{"id":2322,"date":"2024-09-06T10:00:00","date_gmt":"2024-09-06T10:00:00","guid":{"rendered":"http:\/\/138.197.200.24\/resources\/blog\/saas-data-security-and-privacy-gdpr-vs-soc2-vs-hipaa\/"},"modified":"2026-07-31T07:11:37","modified_gmt":"2026-07-31T07:11:37","slug":"saas-data-security-and-privacy-gdpr-vs-soc2-vs-hipaa","status":"publish","type":"blog","link":"https:\/\/www.smartkarrot.com\/resources\/blog\/saas-data-security-and-privacy-gdpr-vs-soc2-vs-hipaa\/","title":{"rendered":"SaaS Data Security and Privacy: GDPR vs SOC2 vs HIPAA"},"content":{"rendered":"
\n

When it comes to data security and privacy, in context of a virtual world, we are faced with an uncomfortable situation to choose from a variety of compliance frameworks<\/a> \u2013 ISMS, ISO, GDPR, SOC 2 Type 2, HIPAA just to name a few. SaaS data security and privacy is no different.<\/p>\n

While all of these are targeted towards one single goal of \u201cdata security & maintaining the privacy of the user\u201d, not all of them are applicable for all types of organizations\/companies. Some are important for service-based industries, some for SAAS based cloud product\/services, while some for healthcare and some for organizations working with data from EU or storing data of users from EU.<\/p>\n

Since, I have worked with SAAS products and platforms for more than a one and half decade, and have had the experience of driving compliance for these organizations, I would touch upon three key data security and privacy compliance that have become industry standards today \u2013 GDPR, SOC 2 Type 2 and HIPAA.<\/p>\n

At SmartKarrot<\/a>, we regard the privacy and security of our clients\u2019 personal & business data as sacrosanct for our progress. Every member of SmartKarrot team, right from the founders to the bottom of the pyramid truly believe that ensuring our clients\u2019 data security & privacy is our fundamental responsibility. With that being said, we are happy to announce that we have achieved one key security and privacy milestones \u2013 GDPR and are truly on our way to achieve SOC 2 Type 2 compliance as well by mid-2020.<\/p>\n

This article highlights the key aspects and requirements of SOC2, GDPR and HIPAA<\/p>\n

Service Organization Control (SOC) 2 Type 2:<\/strong>\u00a0<\/strong>\u00a0<\/strong><\/p>\n

Prior to SOC 2 Type 2, the standard of auditing service organizations was SAS 70 (Statement of Auditing Standards No. 70). These audits were performed by Certified Public Accountant (CPAs) with the original intent to report on the effectiveness of internal financial controls. But overtime, this started to be used as a way to report on the effectiveness of internal financial controls. But somewhere around 2010, SOC 1 and SOC 2 reports were introduced by AICPA with the explicit purpose of addressing the growing need of companies (especially operating out of cloud infrastructure) to externally validate and communicate their state of security.<\/p>\n

SOC 2 Type II reports are the most comprehensive certification within the Systems and Organization Controls protocol. Businesses seeking a vendor such as an I.T. services provider will find SOC 2 Type II is the most useful certification when considering a possible service provider\u2019s credentials.<\/p>\n

There is one common misconception across the industry that SOC is a certification, and to that extent a SOC auditor at the end of the audit certifies an organization control protocols. SOC 2<\/a> Type 1 \/ SOC 2 Type 2 is not a certification-based compliance, but it is a framework for an auditor to audit an organization control protocols. Hence at the end of the audit, the auditor hands over an audit report known as \u201cSOC Attestation Report\u201d to the organization and ranks the organization across all key points noted in SOC compliance by AICPA.<\/p>\n

A business entity shares this attestation report with its existing customer as a confidence building measure as well as passes this on to new customers that are signing up with the business entity. Based on the report, the security office for the customers\u2019 company can ask for additional policy and procedure documentations.<\/p>\n

SOC is based on these 5 criteria\u2019s which it calls as Trust Service Criteria.<\/p>\n

Security
\nAvailability
\nProcessing
\nIntegrity
\nConfidentiality
\nPrivacy<\/p>\n

