As of 2023, SaaS sprawl is extensive across most organizations, irrespective of size. For example, ~40% of organizations surveyed recently use over 50 SaaS tools, whereas ~5% use 250+ tools!

When using this many SaaS tools, overlooking compliance issues is common. However, it can prove costly in future since a single mistake can expose your company to significant security risks, inviting penalties, reputation loss and flatlining of revenue.

However, with enterprise SaaS compliance, upholding industry standards is a breeze. 

In this blog, learn everything about SaaS compliance and why it is important for your SaaS-reliant business in the coming year. 

What is compliance SaaS compliance?

SaaS compliance refers to adhering to legal, industry, and security standards while delivering cloud-based software. It encompasses regulations like GDPR, HIPAA, or SOC 2, ensuring data privacy, security, and operational reliability.  

For example, healthcare SaaS must comply with HIPAA regulations to safeguard patient data.SaaS compliance ensures user trust, safeguards sensitive information and helps to prevent risks associated with data breaches or legal liabilities.

Achieving SaaS compliance involves:

• Regular checks
• Security audits
• Implementing preventive measures

The goal here is to guarantee the software operates safely, securely, and within the legal periphery.

Why is SaaS compliance important in 2024? 

In 2024, overlooking SaaS compliance poses significant risks for CFOs. 

Consider a financial institution neglecting compliance standards on its cloud accounting software. A breach exposes critical financial data, leading to regulatory fines, legal liabilities, and erosion of investor trust. 

To mitigate this, stringent SaaS compliance measures ensure data encryption and regulatory adherence. This shields sensitive financial information and demonstrates a commitment to security and transparency. 

SaaS compliance isn’t merely about meeting regulations; it's a commitment to ethical practices, customer trust, and long-term sustainability. With evolving data protection laws worldwide (such as GDPR and CCPA), non-compliance can lead to severe penalties, reputation damage, and loss of customer trust. 

As cyber threats persist and regulations evolve, staying compliant becomes pivotal for SaaS companies, fostering a secure digital environment and maintaining a competitive edge in the market.

Types of SaaS compliance

Here's an overview of different types of SaaS compliance:

1. Financial Compliance

Financial compliance in SaaS refers to adhering to regulations and standards set forth by governing bodies related to financial data. It involves ensuring that SaaS platforms handling financial information meet requirements, e.g.:

ASC 606

The ASC 606 standard aims to streamline revenue recognition, ensuring consistency in how companies account for contracts with customers. Its five-step process includes contract criteria, performance obligations, transaction pricing, allocation, and revenue recognition. This standard applies across entities, promoting uniformity in financial reporting.

GAAP

GAAP, set by the FASB, mandates accounting guidelines for public companies in the United States. Its ten principles ensure financial statements are consistent, comparable, and complete, aiding investor analysis.

IFRS

IFRS, a globally accepted accounting standard, focuses on transparency in financial reporting. It mandates specific statements related to financial position, income, equity, and cash flows.

2. Security Compliance

Security compliance within SaaS revolves around meeting established security standards and best practices to safeguard data from breaches and unauthorized access. It includes adherence to frameworks, like:

SOC 2 Certification

This certification demonstrates a company's commitment to managing customer data with integrity and security. It covers criteria like security, privacy, confidentiality, processing integrity, and availability.

PCI DSS Certification

For companies handling credit card transactions, this certification ensures adequate controls are in place to secure cardholder data, reducing the risk of credit card fraud.

ISO 27001 Certification

Though not mandatory, this certification showcases a company's investment in information security management systems, reassuring customers about their data protection measures.

3. Data Privacy Compliance

Data privacy compliance deals with respecting and protecting users' personal information handled by SaaS platforms per privacy laws, such as: 

Data Security Compliance

This involves data control through setting policies, establishing systems, and defining service-level agreements to ensure data quality and security.

GDPR

The GDPR strictly regulates the processing and storage of personal data of EU citizens. It emphasizes limiting data processing to only what's necessary and imposes strict legal requirements on data protection.

HIPAA

HIPAA safeguards personal patient health information and is mandatory for software companies dealing with healthcare data. It enforces security safeguards, encryption, data disposal, and Business Associate Agreements.

CCPA

The California Consumer Privacy Act grants Californian consumers increased control over their data, allowing them to request data deletion, opt out of data selling, and receive privacy policy notices.

