Data security when outsourcing: how to keep your data safe

Why has data security become a hot outsourcing topic? With 57% of businesses globally relying on outsourcing for some of their core operations1, keeping sensitive data safe is an absolute non-negotiable.

M_BlogT_Data security when outsourcing-how to keep your data safe

With the average time to detect a data breach standing at a staggering 118 days2, and 41% of organizations identifying hybrid IT environments as their biggest cybersecurity challenge3, the call for stringent data protection strategies in outsourcing arrangements has become louder than ever.

What are the risks of outsourcing data?

The fundamental risks in data security revolve around data breaches, loss of data integrity and unauthorized access. Research suggests that by 2025, 60% of organizations will use cybersecurity risk as a primary criterion in their business engagements with third parties4

Additionally, compliance with industry regulations such as the GDPR or HIPAA becomes a pivotal concern when outsourcing. Ensuring third-party providers adhere to these regulations is crucial to avoid penalties and protect your organization's reputation.

The dynamics between an organization and its third-party service providers introduce specific vulnerabilities:

  • A lack of control: outsourcing inherently involves ceding a degree of control over data management and security, leading to potential inconsistencies in how data is protected.
  • Dependency on vendor security practices: the saying that your security is only as strong as the weakest link holds particularly true here. It can be something as simple as password control, with 62% of users sharing theirs over email or text messages5. If vendors lack comprehensive security measures, your data is at risk.
  • Data transit risks: the process of transferring data between the outsourcing company and the service provider poses its own set of risks. Data in transit is susceptible to interception and unauthorized access, raising the likelihood of breaches.
  • Insider threats: variations in hiring standards and internal controls between your organization and third-party vendors can increase the risk of insider threats. Such threats can arise from service provider employees who, intentionally or unintentionally, jeopardize data security.

How can you ensure your data is secure when outsourcing?

When it comes to data security, it's not just about what measures your offshore provider has in place, but also what your business can do to safeguard information on your end. Here are five best practices your business should implement to minimize and build a robust defense against potential offshore data risks.

1. Data access and permissions

  • Prohibit unauthorized access: implement stringent measures to prevent unauthorized access, disclosure and data transfer outside of your organization that you communicate to your third-party provider. This includes ensuring that all data exchanges are secure and monitored.
  • Limit access: grant access permissions to offshore employees strictly based on their job requirements. This minimizes the risk of data being accessed unnecessarily or maliciously.
  • Secondary authentication: enforce multi-factor authentication (MFA) or token-based authentication for all users accessing your systems. Only 29% of businesses use multi-factor authentication2. By adding this step, you get an extra layer of security, significantly reducing the chances of unauthorized access - you can never be too careful.

2. Monitoring and awareness

  • Activity monitoring: Use tools that provide real-time monitoring of user activities within your systems. This helps in identifying suspicious behavior promptly.
  • Security training: regularly conduct information security awareness training for offshore employees. This ensures they are aware of their responsibilities and the best practices for data security.
  • Secure devices: if possible, provide offshore employees with devices that have pre-approved security controls. This allows you to manage patching, antivirus, encryption and other security-related aspects effectively.

3. Device and work environment controls

  • Private workspaces: encourage the creation of private, secure workspaces for offshore employees to minimize unauthorized access during work hours.
  • Restrict personal device use: limit the use of personal devices for work purposes to mitigate the risk of data leakage.
  • Prohibit sensitive information recording: ban the use of mobile devices, cameras, and even paper and pens for recording sensitive information at the offshore employee's workstation.

4. Privacy and compliance

  • Risk assessment: conduct thorough assessments of potential risks and vulnerabilities, especially concerning personal and health information, and implement risk management measures accordingly.
  • Compliance policies: develop and enforce policies for privacy, compliance, and security incident management. This includes establishing procedures for emergency responses and ensuring compliance with relevant regulations like HIPAA and PCI DSS.

