1 Service Provider Assessment Framework A Platform for Building Synergies between Clients and Service Providers for Trusted Global Sourcing A Study Report Data Security Council of India in collaboration with Ernst & Young December 2010 Under Cyber Security Awareness Program, Department of Information Technology, Government of India
2 About DSCI Data Security Council of India (DSCI) is a section 25, not-for-profit company, setup by NASSCOM as an independent Self Regulatory Organization (SRO) to promote data protection, develop security and privacy codes & standards, and encourage the IT/BPO industry to implement the same. For more information about DSCI or this report, please contact: Data Security Council of India Niryat Bhawan, 3rd Floor, Rao Tula Ram Marg, New Delhi , India Phone: Fax: DSCI. All rights reserved. Disclaimer This document contains information that is Intellectual Property of DSCI. DSCI expressly disclaims to the maximum limit permissible by law, all warranties, express or implied, including, but not limiting to implied warranties of merchantability, fitness for a particular purpose and non-infringement. DSCI disclaims responsibility for any loss, injury, liability or damage of any kind resulting from and arising out of use of this material/information or part thereof. Views expressed herein are views of DSCI and/or its respective authors and should not be construed as legal advice or legal opinion. Further, the general availability of information or part thereof does not intend to constitute legal advice or to create a Lawyer/ Attorney-Client relationship, in any manner whatsoever.
3 3 Service Provider Assessment Framework
4 Foreword The IT (Amendment) Act, 2008 has established a strong data protection regime in the country, by requiring body corporates to implement reasonable security practices to protect sensitive personal information. What is reasonable security though? An organization is expected to have a comprehensive information security program, with appropriate controls that are commensurate with its information assets and risk assessment. In the event of a security breach, it should be able to demonstrate that its practices were in conformance with its written security policy, and that its controls were adequate. It is, however not that easy, since enterprises are outsourcing some of their work, and they must manage information risk across a vast global network of Service Providers. Outsourcing thus brings into focus the practices followed by Service Providers, and their accountability. Service Providers are subjected to ongoing assessments and on-site audits, which are laborintensive and costly for both the sides. Likewise, Service Providers with hundreds of Clients distributed in various geographies must submit themselves to several audits by the Clients. Moreover, the multiple assessments are based on different frameworks, questionnaires and audit approaches clearly they result in wasted effort and time; and, of course, higher costs. It is the wish of both - Clients and Service Providers - that third-party evaluations that are standards-based, or framework-based, may ease the assessment burden. But how do they view the implementation of a standard, or best practices for security; and an assessment framework to validate that this has indeed made the organization secure? Again both of them will have a different perspective on this. Can enterprises take a methodical approach to assessing and managing the risks through frameworks like ISO 27001; BITS Shared Assessment Program, Moody s Vendor Information Risks ratings, Information Security Forum, COSO, NIST or COBIT? Will attestation of a Service Provider s practices necessarily be in the form of a third-party certification, or a maturity rating of its practices?