GDPR (General Data Protection Regulation)\u00a0<\/strong><\/p>\n

The GDPR (General Data Protection Regulation) was adopted by the European Parliament and the Council on the 27th\u00a0of April 2016 and comes into force on the 25th\u00a0of May 2018.\u00a0This is the latest privacy and data protection legislation of the European Union (EU).<\/p>\n

GDPR has implications for all companies no matter their size. A lot of smaller\u00a0companies\u00a0don\u2019t even realize they are impacted, which is a dangerous situation to be in, because they could be subject to substantial\u00a0or even crippling fines.<\/p>\n

GDPR creates many new rights for individuals and new obligations for those who process personal data. It also defines what \u2018processing\u2019 of personal data means \u2013 any operation or set of operations which is performed on personal data or on sets of personal data, whether or not by automated means. Such operations include, among others, collection, recording, organization, structuring, storage, adaptation or alteration, retrieval, consultation, use, disclosure by transmission, dissemination or otherwise making available, alignment or combination, restriction, erasure or destruction of personal data. To put it simply \u2013 processing includes everything that is\u00a0done with personal data by\u00a0an organization.<\/p>\n

Pivotal Point in GDPR<\/strong><\/p>\n

GDPR being a set of legislation set by the EU defines personal data broadly and put the individual at the center of data protection. It gives every individual resident of EU, the right to know and decide how his or her personal data will be stored, processed, transferred and deleted.<\/p>\n

With the above stated point as the most important aspect of GDPR, organizations are required to make full review of their practices regarding collection, use and protection of potentially huge amount of data.<\/p>\n

Global reach \u2013 who does GDPR affect?<\/strong><\/p>\n

The new European data protection law applies to the processing of personal data of data subjects (natural persons) who are in the Union by any public or private organization (or a single natural person) not established in the Union. In this case though, the processing activities must be related to either:<\/p>\n

    \n
  1. the offering of goods or services, irrespective of whether a payment from the individual is required; or<\/li>\n
  2. the monitoring of their behavior as far as their behavior takes place within the Union.<\/li>\n<\/ol>\n

    This means, for example, that if a US or Asia based company wants to conduct e-commerce in the EU (for which it needs to process some personal data such as name, shipping address, bank information, etc.), the GDPR applies to it. Furthermore, it applies also if no payment is involved at all, as with Facebook and most of Google\u2019s services.<\/p>\n

    GDPR Implications for SaaS<\/strong><\/p>\n

    Under the previous data protection directive,\u00a0TalkTalk was found guilty\u00a0of security failings in 2016 that gave hackers access to customer data. The company was then given a\u00a0450,000 euro fine. Pharmacy2U was found responsible for a similar failure, and they had to pay a 150,000 euro fine. But these fines are a fraction of what the GDPR fines will add up to. The NCC Group recently found that if the GDPR had been in place when TalkTalk was fined,\u00a0they would have paid over 65 million euros<\/a>. Pharmacy2U would like to have been fined around 5 million euros. In general,\u00a0the existing fines will be 79 times higher\u00a0under GDPR.<\/p>\n

    The above data begs the question, how do SaaS companies become GDPR compliant?<\/strong><\/p>\n

    Under the GDPR, both SaaS customers (i.e., data controllers) and vendors (i.e., data processors) have new duties that they are responsible for. SaaS vendors\u2019 primary obligation will be to guarantee that all customer product agreements are in compliance. This means that the agreement should state:<\/p>\n

      \n
    1. Customer rights, requirements, and responsibilities.<\/li>\n
    2. The type of data being processed.<\/li>\n
    3. The duration, purpose, and nature of the data processing.<\/li>\n
    4. Whether an instruction of providing personal data to the customer breaches the GDPR or other data regulation laws.<\/li>\n
    5. A clarification that the customer must give recorded instructions in order for personal data to be processed.<\/li>\n
    6. How they will help the customer to comply with their duties to the GDPR.<\/li>\n<\/ol>\n

      Additionally, from the vendors\u2019 side:<\/strong><\/p>\n

        \n
      1. The SaaS supplier or customer must implement safeguards to make personal data transfers outside of the European Economic Area.<\/li>\n
      2. Customers may have their data returned or deleted if mandatory laws don\u2019t require storage.<\/li>\n
      3. Suppliers are required to report obligation breaches to customers.<\/li>\n
      4. In short, SaaS vendors will need to make\u00a0significant updates\u00a0to their procedures, internal policies, and product agreements.<\/li>\n<\/ol>\n