5. Standards and framework compliance

  • HIPAA and PCI DSS compliance: if applicable, ensure that your organization and its offshore partners are compliant with standards such as HIPAA for health information and PCI DSS for payment card security. This includes implementing physical and technical safeguards, a data retention policy and encryption for data transmission.

Important data security outsourcing certifications

In the realm of outsourcing, certain certifications stand out as beacons of trust and security, signaling a provider's commitment to safeguarding data. ISO 27001 emerges as the most prevalent, with a staggering 48% of companies adopting this cybersecurity framework2. When an outsourcing provider is ISO 27001 certified, it assures clients that the provider is committed to identifying risks, assessing implications and putting in place systemized data controls that limit any damage to the organization. 

The Payment Card Industry Data Security Standard (PCI DSS) is a set of security standards designed to ensure that all companies that accept, process, store or transmit credit card information maintain a secure environment. A PCI DSS-compliant provider adheres to the highest security standards to protect cardholder data from fraud and data breaches.

ISO 9001, though not exclusively a cybersecurity certification, emphasizes quality management systems that, when applied to IT services, can indirectly bolster data security by ensuring processes are efficient, well-documented and continually improved. A provider with this certification assures businesses that they are dedicated to delivering services that meet both customer and regulatory standards.

Outsourcing providers’ data security policies and procedures

With 95% of data breaches occurring due to human error6, data security policies and procedures need to be fool-proof. Different providers will have varied data security approaches, but here's a general guide, inspired by our comprehensive measures at MicroSourcing, to what robust data security practices in outsourcing should look like. Feel free to use this to help ask the right questions to a potential or existing outsourcing provider about their data security policies.

Information technology-related policies

  • Customizable workstation and server environments: MicroSourcing offers fully customizable workstation environments, including options to work with thin client desktops or to disable USB ports and optical drives, catering to specific client security needs. The server and networking environment are equally adaptable, with options for VLANs, physically segregated network partitions and MPLS links, ensuring that each client's data is handled within a securely configured infrastructure.
  • Unified threat management: the deployment of unified threat management devices offers comprehensive data and content filtering, which can be fully adjusted to meet specific security requirements. 
  • Endpoint security: desktop security is managed centrally through Symantec End Point Protection, providing a robust defense against malware, ransomware, and other malicious attacks. 
  • Network resilience: the IT infrastructure is designed with redundancy and automatic fail-over capabilities to ensure uninterrupted service. This fully redundant network infrastructure guarantees that client data remains accessible and secure, even in the event of system failures, providing peace of mind for clients relying on continuous operations.

Organizational controls

  • Robust information security policy: our information security policy prohibits unlawful activities, unauthorized commercial use of systems and personal gain activities that violate the company's regulations. 
  • Comprehensive conduct guidelines: the employment contracts feature confidentiality clauses to prevent data disclosure. These guidelines extend to prohibiting the connection to unsecured Wi-Fi networks, unauthorized data sharing and the use of personal ICT equipment without a security exemption. Breaches of confidentiality and data privacy laws are considered serious offenses, enforceable under our disciplinary policy.

Technical controls

  • Advanced system security measures: MicroSourcing equips all Windows-based systems with approved antivirus software and enforces hard drive encryption for all personal data, both at rest and in transit. Multi-factor authentication is a standard requirement for system access, ensuring an added layer of security.
  • Network and device security protocols: the technical controls extend to regular patch updates and the use of tools to scan for unauthorized applications. IT administrator access agreements further solidify the security posture by restricting local admin privileges to authorized personnel only.

Physical controls

  • Onsite security measures: surveillance cameras and workstation protection mechanisms are in place to monitor and secure the physical workspace. Special work floors with additional security protocols mandate that employees leave personal belongings at designated counters, minimizing the risk of data leakage.
  • Controlled access and fire safety: access to office premises is regulated through network-driven proximity card devices, allowing for centralized management of entry. The offices are equipped with sprinklers and central fire detection panels, ensuring a comprehensive approach to physical security and safety.