5 With DSCI best practices and data-centric methodology, we ve rolled out a solution for adoption by Service Providers to make them secure. DSCI Security Framework (DSF ) is based on a number of security principles, that help make the security program of an organization dynamic, instead of a static checklist approach that relies on bulky documentation. We wanted to review the available assessment frameworks, to see how DSF could fit into them, and how rating of practices may give a sense of security to organizations, and also show them the direction for improvements. In short, it ll help realize an effective security program, and transparent assessment framework, that may address the concerns of both Clients and Service Providers. In the process, reasonable security practices will get implemented. It is with this in view that DSCI partnered with Ernst & Young Pvt. Ltd. (EY) in this study, which required extensive knowledge and experience in the domain, to review the existing frameworks and think through the advantages of certification/ratings. Survey of Clients and Service Providers, based on an in-depth questionnaire gives key pointers to the concerns of both the groups, and points towards a possible third-party ratings approach that may be useful and acceptable to both, namely Clients and Service Providers. I would like to acknowledge the great team effort of DSCI and EY in conducting this study, and creating a useful analysis. I hope this report will generate sufficient interest among Clients, Service Providers, and even governments and regulators that will help DSCI arrive at the right decisions in taking the next steps in certification/rating of Service Providers. Kamlesh Bajaj CEO, DSCI
6 The study team Data Security Council of India Mr. Vinayak Godse Mr. Vikram Asnani Mr. Rahul Jain Director Data Protection Senior Consultant Security Practices Senior Consultant Security Practices Ernst & Young Pvt. Ltd. Ms. Nity Singh Mr. Taslimm Quraishi Mr. Lalit Kalra Manager Advisory Services Manager Advisory Services Consultant Advisory Services DSCI Project Advisory Group Prof. N. Balakrishnan Mr. B.J. Srinath Prof. Anjali Kaushik Mr. Akhilesh Tuteja Mr. Kartik Shahani Mr. Satish Das Mr. Baljinder Singh Mr. Vishal Salvi Mr. Ashwani Tikoo Mr. PVS Murthy Mr. Deepak Rout Ms. Seema Bangera Chairman DSCI and Associate Director, Indian Institute of Science (IISc), Bangalore Senior Director, Indian Computer Emergency Response Team (CERT-In) Management Development Institute, Gurgaon Executive Director, KPMG Country Manager, India & SAARC, RSA CSO, Cognizant Global Head of Technology, Information Security & Business Continuity, EXL Service (I) Pvt. Ltd. CISO, HDFC Bank Pvt. Ltd. CIO, Computer Sciences Corporation India Pvt. Ltd. Global Head Information Risk Management Advisory, TCS CISO, Uninor DGM Information Security, Intelenet Global
7 Executive summary Businesses today are global, complex and fast evolving, and technology has made business transactions independent of space and time. This has enabled businesses to focus on its core competencies and outsource non-core business operations to Service Providers, who are capable of providing services to the businesses from around the world round the clock. Information Security and Privacy becomes crucial when it comes to outsourcing as technology enables free flow of information across borders between Clients and Service Providers. This information could be business sensitive information and / or sensitive personal information of the Clients end customers including but not limited to health related information, credit card details, social security number, etc. Also, stringent global data protection regulations make the businesses liable for loss, misuse, wrongful disclosure of any personal information of any citizen irrespective whether the failure is at outsourcers end or Service Provider s end. The Indian IT/BPO Service Providers are striving hard to ensure that security and privacy of data is well maintained. They follow stringent security controls specified by the Clients through contractual obligations. The Clients conduct regular Information Security and Privacy assessments of the Service Providers to ensure compliance with the contractual obligations and / or regulatory requirements or to simply assess the security posture of Service Providers. In this outsourcing ecosystem, many Clients have developed and applied their own proprietary assessment frameworks for evaluating their Service Providers. Service Providers, on the other hand, strain their resources to respond to diverse client information requests. This isolated approach proves to be an inefficient and costly affair, both for the Clients and the Service Providers. Inconsistencies arising from use of different assessment methodologies cause delays, resulting in inefficient use of time and resources. Aggravating the problem is the unavailability of generally accepted standard for Service Provider assessments. To overcome these issues and challenges, DSCI as an industry initiative seeks to establish a well defined Service Provider Assessment Framework in order to have a common assessment approach that can be used to assess different Service Providers. This study especially through its survey attempts to understand the perspective of Client and Service Provider organizations with respect to Service Provider assessments and takes inputs to define a Service Provider Assessment Framework.
