In today's dynamic business landscape, outsourcing has become a standard practice, primarily due to its potential for reducing operational expenses.
The decision to outsource business services is increasingly popular, given its numerous advantages such as cost-effectiveness (compared to in-house operations), round-the-clock coverage and dependability.
Take cybersecurity outsourcing as an instance; it's a prevalent choice for companies aiming to enhance their data protection and security measures. However, it's not without its risks, which need to be effectively managed.
To lessen the chances of data being inaccessible or compromised, a company can specify the nature of the data and its ownership in contractual agreements with service providers.
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When evaluating security threats linked to managed services, a company should consider all managed service providers that can access their premises, systems, or information. Cybersecurity, application/software creation, and IT infrastructure services are some of the most frequently outsourced IT services. Indeed, most today's executives rely on third-party vendors for some or all their cybersecurity needs.
The most outsourced IT services are (in descending order) are:
- Cybersecurity
- Application/software creation
- IT infrastructure services
- Next-generation technology
- Data and analytics
- Application support
- Helpdesk
- User computing
The 2020 Global Outsourcing Survey by Deloitte reveals that the top qualitative factors valued in a provider are transparency, reliability, and business understanding. In the current digital environment where data breaches are common, the need for vigilance in cybersecurity has never been more critical. The outsourcing of services increases the complexity of security requirements and introduces an additional layer of risk.
Issues With Outsourcing
Communication
There are many factors potentially leading to ineffective communication such as cultural differences and varying time zones. The issues can lead to poor communication and misunderstandings; only exacerbated by a physically scattered team and language barriers. More seriously, they can lead to delays in both threat detection and mitigation.
It is crucial to select the right provider to enhance data security and safety. Clear communication channels with cyber security providers, receiving timely updates on the status of their cybersecurity information. Responsiveness is also essential, as it delays in addressing a cyber threat can result in significant damage. Selecting the right cybersecurity management provider is essential for businesses looking to enhance data safety and security.
Key factors to consider/examine when choosing a vendor include:
- Industry expertise and experience
- A track record of success
- Clear communication and responsiveness
- Robust computer
- Network security
- Scalability
Lack of control and communication issues are potential concerns when outsourcing cybersecurity services. Therefore, businesses need to ensure they have clear communication channels with their cybersecurity provider and receive timely updates on the status of their cybersecurity information. Responsiveness is also essential, because delays in addressing a cyber threat can result in significant damage.
Lack of Control
Outsourcing cybersecurity services clearly leads to a lack of control over the process, so it is essential to consider risks inherent in the everyday management of potentially sensitive data.
Depending on the service type being outsourced, there are both benefits and vulnerabilities, with some of these more serious than others. Essentially, any business outsourcing cybersecurity makes itself vulnerable to outside third parties, with access to valuable information.
It is also possible that the third party an organisation is using is also outsourcing - meaning that data is accessible to other parties they outsource to, creating further vulnerabilities. Additionally, outsourced providers are not fully integrated into business processes and may mishandle data, with a lack of knowledge potentially slowing down response times, causing mistakes, and impacting data integrity. Outsourced providers also have many clients at a time, meaning your organisation and its security is not a top priority.
Financial Risk
Risks associated with cyber incidents can have negative financial implications. Damaged reputations and loss of customer trust are also a reality - particularly if the breach involves third-party providers. Cyber incident risks can have serious financial consequences, and even with cybersecurity insurance, they may still be held responsible if adequate protection measures have not been taken. Companies can also suffer reputational damage and loss of customer trust, particularly if the breach involves third-party providers.
Geopolitical Risks
There are also inherent geopolitical risks when outsourcing. As an extreme example, third parties could unintentionally hire freelance workers who have been dispatched by nation-states to generate revenue for that country's authoritarian regime. Whilst these workers may not engage in malicious cyber security work themselves, they may be using privileged access to enable malicious cyber intrusions from the inside.
Third-party vendors may also expose organisations to compliance risk when they violate governmental laws, the company's internal processes, or industry regulations. As non-compliance is considered a significant risk, companies may have monetary penalties for vendor non-compliance. Because outsourced services are in other countries, they are at risk of being affected by different laws. Outsourced services in other countries are at risk of being affected by different laws. This can be problematic because laws in foreign countries can change suddenly. Suppliers owned by foreign governments in Australia may have to give access to customer data. Before working with a third-party supplier or vendor, it is best practice to check their track record of transparency.
Lack of Knowledge
The outsourcing of cybersecurity services requires relinquishing control over your information, potentially leading to breaches. When a provider has responsibility of all security aspects, they're able to make decisions based on their knowledge of the culture. A lack of specific organisational-based knowledge, coupled with a lack of cultural awareness, can have its disadvantages. An external third-party vendor may find it difficult to understand daily organisational operations and therefore detect emerging attacks and threats.
Due to most organisations having very different types of data, it can be challenging to grasp all aspects of the business. A shallow understanding of the business can be a large risk if you are in a highly specialised industry and need specific data protection and regulations. Navigating the complex world of hiring offshore staff is an important task. Successfully managing outsourced services begins with conducting a risk assessment on the vendor's network infrastructure and internet connection. The ability to track which tasks the vendor are undertaking in real-time is also crucial. If you don't ensure these factors are covered, you are putting your business and legislative requirements at risk.
The Takeaway
Whilst there are benefits to outsourcing, these need to be carefully weighed up alongside the risks (due to their serious business implications).
Organisations need to consider the number of risks that are inherent in outsourcing services, such as potential communication issues, lack of control over the process, financial risks, loss of reputation, geopolitical risks, and the vendor’s lack of knowledge.
Ultimately, an organisation will still need to decide whether a particular outsourced cloud service represents an acceptable security risk and if appropriate to do so, authorise it for their own use. Since outsourcing IT capabilities is becoming increasingly commonplace, it’s also crucial to understand how to mitigate risks - it is essential to maintain clear communication channels, conduct thorough due diligence on service providers, and establish transparent contractual arrangements.
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