Human resources-related policies

  • Extensive pre-employment screening: the background investigation extends to identity, employment and academic verification, along with checks on credit records and criminal cases. 
  • Contractual and compliance measures: Employment contracts are fortified with confidentiality and intellectual property clauses. The human resources department assists in tailoring NDAs, non-competes and other stipulations to ensure compliance with local labor laws. MicroSourcing's code of conduct details breaches of confidentiality and security scenarios, with strict off-boarding processes in place for terminating access and returning assets.

How to audit outsourcing providers’ data security controls?

To effectively assess a provider's data security measures, consider asking the following questions:

  1. What certifications do you hold?
  2. Can you describe your data security policies and procedures?
  3. How do you ensure compliance with international data protection regulations?
  4. What technical safeguards do you have in place?
  5. How do you manage and monitor access to sensitive data?
  6. How frequently do you conduct security audits and penetration testing?
  7. Can you provide details on your incident response plan?
  8. How do you ensure the security of data during transit between our systems and yours?
  9. What training do you provide your staff regarding data security?
  10. What are your policies and technologies for data backup and disaster recovery?

An example of a highly secure outsourced data environment

One of our clients operates in the healthcare information management industry in the United States. Healthcare continues to experience the highest data breach costs of all industries7 and this particular client had to adhere to the strict standards as set by HIPAA:

  • We provided them with their own floor in one of our office buildings with a single entry point. The entrance is guarded by our guards 24/7/365.
  • Visitors need to be approved and scheduled ahead of time or they will be redirected to our corporate offices.
  • Security cameras monitor the main entrance and all hallways. Work floors are covered too but only at a video resolution where the screens of the staff cannot be read. 
  • All employees need to check in and leave their personal belongings at the baggage counter. No personal items are allowed on the work floor.
  • The work floor is 100% paper-free with no paper, pens, copiers, faxes or other print devices on the work floor. 
  • All employees work on thin client workstations which have no hard disk or other data access points. All data reside on the servers hosted and managed by our client in the USA and accessed from the Philippines through secure dedicated lines.
  • All employees undergo a full background screening before joining operations and receive extensive training in HIPAA and data security.

Can data protection be outsourced?

An overwhelming 81% of executives utilize third-party vendors for cybersecurity capabilities, fully or partially8. This trend is driven by a practical response to the cybersecurity skills gap, with 70% of cybersecurity professionals acknowledging its impact on their organizations9. 50% of companies have taken the step to outsource their cyber security operations center2, highlighting the reliance on external third-party vendors for critical security functions.

Here are some of the types of data security roles and teams that can be effectively outsourced:

  • Cybersecurity analyst.
  • Penetration tester or ethical hacker.
  • Security architect.
  • Incident response specialist.
  • Security software developer.
  • Information security manager.
  • Cloud security engineer.
  • Network security engineer.

Offshoring cybersecurity roles to the same provider you outsource other roles enriches your outsourced team with on-the-ground, specialized data security support. This setup ensures that your cybersecurity experts work closely with your outsourced teams, allowing for seamless integration and real-time defense. Such strategic alignment enhances communication, improves response times and fortifies your overall security posture, offering a streamlined and effective approach to protecting your business's critical data assets.

[1] Hype Cycle for Business Process Services, 2021
[2] Cybersecurity Solutions for a Riskier World
[3] 2021 Future of Cyber Survey
[4] Gartner Unveils the Top Eight Cybersecurity Predictions for 2022-23
[5] Workplace Password Malpractice Report 2021
[6] X-Force Threat Intelligence Index 2022
[7] Cost of a Data Breach Report 2023
[8] Global outsourcing survey 2022: Talent, IT, and new ways to outsource
[9] The Life and Times of Cybersecurity Professionals Volume VI