8 The survey results reveal that: DSCI should play a vital role in conducting Service Provider assessments and sharing the outcome in the ecosystem. It should: have an Service Provider assessment program that comprises of framework, processes, and methodology for assessments provide an organization wide security and privacy maturity rating, and domain specific maturity rating that may be shared in the ecosystem after taking the due permission of the Service Providers A new standard mapped to prevalent standards should be considered as a potential assessment standard for third party assessments of Service Providers DSCI as an industry initiative and a Self Regulatory Organization having representation from both the Client and Service Provider organizations should empanel auditing firms for conducting independent third party assessments of Service Providers The study also focused on understanding of various assessment models which included Malcolm Baldrige Framework, Capability Maturity Model Integration (CMMI), CRISIL Ratings, BITS framework, e-sourcing Capability Model (escm), Moody s assessment framework. The study of assessment models reveals that: Service Provider Assessment Framework should be easy to comprehend and adaptable regardless of size of the organization and nature/ complexity of its processes The framework assessment areas should be outlined in the form of best practices rather than a stringent set of controls. This would provide an opportunity to organizations for implementing / performing the control activities according to the needs of the organization specific environment The framework should follow a process-approach and outline measurable assessment areas It should be reviewed and updated (if required) on a periodic basis The maturity criteria should be transparent, and should help in assigning a formal maturity rating to a Service Provider Overall, DSCI may develop a Service Provider Assessment Framework that is aligned to DSF Best Practices & the maturity criteria defined for each of its sixteen security disciplines and the study results elucidated in this report; and make it popular in the ecosystem by performing pilot runs. The framework may follow a CMMI-like rating methodology which is assessment of the security and privacy practices at both the layers capability/ maturity of the business processes, and maturity of the organization.
9 Content Introduction... 1 Survey Highlights... 5 Detailed Survey Results...7 Key drivers for Service Provider assessments...7 Scale of Service Provider assessments...9 Current assessment program/ mechanism...11 Focus on Data Privacy in Service Provider assessments...13 Types of Service Provider assessments...14 Level of perceived risk IT services...15 Level of perceived risk BPO services...17 Risk profiling of Service Providers...18 Frequency of Service Provider assessments...19 Budget and cost for Service Provider assessments...21 Modes of Service Provider assessments...23 Service Provider assessment challenges...25 Service Provider assessments solutions and future landscape...27 Influence of IT (Amendment) Act, 2008 on Service Provider assessments...29 Third party assessments...31 Third party assessors...33 Standards for Service Provider assessments...35 Role of DSCI in Service Provider assessments...37 Outcome of Service Provider assessments...39 Sharing of Service Provider assessment results...41 Recommendations...43 Annexure...45 Glossary...57 References...57
10 Introduction Background As buyers of Information Technology (IT) and Business Process Outsourcing (BPO) services become increasingly sophisticated and demanding, Service Providers are challenged to achieve new levels of efficiency, agility and transparency in service delivery and protection of information. Clients increasingly expect real evidence of robust process management, continuous improvement, effective governance, and measures adopted for ensuring Information Security and Privacy. Objective DSCI engaged EY to study the current landscape of Service Provider (IT/BPO organizations) assessments conducted by the Client organizations, and assist in documenting the assessment approach that may be adopted in order to minimize the challenges of both, Client and Service Provider organizations, with an intent of evaluating and reporting on Information Security and Privacy posture of the Service Providers. Approach In order to achieve the project objectives, the joint study team undertook the following steps: Primary research: A survey of Client and Service Provider organizations was undertaken to gain an insight into the current Service Provider assessment program. The survey covered the following aspects: Business drivers for Client organizations to conduct Service Provider Assessments 1
