes vulnerable to interception. Imagine sending confidential client information over an unsecured network—hackers could easily capture and misuse this data. 

An example is the Equifax data breach in 2017, where the personal information of 147 million people was exposed. Part of the issue stemmed from poor encryption practices and inadequate security protocols during data transmission.

Lack of Compliance with Data Protection Regulations

If your outsourcing partner isn’t following key data protection laws like GDPR or HIPAA, it can result in hefty fines and legal trouble. 

Best Practices for Ensuring Data Security in IT Outsourcing

A single oversight or even human errors can lead to huge financial losses and damage to a company’s reputation. By addressing these IT outsourcing security issues, you can protect both your business and your customers. What exactly can you do to ensure data security in IT outsourcing?

Vetting and Selecting Secure Outsourcing Vendors

Look before you leap. Outsourcing is increasingly popular today and logically there are far more companies selling their services than it used to be five years ago.

Some of them offer very tempting prices, especially if we consider software development in Asia, China, or the Philippines. However, choosing the cheapest option isn’t always the right decision, especially, in the matter of IT outsourcing security.

Outsourcing software development to Eastern Europe is still an effective cost-cutting strategy for US- and UK-based companies, as well as for businesses from Western Europe while offering strong data security in outsourcing.

Setting Up Comprehensive Security Agreements

A loosely framed contract can play a trick with you, and most probably will result in sizable monetary and reputational losses.

Security protocols and compliance standards such as data encryption measures, role-based access controls, and regular security audits must be part of the agreement. 

Make sure to clearly outline how the external provider will monitor, log, and manage potential security threats so that you can also establish incident response protocols to address breaches swiftly and efficiently if they occur. 

Ensuring Strong Encryption and Secure Communication

Mandate the use of encryption for data at rest and in transit to protect sensitive information from unauthorized access. Secure communication channels (like VPNs) should also be used for all data exchanges between your organization and the outsourcing partner to reduce the risk of interception.

Regulatory Compliance in IT Outsourcing

Understanding GDPR, HIPAA, and CCPA Requirements

GDPR, HIPAA, and CCPA requirements set strict guidelines for protecting and managing personal data, and failing to comply with them can lead to severe penalties and damage to a company’s reputation.

# GDPR (General Data Protection Regulation)

GDPR is a regulation from the European Union that sets a high standard for data privacy and security. It applies to any company that handles the personal data of EU citizens, regardless of where the company is based. Under GDPR, businesses must ensure that third-party service providers adhere to principles like data minimization, consent management, and data breach notifications.

# HIPAA (Health Insurance Portability and Accountability Act)

HIPAA is a US regulation that focuses on protecting the privacy and security of healthcare information. It’s crucial for companies outsourcing healthcare data processing to ensure their vendors comply with HIPAA’s Privacy Rule and Security Rule. 

This means establishing Business Associate Agreements with third parties to safeguard Protected Health Information, implementing encryption and access controls, and conducting regular risk assessments.

# CCPA (California Consumer Privacy Act)

CCPA is a regulation from California, USA, designed to give consumers more control over their personal information. It focuses on rights such as data access, deletion, and opt-out options for the sale of data. For data security outsourcing, it’s essential to ensure compliance with CCPA by establishing service provider agreements that limit how personal information is used, shared, or sold.

How to Ensure Compliance with Global Data Laws

If your product handles sensitive information across borders, ensuring compliance with global data laws is an important factor in data security outsourcing.

It involves understanding and adhering to various regulations that govern the collection, processing, and storage of personal information and may vary from country to country.

Compliance helps companies avoid hefty fines, maintain trust with customers, and protect sensitive data from breaches or misuse.

Companies should also train staff on privacy protocols and stay updated on evolving regulations.

Essential Security Measures in IT Outsourcing Contracts

Your contract defines your rights, the vendor’s responsibilities, and the level of data security in outsourcing. What should be included in it?

#1 Data Protection and Privacy Clauses

Outline strict requirements for data handling, storage, and access. Ensure compliance with relevant regulations like GDPR, CCPA, or HIPAA and clearly define responsibilities for safeguarding personal data.

#2 Confidentiality and Non-Disclosure Agreements

Implement NDAs to protect sensitive information from being disclosed or misused by the outsourcing providers. This agreement should cover all confidential data shared during and after the contract period.

#3 Access Control Security Policies

Define who can access sensitive data and establish role-based access controls. Ensure that only authorized personnel have access to specific information and systems.

#4 Incident Response and Reporting Protocols

Include a well-defined incident response plan that outlines steps for managing data breaches, including immediate reporting timelines and mitigation measures.

#5 Security Audits and Compliance Checks

Require regular security audits and compliance checks to ensure the outsourcing partner adheres to data security outsourcing standards and contractual obligations. This could include independent assessments or reviews by third-party vendors.

Defining Clear Data Security Responsibilities

When outsourcing IT security services, it’s crucial to outline who is responsible for protecting sensitive data. This includes specifying which party handles data encryption, access controls, and security updates. A clear division of responsibilities prevents confusion and helps avoid blame-shifting if security issues arise.

Including Data Breach Response Protocols

Your outsourcing contract should include a detailed incident response plan that specifies how to handle a data breach. It should cover reporting timelines, immediate containment measures, communication protocols, and follow-up actions. This proactive approach ensures that all parties know what to do in case of a breach, minimizing damage.

Achieving Strong Data Security in IT Outsourcing

Whether the business operates fully in-house or outsourced, client data security shouldn’t be overlooked.

At inVerita, we follow strict protocols for documenting every stage of development, from gathering initial requirements to final testing and deployment. This helps us minimize the mere possibility of security issues with outsourcing for our clients.