SaaS compliance checklist 

Follow this checklist for ensuring SaaS compliance:

1. Compliance Framework Identification

Identifying the compliance framework involves recognizing the specific regulations, standards, and guidelines applicable to the SaaS platform. It involves selecting frameworks such as SOC 2, ISO 27001, or HIPAA, providing a structured set of controls and criteria to ensure data security and regulatory alignment. 

This step requires a thorough understanding of the following:

• Industry-specific requirements
• Regional laws (such as GDPR and HIPAA)
• Sector-specific mandates (like PCI-DSS for payment processing)

2. Risk Landscape Assessment

Conducting a comprehensive risk assessment involves identifying potential threats and vulnerabilities within the SaaS infrastructure.  Understanding these risks allows for targeted mitigation strategies and ensures alignment with compliance frameworks, reducing the likelihood of security incidents and non-compliance penalties.

This includes evaluating these aspects:

• Cybersecurity risks
• Data exposure possibilities 
• Regulatory compliance gaps

This process identifies vulnerabilities like weak access controls, data breaches, or inadequate encryption methods. 

3. Compliance Readiness Review

A compliance readiness review involves assessing the SaaS platform's existing policies, procedures, and technical measures to ensure they align with chosen compliance frameworks. It includes examining documentation, security protocols, data handling practices, and employee training. 

The goal is to identify gaps between the current state and required compliance standards. 

Addressing deficiencies by:

• Implementing necessary controls 
• Updating policies
• Providing additional training ensures readiness for compliance audits and demonstrates a proactive approach to meeting regulatory requirements.

4. Compliance Strategy Design

Craft a compliance strategy and outline a roadmap to meet regulatory requirements and coordinate with business objectives. The strategy delineates the steps necessary for achieving and maintaining compliance, considering factors such as data security, privacy, and risk mitigation.  

This step usually begins with understanding the specific compliance needs based on industry standards and regional regulations. It involves setting clear goals, assigning responsibilities, establishing timelines for implementation, and ensuring a structured approach to achieving and sustaining compliance within the SaaS environment.

5. Deployment of Aligned Measures

Once the compliance strategy is formulated, deploying aligned measures involves putting the outlined plans into action. This entails implementing the necessary controls, protocols, and technological solutions to align with the compliance strategy. 

It also encompasses a range of actions, from updating software to integrating security measures like encryption, access controls, and regular audits. 

Deployment ensures that the designed compliance measures are effectively put in place across the SaaS infrastructure, strengthening data protection, reducing risks, and providing ongoing adherence to regulatory standards.

6. Compliance Preparedness Evaluation

A SaaS regulatory compliance preparedness evaluation involves assessing the SaaS platform's readiness to meet regulatory standards and requirements. It begins with an internal assessment, reviewing existing policies, procedures, and technical measures. 

This step identifies gaps between the current state of compliance and the desired regulatory standards. This evaluation identifies deficiencies, and corrective actions are planned to align with compliance frameworks. 

As an outcome, the SaaS platform is adequately prepared for external audits, demonstrating a proactive approach to meeting regulatory obligations and mitigating potential compliance risks.

7. External Audit Conduct

Once the SaaS platform's compliance readiness is established, an external audit is conducted by an independent entity or regulatory body. This audit verifies the platform's adherence to specific compliance standards and regulations. It thoroughly examines implemented controls, documentation, security measures, and data handling practices. 

The external audit aims to validate the platform's compliance status, ensuring it meets the requirements outlined in the chosen compliance frameworks. 

Successful completion of an external audit indicates the platform's commitment to maintaining regulatory compliance and instilling trust among users and stakeholders regarding data security and integrity.

Moving forward and staying compliant with Spendflo

Simplify SaaS compliance management and amplify your SaaS strategy with Spendflo's comprehensive platform for a more profitable and streamlined operation.

Spendflo transforms SaaS compliance with a consolidated platform for comprehensive stack visibility and automated procurement, ensuring up to 30% savings.

Our expert buying team also negotiates the best price for your SaaS contracts based on benchmark pricing data and years of experience. 

Some clients have seen a 2X ROI with three urgent procurements within a week of onboarding. Others have reduced costs by 80% by migrating their existing technology vendors to more cost-efficient SaaS alternatives. 

 Want to see how much you can save? 

Get a free savings analysis with us today!