11 The value that various Service Provider assessments conducted by Client organizations bring to the Service Providers Investments made, and challenges faced by the Service Provider and Client organizations in driving such assessments Possible solutions for overcoming the current challenges Role of DSCI and third parties in Service Provider assessments Secondary research: A study was undertaken to document the pros and cons of prevalent assessment frameworks like Capability Maturity Model Integration (CMMI), BITS shared assessment program, Carnegie Mellon University e-sourcing Capability Model (escm), etc. The list of assessment frameworks was documented on the basis their widespread use, and international recognition in performing assessments. The study areas included the following: Assessment areas / ease of use by the organization being assessed Assessment methodology / scoring pattern / process of sharing assessment results Acceptability / popularity of the framework Independence of examiners Frequency of framework update to cater to future requirements The team also studied DSCI Security Framework (DSF ) Best Practices and maturity rating criteria for each of its sixteen disciplines to gather inputs (in addition to the inputs provided by primary and secondary research) for defining Service Provider Assessment Framework. 2
12 Profile of participants The survey respondents were a set of Client and Service Provider organizations. The respondents were majorly from Information Technology (IT), Business Process Outsourcing (BPO), Telecommunications and Financial Services verticals. Correspondingly, the survey results have been divided into two perspectives Clients perspective and Service Providers perspective, and may be read accordingly. Client organizations Industry wise distribution 9.00% 37.00% 36.00% 18.00% Telecommunication Banking Technology Financial Services Service Provider organizations Industry wise distribution 8.00% 42.00% 50.00% BPO IT Services KPO 3
13 The sample size selected for the survey was limited and this should be taken into consideration when interpreting the survey results. Client organizations More than $ 24 billion $ 1 billion to $ 24 billion 3 3 $ 100 million to $ 249 million 1 Less than $ 100 million 2 Number of Client organizations Service Provider organizations $ 10 billion to $ 24 billion 1 $ 1 billion to $ 9 billion 6 $ 100 million to $ 249 million 4 Less than $ 100 million 1 Number of Service Providers 4
14 Survey highlights Service Provider assessments are conducted by Client organizations in order to protect business sensitive information, and mitigate security & privacy risks while outsourcing work to Indian IT/ BPO companies. These assessments help Service Provider organizations to align security & privacy initiatives to their Client s requirements and build on the existing relationship with the Clients Comprehensive risk based assessments covering all the domains of security are carried out annually by majority of Client organizations. Vulnerability assessments and penetration testing continue to display strong acceptance (100%) by Client organizations in Service Provider assessment programs Most of the Service Provider organizations reported that ISO controls checklist is used as a mechanism by their Clients for conducting assessments. On the other hand, Client organizations revealed that a proprietary Service Provider assessment program has been developed to conduct Service Provider assessments Provisions of the IT (Amendment) Act, 2008 (ITAA 2008) need to be appropriately incorporated in the Client-Service Provider contracts High number of assessments around the year is the most critical challenge faced by Service Providers at the time of assessments, followed by meeting diverse & varied assessment. Whereas for Clients, rising legal liabilities, regulatory requirements, level of security awareness in the Service Providers, ensuring compliance by Service Providers, and Service Provider commitment to ensure Information Security & Privacy are some of the critical challenges faced in assessing Service Providers 5
15 Currently, Service Provider assessments are majorly conducted onsite by Client s internal staff. Majority of the Client organizations indicated that auditing firms empanelled by a joint industry consortium of outsourcers and the Service Providers could act as the third party assessors for conducting independent Service Provider assessments More than half of the Service Provider respondents suggested that DSCI should have a Service Provider assessment program that comprises of framework, processes, methodology for assessments Clients and Service Providers reveal that third parties should conduct Service Provider assessments, based on a standardized assessment methodology. This would save costs and efforts by avoiding the need for conducting assessments of multiples Service Providers Both Client and Service Provider respondents suggested a new standard mapped to ISO 27001, NIST SP, COBIT, ITIL etc. that meets all the regulatory requirements like GLBA, HIPAA, PCI DSS etc., as a potential assessment standard for third party assessments of Service Providers DSCI should provide organization wide security and privacy maturity rating, and also domain specific maturity rating 6