        What is a GDPR breach notification?<\/strong><\/p>\n

        GDPR sets out a duty for all organizations to report certain types of data breaches which involve unauthorized access to or loss of personal data to the relevant supervisory authority. In some cases, organizations must also inform individuals affected by the breach and\u00a0set up an integrated\u00a0data protection solution<\/a>.<\/p>\n

        Organizations are obliged to report any breaches which are likely to result in a risk to the rights and freedoms of individuals and lead to discrimination, damage to reputation, financial loss, loss of confidentiality, or any other economic or social disadvantage.<\/p>\n

        What comes next for GDPR and data protection?<\/strong><\/p>\n

        Countries and regions around the world appear to be taking cues from GDPR by introducing or modifying data protection legislation. Countries which have signaled they\u2019ll change their privacy laws since the introduction of GDPR include\u00a0Brazil<\/a>,\u00a0Japan, South Korea, India and others<\/a>.<\/p>\n

        Silicon Valley, California, is also set to introduce its own data privacy laws in\u00a0the California Consumer Privacy Act<\/a>, which comes into force as of 1st January 2020.<\/p>\n

        The legislation follows in the footsteps of GDPR by allowing individuals to have a greater say about how their personal data is used, but in many ways it doesn\u2019t go nearly as far: there\u2019s no set time-limit for notifying consumers about a breach and organizations won\u2019t face fines for non-compliance.<\/p>\n

        However, the introduction of this legislation into the heat of the technology industry appears to suggest that privacy and consent are issues that could change how Silicon Valley operates.<\/p>\n

        HIPAA Compliance<\/strong><\/p>\n

        The Standards for Privacy of Individually Identifiable Health Information (Privacy Rule) sets forth, for the first time, a set of national standards for the protection of certain health information. The U.S. Department of Health and Human Services (HHS) issued the HIPAA Privacy Rule to implement the requirement of the Health Insurance Portability <\/a>and Accountability Act of 1996 (HIPAA).<\/p>\n

        The\u00a0HIPAA Privacy Rule<\/a>\u00a0addresses the use and disclosure of individuals\u2019 health information called \u201cProtected Health Information (PHI)\u201d.\u00a0 \u00a0The HIPAA Privacy Rule is to assure that an individual\u2019s health information is properly protected while allowing the individual\u2019s necessary health information that is needed to provide and promote quality<\/a> health care, is protected. The HIPAA Privacy Rule permits important uses of information, while protecting the privacy of people who seek healthcare.<\/p>\n

        The HIPAA Privacy Rule is designed to be flexible and comprehensive to cover the variety of uses and disclosures that need to be addressed.\u00a0Covered entities regulated by the Rule are required to comply with all of its applicable HIPAA requirements<\/a>.<\/p>\n

        The Privacy Rule applies to health plans, healthcare clearinghouses, and to any health care provider who transmits health information in any form in connection with transactions for which the Secretary of HHS has adopted standards under HIPAA (the \u201ccovered entities\u201d).<\/p>\n

        HIPAA SECURITY<\/strong><\/p>\n

        The Security Rule requires covered entities to maintain reasonable and appropriate administrative, technical, and physical safeguards for protecting e-PHI. The Security Rule defines confidentiality to mean that e-PHI is not available or disclosed to unauthorized persons. The Security Rule\u2019s confidentiality HIPAA requirements <\/a>support the Privacy Rule\u2019s prohibitions against improper uses and disclosures of PHI.\u00a0Under the Security Rule, integrity means that e-PHI is not altered or destroyed in an unauthorized manner. Availability means that e-PHI is accessible and usable on demand by an authorized person.5<\/p>\n

        HHS recognizes that covered entities range from the smallest provider to the largest, so the Security Rule is flexible and scalable to allow covered entities to analyze their own needs and implement solutions<\/a> appropriate for their specific environments.
        \nWhen a covered entity is deciding which security measures to use, the Rule does not dictate those measures but requires the covered entity to consider:<\/p>\n

          \n
        1. Its size, complexity, and capabilities<\/li>\n
        2. Its technical, hardware, and software infrastructure<\/li>\n
        3. The costs of security measures<\/li>\n
        4. The likelihood and possible impact of potential risks to e-PHI.<\/li>\n<\/ol>\n

