SaaS companies are directly affected by data protection laws. They handle customers’ personal information; hence, they constantly have to update their security standards to meet data localization requirements. Global SaaS companies often use cloud services when executing their business obligations. To remain within the ambit of the law, they must also adhere to security standards for cloud data processing and storage.
Failure to comply with data protection and privacy laws can result in severe financial losses and reputational damage. For example, in 2019, Google Inc was fined to the tune of £50 million for non-compliance with a GDPR requirement. More recently, in 2021, Amazon Europe paid a whooping £746 million for a similar blunder. However, your SaaS company doesn’t have to be the next on this list since Google Inc and Amazon’s experiences warn global SaaS companies to prioritize SaaS compliance requirements.
In this article, we intend to explain the basic concepts and regulations international SaaS companies need to know about data compliance and residency.
What does SaaS data compliance mean?
Data compliance is the sum of practices and procedures implemented by organizations in adherence to applicable laws, regulations, and standards. Because SaaS solutions are usually based on subscriptions, clients’ data is required for personalized services. SaaS compliance requires that data collated for such purposes is handled at every stage according to the security prescriptions contained in relevant laws and regulations. Data compliance is cumbersome for SaaS companies that utilize cloud technology to provide application services across countries. However, it would help if you familiarize yourself with the following terms. The truth is that you will oftentimes stumble over them as your company journey through software compliance standards.
Here is a brief overview of some data compliance terms you should know:
- Data security: this term defines the process of preventing unwanted use, manipulation, or exploitation of electronic data across its entire lifespan. It is a notion that incorporates all aspects of information security, from the safety of hardware and storage device to operating and access controls, as well as the security of software applications. It also comprises policies and procedures that dictate how companies handle users’ data in their business dealings.
- Information security: information security describes the methods, processes, and tools deployed by a company to protect the data of users of their product or service.
- Data privacy: refers to who has access or control over personal data and the extent of such control. Laws regulating data privacy ensure that personal information is kept private by companies that obtain them and use them solely for the initially intended purpose.
- Data residency: Data residency is a term that sits at the heart of SaaS compliance requirements. For SaaS companies to remain compliant in their business operations, citizens’ data must be stored physically in the country of origin.
- Data sovereignty: this term is more of an abstract concept than a concrete one. It is not a legal framework or policy but rather an idea that data generated and processed are bound by the laws and governing policies of the country where they are being collected.
- Data localization: this refers to policies that regulate the processing and storage of data within a country. The data privacy laws of most countries dictate that for saas companies to achieve compliance, the data of their citizens collected and processed must be stored within the country of origin. And this remains valid except in circumstances as provided by the respective jurisdiction.
Data compliance is usually measured by external organizations authorized by law to do so. Data compliance is also a continuous process, so these guidelines must be reviewed regularly for real-time compliance.
What do you need to consider when implementing SaaS data compliance?
SaaS companies’ activities involve regular interactions with customers’ personal data. At nearly every turn, there is a data regulation requirement to be met.
Here are some of the cases in which SaaS companies will need to observe software compliance standards:
- Handling sensitive data
Mismanagement of sensitive data, like credit card numbers or health care information, can result in significant penalties for any company. The GDPR places a hefty sum of 4% of the company’s turnover or £20 million, whichever is higher. If a SaaS company deals with sensitive personal data, such data should be processed with the highest security standards possible.
- Cross-border data transfer
Many jurisdictions place requirements regulating data transfer from one country to another. These laws apply directly to global SaaS companies because they usually have branches in different countries and must comply with data protection practices.
- Expanding into foreign markets
Doing business on a multi-national level as a SaaS company implies that you have updated technology to comply with different, ever-changing local and regional laws. More countries are adopting strict privacy rules, and SaaS companies who want to do business in those countries must carefully keep track of their requirements.
Key concepts of data compliance
- Personal Data: Personal data is information related to a living individual used as a token of identification. It includes but is not limited to an individual’s name, surname, location, email address, internet protocol address, ID number, credit or debit card, etc. Personal data is the subject of most data protection regulations because it directly affects the identity and security of citizens.
- Processing: Processing refers to activities related to collecting, classifying, sorting, storage, transferring, and retrieval of an individual’s personal information. Data processing refers to any automated or manual activity performed on data.
- Data Subject: The data subject is the individual whose personal information is being collected and processed by an organization.
- Controller: A data controller is an organization that collects personal data, usually for its purposes, and is responsible for the data management procedure.
- Processor: The processor is usually a contractor who undertakes the data management process on behalf of the controller. For example, a business that provides IT or cloud storage services for a SaaS company is a processor. The relationship between a controller and processor is a contractual one. Subject to permission from the controller, processors can recruit other processors to work with them on a specific task or a part thereof.