16 Detailed survey results Key drivers for Service Provider assessments The survey results reflect that majority of the Clients consider protecting business sensitive information, and mitigating security & privacy risks as the critical business drivers for conducting Service Provider assessments. On the other hand, Service Providers report that Client s corporate policy requirements, and achieving end customer confidence are the main reasons which drive their Clients to conduct assessments. Clients perspective Business drivers for conducting Service Provider assessments Protecting business sensitive information including intellectual property Mitigating security and privacy risks that exist in outsourcing arrangements 88.89% 88.89% To address the security and privacy concerns of some of the key stakeholders within our organization Achieving end customer confidence and preventing loss of reputation by mitigating risks of privacy/ information leakage that may arise at Service Provider end Strengthening of data protection regime in the geographies where we operate, stipulating stringent requirements and heavy fines for a data breach Data protection regulations demand our organization to undertake regular assessments of third parties Our corporate policies require us to undertake a comprehensive vendor risk assessment 77.78% 77.78% 55.55% 55.55% 44.44% Addressing security and privacy risks that arise from use of emerging technologies Use Service Provider assessments as a mechanism to foster a culture of compliance at all Service Providers and introducing a sense of competition among them with regards to fulfillment of their data security and data privacy needs 44.44% 33.33% 7
17 Service Provider assessment as a mechanism to foster a culture of compliance was selected by the least number (thirty three percent) of Clients while the same response was selected by fifty percent of the Service Provider organizations, as a reason for conducting assessments. Service Providers perspective Reasons that drive Clients to conduct Service Provider assessments Achieving end customer confidence and preventing loss of reputation by mitigating risks of privacy/ information leakage that may arise at Service Provider end Clients corporate policies require them to undertake a comprehensive vendor risk assessment Mitigating security and privacy risks that exist in outsourcing arrangements Data protection regulations demand Client organization to undertake regular assessments of third parties % 66.67% 58.33% 58.33% Protecting business sensitive information and mitigating security and privacy risks are the major drivers for conducting Service Provider assessments Strengthening of data protection regime in the Client geographies that stipulate stringent requirements and heavy fines for a data breach Clients use Service Provider assessments as a mechanism to foster a culture of compliance at all its Service Providers and introducing a sense of competition among them with regards to fulfillment of their data security and data privacy needs 50.00% 50.00% Protecting business sensitive information including intellectual property 41.67% To address the security and privacy concerns of some of the key stakeholders in Client organization 41.67% 8
18 Scale of Service Provider assessments The survey results show that the number of Service Provider assessments is directly proportional to the number of Clients or Service Providers that an organization is engaged with. This is proven by the fact that Clients working with 500 Service Providers conduct more than 100 Service Provider assessments annually, and those with 200 & 300 Service Providers conduct and Service Provider assessments respectively. Also, Service Providers engaged with 800 Clients undergo assessments annually, and those with 700 & 600 Clients undergo assessments respectively assessments respectively. Clients perspective Number of Service Providers the organization is engaged with 600 Number of Sevice Providers Clients Number of Service Provider assessments conducted Above % Number of annual assessments % 22.22% 44.44% % 9
19 Service Providers perspective Number of Clients serviced by the organization Number of Clients Service Providers Number of Service Provider assessments faced Number of annual assessments Above % 9.09% 9.09% 18.18% 27.27% 36.36% 10
20 Current assessment program/ mechanism Proprietary Service Provider assessments followed by SAS 70 and ISO checklist are the most commonly adopted assessment programs/ mechanisms by Client organizations. On the other hand, more than ninety percent Service Providers reported that their Clients use ISO checklist for conducting assessments. This is closely followed by proprietary assessment programs and assessment programs of Client appointed external auditors (sixty seven percent each). The survey further revealed that majority of the Client organizations do not consider ISO certification as an alternative to conducting Service Provider assessments. Interestingly, the survey also highlighted that BITS Shared Assessment Program is not used by any of the Client organizations for conducting Service Provider assessments. Clients perspective Service Provider assessment program/mechanism used by the organization Assessment program developed by our organization (proprietary) 77.78% ISO controls checklist Reliance on Statement on Auditing Standards (SAS) No. 70 report provided by the auditing firm assessing your Service Providers Asking the Service Providers to get ISO certified thereby eliminating the need for getting assessed Assessment program of the appointed external auditor Asking the Service Providers to provide self declaration/attestation for compliance to our security policies/requirements Use pre-defined controls list provided by an assessment tool 44.44% 44.44% 33.33% 22.22% 22.22% 11.11% BITS shared assessment program 0.00% 11
