What is SOC 1 and SOC 2 Certification?

This post was updated November 2024.

In the rapidly evolving landscape of Software as a Service (SaaS), ensuring compliance is paramount. Clients entrust their sensitive data to SaaS providers, necessitating robust security measures and compliance for SaaS. Certifications like SOC 1 and SOC 2 serve as indicators of a company’s commitment to data integrity and security. In this article, we’ll delve deeper into the significance of these certifications and their implications for SaaS businesses.

What is a SOC 1 Certification?

SOC 1, or Service Organization Control 1, focuses on controls relevant to financial reporting. It is particularly crucial for SaaS providers handling financial transactions on behalf of their clients. By undergoing SOC 1 audits, companies demonstrate the effectiveness of their internal controls in ensuring the accuracy and integrity of financial information to receive a SOC 1 certification.

What is SOC Type 1 Certification?

A SOC 1 Type 1 certification evaluates the design and implementation of controls at a specific point in time. It provides assurance to stakeholders regarding the adequacy of controls related to financial reporting. For instance, a SOC 1 Type 2 report example PDF showcases the controls in place and their effectiveness in achieving the desired objectives.

What is the Difference Between SOC 1 and SOC 2 Certification?

What is SOC 1 and SOC 2 certifications? While SOC 1 focuses on controls relevant to financial reporting, SOC 2 encompasses a broader range of criteria, including security, availability, processing integrity, confidentiality, and privacy. SOC 2 audits evaluate the effectiveness of controls in safeguarding customer data and ensuring the security and privacy of sensitive information.

While both certifications demonstrate a commitment to security, SOC 2 offers a more comprehensive picture by addressing a broader range of trust service principles.

What is the Difference Between SOC 1 and SOC 2?

In essence, SOC 1 vs SOC 2 lies in their scope and objectives. SOC 1 is primarily concerned with controls related to financial reporting, while SOC 2 addresses a wider array of controls, reflecting the evolving cybersecurity landscape and the increasing importance of data protection.

Why Should SaaS Businesses Pursue SOC Compliance?

There are several compelling reasons for SaaS businesses to seek SOC certification:

• Enhanced Credibility and Trust: In a competitive market, achieving SOC compliance gives your company a significant edge. These certifications demonstrate a proactive approach to data security and compliance, fostering trust and confidence with potential and existing clients. Prospective clients are increasingly looking for these certifications before entrusting their data to a SaaS provider.

• Competitive Advantage: SOC certifications can be a powerful differentiator in the SaaS landscape. By showcasing your commitment to data security, you stand out from competitors who may lack these independent verifications.

• Reduced Risk and Improved Security Posture: The process of preparing for a SOC audit involves a thorough review of internal controls and security practices. This process often identifies vulnerabilities and leads to improved security measures, ultimately reducing your company’s overall risk profile.

• Streamlined Third-Party Audits: Having a SOC report can significantly simplify and streamline third-party audits by providing a pre-vetted assessment of your controls. This can save your company time and resources during the audit process.

The specific type of SOC certification your company pursues depends on your business needs and client requirements. Many SaaS companies opt for a SOC 2 Type 2 with a focus on security, availability, and processing integrity.

Is SOC 2 Worth It?

It can take between three and six months to complete a SOC Type 2 report. The process requires significant investments of time and often money as well. So, is completing a SOC 2 report worth the effort? That depends on your business situation.

SOC 2 reports provide an unbiased look at your company’s internal security controls. They help potential partners and customers understand how effectively your business stores and processes sensitive information. Sharing this information can be very valuable in certain situations.

For example, you may be interested in partnering with a new vendor, but that vendor may need to verify that your organization meets its security standards. Showing a full SOC 2 report to the vendor would be a great way to prove that your business takes cybersecurity seriously.

These reports can also be valuable to customers. Research shows 66% of consumers won’t trust a company after a data breach. Sharing that your business is SOC Type 2 compliant is one way to show it recognizes the importance of protecting customer data.

