SOC 2 Explained: Security That Makes Sense

Discover how SOC 2 enhances data security and customer trust. Learn about SOC 2's critical areas and compliance process.

by

Everett Frank

December 27, 2024
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Did you hear the words SOC 2 and get excited? We didn’t think so, but maybe you will. 

If you’re working with customer data, you’ve probably heard the term SOC 2 certification thrown around. Sounds technical, right? That’s because it is. It can be crucial for some of our customers, and if you have a lot of customers who require extensive security questionnaires, SOC 2 can actually save you a lot of time and hassle. 

In this guide, we’ll answer essential questions:

  1. What is SOC 2?
  2. What is it not?
  3. Is it required?
  4. Who’s it for?
  5. How much will it cost?

By the end, you may realize you have a lot more to learn. Or maybe you’ll realize you don’t need SOC 2 at all. Wouldn’t that be nice? 

What is SOC 2?

SOC 2 is a security framework designed to ensure companies handle customer data securely and responsibly. It’s part of the System and Organization Controls (SOC) standards developed by the American Institute of Certified Public Accountants (AICPA). You read that right. It’s an audit designed by auditors for auditors. It has “not fun” built right in. 

At its core, SOC 2 focuses on five critical areas, known as the Trust Services Criteria:

  • Security: Protecting data from unauthorized access or breaches.
  • Availability: Ensuring systems are reliable and accessible when needed.
  • Processing Integrity: Making sure data is processed accurately and as intended.
  • Confidentiality: Keeping sensitive information secure.
  • Privacy: Safeguarding personal information.

When you undergo a SOC 2 audit, an independent auditor reviews how well your internal systems meet these criteria. Then, they issue a report. Think of it like a report card for data protection. There are two types of reports:

  • Type I: Evaluates your company’s controls at a specific point in time.
  • Type II: Assesses how well these controls work over a longer period, typically 3–12 months.

Why does this matter? Let’s just say you already do everything right regarding data security (you don’t). How can your customers know it? And how can your customers demonstrate to their customers that you aren’t a security risk? They can ask you a zillion questions and verify your answers, OR they can accept an independent audit verifying conformance to an accepted standard. Starting to get the idea?

What SOC 2 is Not

A certification! That’s right, there is no such thing as SOC 2 certification. Or compliance. You just get a report from an auditor (which can be any CPA) that ‘attests’ to their findings. When your customers ask, you give them the report, that’s it. The most you can say is you have received a SOC 2 Type 1 attestation report or something like that.

Is SOC 2 a Requirement?

No, it’s completely voluntary. No law or regulation forces you to be certified. However, a growing number of customers are requiring it from their suppliers. This is especially true if your customer is SOC 2 certified. In effect, this voluntary program is a requirement for many of your potential customers. Here’s why your customers care so much:

Safeguarding Reputation

Obviously, data breaches can devastate a company’s reputation—yours, your customers, their customers, etc. A single mistake can erode customer trust down the entire chain. Everyone loses, and nobody wins. SOC 2 reassures your customers that you get it and take their data security seriously.

They’re Required to Require SOC 2

Conveniently for auditors, SOC 2 more or less requires a SOC 2 company to require SOC 2 of their suppliers to handle data. Isn’t that brilliant? Who knew auditors could be such excellent marketers! While it’s super fun to be snarky about this, the truth is it actually makes total sense because…

Data Security is All About “Chain of Custody”

If an end user gives private data to your customer, and your customer exposes you to the end user data, and then you expose that data to one of your suppliers, a breach at any level is essentially a breach at every level. If the data is insecure at any point in that chain of custody, then all the cost and effort that went into data security at the other levels is wasted.

Who is SOC 2 For?

Maybe not you. SOC 2 applies to any company that stores, processes, or transmits customer data, especially if using cloud-based environments. So if you touch customer data, tag you’re it. Here are a few examples:

  • Software-as-a-Service (SaaS) Providers: Companies offering cloud-based software solutions that involve customer data.
  • Data Storage Providers: Businesses responsible for storing sensitive client information securely.
  • Service Providers: Companies handling or processing data on behalf of other organizations.

Hooray for you if you only sell hardware. It’s unlikely anyone will insist you have SOC 2. However, if your company fits into any of those categories, SOC 2 is becoming required

How Much, and How Long Will This Take?

Budget $25,000 and 1 year for most early-phase, smaller companies. It could be more, up to $50,000, if your practices/policies are super immature. You can shave time with a ton of focus and probably using third-party SOC 2 automation solutions. It’s reasonable to think you can get it down to 6 months, crazy but doable to think 3 months, and insane to think less than 3 months.

Some Final Notes

SOC 2 sounds complicated and technical, and it is. But its purpose is noble: to ensure companies handle customer data securely, responsibly, and transparently throughout the chain of custody.

Here’s a quick recap of the essentials:

  • What is SOC 2? A security framework built around the five Trust Services Criteria: Security, Availability, Processing Integrity, Confidentiality, and Privacy.
  • Why is SOC 2 important? It builds trust, prevents breaches, and supports business growth.
  • Who needs SOC 2? Any company handling customer data that needs to demonstrate they are safe.

As your company grows, following best practices and understanding frameworks like SOC 2 will become increasingly crucial to expanding your customer base. SOC 2 automation software is super helpful. Cofactr uses Vanta, and they have a ton of excellent articles to help you learn more.

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