21 Service Providers perspective Programs / mechanisms used by Clients for conducting assessments ISO controls checklist 91.67% Assessment program developed by the client (proprietary) Assessment program of the client appointed external auditor 66.67% 66.67% Getting ISO certification eliminates the need for getting assessed Providing self declaration / attestation for compliance to client security policies/ requirements BITS shared assessment program Use pre-defined controls list provided by an assessment tool Others 41.67% 25.00% 16.67% 0.00% 16.67% 78% Client organizations use proprietary assessment programs for conducting Service Provider assessments. However, the Service Providers report that their Clients use ISO checklist for conducting security and privacy assessments 12
22 Focus on Data Privacy in Service Provider assessments The survey reveals that majority of the Client organizations cover privacy during Service Provider assessments. Contrastingly, majority of the Service Providers report that privacy is not covered as part of the assessments. Eleven percent of the Client organizations also revealed that privacy is not covered as part of Service Provider assessments. Also, Client organizations seem to be satisfied with the current focus on privacy as no Clients foresee the need for a change in the privacy focus in Service Provider assessment programs. Clients perspective Coverage of privacy in Service Provider assessments Majority of the Service Providers report that their Clients do not cover Privacy during assessments while Clients strongly perpetuate the coverage of Privacy in Service Provider assessments 11.00% 33.00% 56.00% Privacy is not covered Strongly Moderately Needs improvement (0%) Service Providers perspective Coverage of privacy in Service Provider assessments 25.00% 41.67% 33.33% Minority of clients Service Providers assessment programs cover Privacy Nearly half of the clients assessment programs cover Privacy Majority of clients Service Providers assessment programs cover Privacy None of the clients Service Provider assessment programs cover Privacy (0%) 13
23 Types of Service Provider assessments Vulnerability Assessment and Penetration Testing as a methodology of Service Provider assessments has a strong acceptance (100%) from Client organizations. While only twenty five percent of Service Providers reveal line of service specific assessments is considered important by their Clients, Client organizations give more importance to these assessments. Clients perspective Different types of Service Provider assessments conducted by the organization Technical: vulnerability assessment and penetration testing Risk based assessments Lines of Service specific assessment (e.g. conducting application security assessment for application development services) Regulatory / Compliance: Assessments to check compliance with applicable regulations (e.g. HIPAA, GLBA) or Assessments based on compliance to Standards like ISO and PCI DSS % 88.89% 77.78% 77.78% Service Providers reveal that Client organizations display a strong propensity towards undertaking comprehensive risk-based assessments, and compliance based assessments Service Providers perspective Different types of assessments conducted by Client organizations Comprehensive risk based assessment covering all the domains of security % Assessment based on well-known standards like ISO Comprehensive compliance based assessment Technical assessment of the IT systems including vulnerability assessment and penetration testing Line of Service specific assessment (e.g. conducting application security assessment for application development services) 25.00% 83.33% 75.00% 75.00% 14
24 Level of perceived risk IT services Results indicate that Client organizations perceive that outsourcing Custom Application Development services (seventy eight percent) involves high risk. This is distantly followed by Infrastructure, Network and Desktop Outsourcing and Software Deployment and Support at sixty seven percent each. Service Providers cited Infrastructure Outsourcing followed by Network and Desktop Outsourcing as the critical risk areas for Service Provider assessments. Clients as well as Service Provider organizations do not attach importance to IT Education and training services for assessments. Clients perspective Custom Application Development, Network and Desktop Outsourcing together with Infrastructure outsourcing are current watchwords in the context of Service Provider assessments Level of perceived risks in the services outsourced by Client organizations: IT services Custom application development Network and desktop outsourcing Infrastructure services outsourcing Software deployment and support Application management Software testing Hosted application management 77.78% 11.11% 66.67% 22.22% 66.67% 11.11% 11.11% 66.67% 11.11% 11.11% 55.56% 33.33% 44.44% 44.44% 44.44% 33.33% Hosted infrastructure services System integration Network consulting and integration Hardware deployment and support IT consulting IT education and training 44.44% 33.33% 44.44% 22.22% 22.22% 33.33% 22.22% 22.22% 33.33% 11.11% 33.33% 22.22% 22.22% 33.33% 11.11% 22.22% 44.44% High Medium Low 15