What Every SaaS Business Should Know About Compliance

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In today’s highly dynamic and tech-inspired business landscape, data privacy and security continues to be of greater importance. SaaS companies are among the service providers whose business models are easy to scale either across industry verticals or to newer markets. However, they are often faced with increasing regulatory requirements. Keeping up with such demands is key to expanding business operations and building trust with customers and partners.

The data privacy and security compliance requirements vary from one industry to another. Whether operating in a given sector or serving international customers across different industries, continuous education about the latest regulatory and compliance standards should be your topmost priority. Below, we have discussed more on SaaS business compliance, from the common regulatory standards, benefits, tips, and everything in between.

What is SaaS Compliance?

Every SaaS business needs to comply with industry regulations relating to the use, transfer, and storage of data. These standards and policies aim to protect companies, partners, and customers from potential data privacy and security threats. SaaS compliance, therefore, is a critical tool that works in favor and not against your business. Independent third-party organizations are tasked with establishing and enforcing policies relevant to a given industry. So SaaS businesses will need to comply with those policies that apply to their partners, clients, and other third parties.

The number of regulatory policies to keep up with often increases as the business grows. For instance, the more clients you serve, the more apps you’ll need to host and deploy in your cloud environment. This means an increased number of app users leads to increased security risks. Third-party apps that do not meet the required security requirements could also open you and the other clients to data leaks and other cyber threats.

Most jurisdictions require SaaS companies to provide proof of a safe and dependable environment. This is in the form of a certification from a trusted and independent third party. The oversight firm will often examine your products and services’ confidentiality, privacy policies, security, and processing integrity before approving your compliance certification. Most knowledgeable customers will also use this certification to score companies before picking the best one to work with.

Regardless of your business goals, ensuring compliance with various regulatory bodies is key to success. Not only will you attract more compliance-conscious customers, but you’ll also enhance your company’s data security.

Common SaaS Compliance Standards

Thanks to the rapid digital transformation witnessed across several industries, IT governance standards are increasingly becoming prevalent. Forward-looking companies have noticed how regulators are becoming stricter on IT audits and are swiftly rethinking their compliance framework. If you are keen on taking your SaaS business to the next level, below are the data privacy and security requirements you’ll need to stay up to date with.

General Data Protection Regulation (GDPR)

This is one of the most comprehensive data protection laws that apply to all EU residents. The GDPR provides data rights for all EU citizens regardless of their country of residence. And since the law is extraterritorial, it means organizations in any part of the world could be held liable for violating its provisions.

Organizations handling data belonging to EU citizens or its residents must fulfill all the requirements of the GDPR. And unlike most data privacy and protection policies, the latter sets the highest standards in giving people greater control over how their data and personal information is used.

Under the law, protected individuals can and should have access to their data and the right to erase, export, or correct errors associated with their data. They also have the right to object to how the data controller/processor handles their data.

Service Organization Control 2 (SOC 2)

SOC 2 is a popular auditing process based on the AICPA’s TSC auditing standards. A typical SOC 2 auditing report assesses the organization’s IT systems to check for compliance issues with the relevant industry regulations. SaaS companies that are SOC 2 compliant means they take their customer data seriously and have control mechanisms to ensure effective risk management.


ISO stands for the International Organization for Standardization. The latter prepares standards for information security management systems through ISO technical committee in collaboration with the IEC (International Electrotechnical Commission). The latter manages information technology risks and provides guidelines that help identify, analyze and mitigate potential risks.

It’s worth noting that ISO/IEC 27001 isn’t a regulation; rather, it’s a standard that every SaaS company can use to enhance their security risk compliance. This compliance standard covers some common assets: intellectual property, financial information, employee details, and third-party entrusted information.

Industry-specific Regulations

The three compliance standards we’ve discussed above apply to nearly all SaaS companies regardless of the industry. If you are in some of the highly regulated sectors such as healthcare and finance, there are more regulatory compliance standards that you’ll need to satisfy. These include:

  • The Health Insurance Portability and Accountability Act (HIPPA). This is a federal law enacted to protect sensitive patient health information. The US Department of Health and Human Services enforces the HIPAA Privacy Rule, which implements the requirements of HIPAA. This law affects all healthcare service providers, so SaaS companies in such industries must ensure compliance.

  • PCI Data Security Standard (PCI DSS). This is a common security standard for all organizations that process cardholder information. The PCI Security Standards Council developed this policy to help organizations protect customer data. It includes requirements for software design, network architecture, security management, data privacy policies, etc.

Another regulatory framework that affects companies in the financial services sector is the 23 NYCRR 500, popularly known as the New York Cybersecurity Regulation. The latter was enacted in 2017, and it seeks to address the growing cybersecurity threats in the financial systems caused by terrorist organizations, nation-states, and other cybercriminals. Any SaaS company licensed under banking, financial services, or insurance laws of New York State is affected by this law.

How to Streamline Your SaaS Compliance

To stay up to date with various compliance policies, you will need to develop a solid compliance framework that fulfills all the industry obligations and keep your company, employees, and customers safe from data losses, fines, lawsuits, penalties, reputational damage, etc. Before creating such a framework, you want to identify all the regulatory compliance risks and issues that could arise from running your SaaS business in different jurisdictions. Here are some tips to help you streamline your SaaS compliance.

  • Work with a competent Chief Compliance Officer (CCO). Having the right leadership in your company is key to successfully implementing SaaS compliance policies. Ensure your CCO has all the resources they need to succeed in their role.

  • Invest in the Right SaaS Compliance Tools and Systems. Besides having a great leader in implementing all the controls and procedures, you also want to equip them with the right tools and systems. A rule of thumb is always to leverage technology to make your processes more efficient.

  • Build Solid Compliance and IT teams. To boost your odds of success, you want to pick the best talents to work on your compliance framework. Train your IT and HR staff and invest in their learning to nurture solid and high-performing teams.

Stay Ahead of the Game

Every SaaS business keen on building its client base while meeting customer expectations will need to prioritize SaaS compliance. Setting up an effective compliance framework may require the input of several industry experts; however, this effort is always worth it. Keep up with the compliance standards we have highlighted above, and you’ll stay ahead of the rest.