So, you may need to complete SOC 2 certification before forming a new partnership. It can also help you win more business. The question for your organization is whether the SOC 2 certification cost is worth these expected benefits. If you struggle to identify concrete advantages, you may not need to complete SOC 2 requirements just yet.

SOC 2 Type 1 vs. Type 2

If you’ve decided to pursue a SOC 2 report, there’s a Type 1 version and a Type 2 version to choose between. They’re designed to serve different purposes, so it’s important to consider which is best for your needs.

A SOC 2 Type 1 report looks at your organization’s cybersecurity controls as they are at the time of testing. It’s like taking a single snapshot of your cybersecurity infrastructure to see whether it meets key benchmarks and compliance-related requirements.

SOC 2 Type 1 reports generally only take a few weeks to complete. That makes them a good option when you’re looking to prove your organization’s cybersecurity readiness as quickly as possible. You might need to do that as part of a new agreement with a vendor or client.

SOC 2 Type 2 reports evaluate your cybersecurity over a longer time frame — typically 3 to 12 months. They look at whether the controls you’ve designed are functioning as intended.

For example, you might have set up strict access controls for internal databases with sensitive client data. A SOC 2 Type 2 report would look at whether those controls are functioning as intended over a period of months. In other words, are they actually working like you think they are?

You can compare that to a SOC 2 Type 1 report, which would only consider whether you’ve implemented appropriate cybersecurity controls. That makes SOC 2 Type 2 reports significantly more thorough. They assure clients and vendors that your organization’s cybersecurity controls are effective in practice, not just in the abstract.

The downside to SOC 2 Type 2 reports is that they take longer to complete. That also means they cost more since they take extra hours of work from cybersecurity professionals.

Your organization’s timeline and goals will dictate which SOC 2 report is the right fit. If you want to prove that you have the right internal controls in place quickly, Type 1 could be enough. But some clients and vendors will want to see the more robust Type 2 report before partnering with your business.

Timelines and Costs

Both types of SOC reports can be helpful for different reasons. If your organization still isn’t sure which to use, looking at timelines and costs may be helpful.

Generally, SOC Type 1 reports take less time to complete. That’s because they look at your audit controls at a specific point in time. They evaluate whether you have sufficient systems and processes in place.

SOC Type 2 reports can take several months to complete, and potentially longer with pre-planning. They also need to be reviewed by an independent auditor. That’s why SOC Type 2 is almost always more expensive.

Type 2 reports look beyond the cybersecurity design you’ve chosen. They also evaluate how those design choices are working out in practice over a sustained period. They provide a more in-depth verification of your security but at a higher cost.

Consult an Expert

SOC reports are technical and can be challenging to understand if you don’t come from a cybersecurity background. That’s why it’s never a bad move to speak with an expert about which report is right for your organization.

Trava Security can walk you through your options and help your business make the right decision for its goals. Feel free to reach out at any time for a free consultation.

Taking the First Step Towards SOC Compliance

The journey towards SOC compliance can seem daunting, but it’s a worthwhile investment in the long run. Here are some initial steps you can take:

• Conduct a gap assessment: Identify areas where your current controls may not meet the requirements of the chosen SOC standard.

• Develop a remediation plan: Address any identified gaps by implementing necessary changes to your policies, procedures, and technical controls.

• Select a qualified SOC auditor: Choose a reputable auditing firm with experience in conducting SOC audits for SaaS companies.

Don’t hesitate to seek guidance from experienced professionals who can help you navigate the SOC compliance process.

In conclusion, SOC 1 and SOC 2 certifications are essential for SaaS providers seeking to assure clients of their commitment to security and compliance. While SOC 1 focuses on financial controls, SOC 2 encompasses a broader spectrum of criteria, reflecting the multifaceted nature of modern cybersecurity threats. By obtaining these certifications, SaaS companies demonstrate their dedication to maintaining high standards of security and compliance, ultimately enhancing trust and credibility in the eyes of their clients.

Ready to showcase your commitment to data security? Contact Trava today to discuss your SOC compliance options.