          Covered entities must review and modify their security policies to continue protecting e-PHI in their ever changing environment.7<\/p>\n

          HIPAA Risk Analysis and Management<\/strong><\/p>\n

          The Administrative Safeguards provisions in the Security Rule require covered entities to perform risk analysis as part of their security management processes. The risk analysis and management provisions of the Security Rule are addressed separately here because, by helping to determine which security measures are reasonable and appropriate for a particular covered entity, risk analysis affects the implementation of all of the safeguards contained in the Security Rule.<\/p>\n

          A risk analysis process includes, but is not limited to, the following activities:<\/p>\n

            \n
          1. Evaluate the likelihood and impact of potential risks to e-PHI;<\/li>\n
          2. Implement appropriate security measures to address the risks identified in the risk analysis;<\/li>\n
          3. Document the chosen security measures and, where required, the rationale for adopting those measures;<\/li>\n
          4. Maintain continuous, reasonable, and appropriate security protections.<\/li>\n<\/ol>\n

            Risk analysis should be an ongoing process, in which a covered entity regularly reviews its records to track access to e-PHI and detect security incidents, periodically evaluates the effectiveness of security measures put in place, and regularly reevaluates potential risks to e-PHI.<\/p>\n

            Administrative Safeguards<\/strong><\/p>\n

            Security Management Process:<\/strong>\u00a0A covered entity must identify and analyze potential risks to e-PHI, and it must implement security measures that reduce risks and vulnerabilities to a reasonable and appropriate level.
            \nSecurity Personnel:<\/strong>\u00a0A covered entity must designate a security official who is responsible for developing and implementing its security policies and procedures.
            \nInformation Access Management:<\/strong>\u00a0The Security Rule requires a covered entity to implement policies and procedures for authorizing access to e-PHI only when such access is appropriate based on the user or recipient\u2019s role (role-based access).\u00a0Workforce Training and Management:<\/strong>\u00a0A covered entity must provide for appropriate authorization and supervision of workforce members who work with e-PHI. A covered entity must             train all workforce members regarding its security policies<\/a> and procedures, and must have and apply appropriate sanctions against workforce members who violate its policies and procedures.
            \nEvaluation:<\/strong>\u00a0 A covered entity must perform a periodic assessment of how well its security policies and procedures meet the HIPAA requirements of the Security Rule.<\/p>\n

            Physical Safeguards<\/h2>\n

            Facility Access and Control:<\/strong>\u00a0A covered entity must limit physical access to its facilities while ensuring that authorized access is allowed.
            \nWorkstation and Device Security:<\/strong>\u00a0A covered entity also must have in place policies and procedures regarding the transfer, removal, disposal, and re-use of electronic media, to ensure appropriate protection of electronic protected health information (e-PHI).<\/p>\n

            Technical Safeguards<\/strong><\/p>\n

            Access Control:<\/strong>\u00a0A covered entity must implement technical policies and procedures that allow only authorized persons to access electronic protected health information (e-PHI).
            \nAudit Controls:<\/strong>\u00a0A covered entity must implement hardware, software, and\/or procedural mechanisms to record and examine access and other activity in information systems that contain or use e-PHI.
            \nIntegrity Controls:<\/strong>\u00a0A covered entity must implement policies and procedures to ensure that it is compliant by the federal requirements, which means that the federal requirements will apply unless the state law is more stringent.<\/p>\n

            Compliance Dates<\/h2>\n

            Compliance Schedule:<\/strong>\u00a0All covered entities, except \u201csmall health plans,\u201d must have been compliant with the Security Rule.<\/p>\n

            Industry compliance and regulations are very helpful in ensuring quality, security and privacy. This empowers the systems and brings confidence in the technology community to be able to design and build systems that can carry complex and high potential transactions leading to high value to end users. Systems today are so powerful, efficient to be able to not only change technology landscape but business landscape as well.<\/p>\n

            Concluding Thoughts<\/h2>\n

            In this blog, we have addressed the topics of SaaS data security and subscription model software privacy. In addition, we\u2019ve gone out of our way to thoroughly clarify the differences between GDPR, SOC2, and HIPAA by presenting all the fine print. In addition to these three laws, you should take the time in\u00a0understanding the CPRA<\/a>. It will aid in protecting the legal rights of B2B SaaS users operating in California.<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

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