Most common data compliance and security regulations
Data residency for SaaS companies is affected by many local and international regulations worldwide. Let’s examine some of them:
The General Data Protection Regulation (GDPR) is the regulation made by the European Parliament for Great Britain and European Union member countries to protect personal data. Although GDPR is a European law, it affects organizations from any country insofar as they carry out activities involving the personal data of European residents. Thus, SaaS GDPR compliance is a necessity for global SaaS companies.
The seven core principles on which the GDPR provisions are hinged include:
- Purpose Limitation: i.e., data should be strictly used for the initial purpose for which it was obtained.
- Fairness, lawfulness, and transparency to the data subject. This includes drafting easy-to-understand privacy policies.
- Data minimization: This requires only the amount of data the organization requires to offer its services efficiently.
- Storage limitation: Data must not be kept longer than is required, except for such organizations that have a required retention period.
- Accuracy: Personal data records must be continually reviewed for accuracy. False or misleading information should be erased or corrected.
- Confidentiality and integrity: This principle deals with establishing efficient security procedures for keeping information from being compromised.
- Accountability. Organizations must be willing to show proof of compliance with GDPR laws to customers, law enforcement, and other bodies that may require it.
The GDPR is regarded as one of the strictest privacy laws in the world, not only because of its complex requirements but also due to its hefty penalties for non-compliance.
PIPL is the data protection law of China. It deals with privacy rules on how organizations handle citizens’ personal information. The scope of the PIPL covers organizations in China and those operating outside of China that still process Chinese citizens’ or residents’ data.
PIPL makes general provisions on data protection, including rules for processing sensitive information, rules for cross-border transfer of sensitive personal information, rights of individuals to their information, the obligation of processors, and legal liability for default of its provisions.
ISO is the International Organisation for Standardization, and IEC is the International Electrotechnical Commission. These bodies usually liaise in matters of common interest, like technology. For example, they both comprise the Joint Technical Committee (JTC) in information technology. This committee is responsible for creating Information Security Management Standards (ISMS) for organizations worldwide, one of which is the ISO/IEC 27001. The ISO/IEC 27001 is not a regulation in the strictest sense but rather a standard for information security management. It is globally accepted among SaaS companies as a leading standard for information security. An ISO certification is a veritable proof of standard data compliance.
Service Organisation Control or SOC refers to the data reporting framework established by the American Institute of CPAs for SaaS companies. The policies and procedures contained in the SOC 2 are not prescriptive, but complying with them can help SaaS companies safeguard data more efficiently.
SOC 2 requirements are based on five Trust Service Principles, namely:
- processing integrity
- confidentiality and;
SOC 2 applies to service-providing companies that store customer data in the cloud, which includes most SaaS companies.
HIPAA is the Health Insurance Portability and Accountability Act, also known as the Kennedy-Kassebaum Act. It was enacted by the United States Congress in 1996, creating rules for protecting patients’ health information in medical facilities. Personal health information (PHI) includes all identifiable information about an individual’s health in any format.
HIPAA compliance for SaaS companies requires, for instance, that SaaS companies must obtain consent from the data subject before their personal health information is disclosed to another party or used for another purpose. HIPAA also provides rules against the unauthorized use of such information.
The HIPAA provisions apply to insurance providers, healthcare providers, and employers.
PCI DSS stands for Payment Card Industry Data Security Standard. This Standard offers a suite of requirements for securing credit card information. Merchants, organizations, and software applications requiring credit card subscriptions must comply with PCI DSS standards to avoid liabilities resulting from the loss of sensitive financial data. A few of these requirements include data encryption, strong password policies, access controls, active firewalls, etc.
How InCountry helps with data compliance
Information security is at the core of InCountry’s offerings. InCountry provides data residency-as-a-service in more than 90 countries across different continents. InCountry maintains SaaS regulatory compliance as prescribed by the General Data Protection Regulation, SOC 2 and 3, HIPAA, PCI DSS, and other laws.
Below are a few listed ways InCountry can help you with data compliance:
- Quick Implementation in Multiple Countries: InCountry’s services are available worldwide. SaaS companies can set up data residency simultaneously in many countries through the same platform.
- Localization: InCountry is up to date with data residency and localization requirements in each country. InCountry’s certified cloud infrastructure enables the localization of regulated sensitive data and keeps other data safe in existing top-tier data centers.
- Security: InCountry provides the best security standards in the industry and protection measures such as high-level data encryption (SHA-256 and AES-256), firewalling, network isolation, and intrusion detection.
- Compliant Cloud Providers: InCountry uses only attested, security-compliant Cloud service providers according to your company’s needs.
Got any questions? Don’t hesitate to get in touch with our experts for assistance.