compliance considerations

7 Compliance Considerations to Weigh When Outsourcing Your IT

There are many benefits to outsourcing your IT. It allows you to focus on your core business while leveraging specialized IT expertise and technologies. It can also enable you to scale up when needed without spending a lot of capital upfront, and for many businesses, IT outsourcing is more cost-effective compared to managing IT functions in-house. 

While there are several important considerations to weigh when considering IT outsourcing, compliance is one of the most crucial. For example, outsourcing your IT could increase your security risks without proper diligence, or it could impact your business in a way that impacts your compliance with industry or government regulations. 

Before You Outsource

There are a few things to consider before you outsource your IT, such as what data and functionality you’re going to turn over to your service provider and what tasks can be outsourced.

1. Defining the IT Tasks to Outsource & Business and Compliance Impacts

As with any major business transformation, planning is paramount, and the first step in outsourcing your IT is to define what IT tasks to outsource. Additionally, you should consider how these activities will impact the different parts of your business. Will outsourcing these tasks disrupt your business in any way?

More importantly, you must determine if IT outsourcing will affect how various departments will go about regulatory compliance. In other words, consider whether outsourcing IT functions could result in your business being non-compliant. Other questions to answer at this stage are whether such a move will affect your ability to continue doing business and how it will affect your financial performance.

2. Evaluating Your Service Providers

IT outsourcing isn’t something that should be taken lightly. When you outsource any business function to another company, you should be sure that the service provider:

  • Has the capacity, ability, and resources to deliver whatever outsourced tasks you have
  • Has enough security, reliability, and service standards in place
  • Is in compliance with relevant regulations

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3. Creating Contracts

Once you have identified functions to outsource, chosen a provider, and minimized the risks of outsourcing IT functions, draft an agreement with your service provider that covers all the bases. This is important because you are entrusting them with some of the most crucial parts of your business, including IT assets, applications, and data.

At this stage, you should outline the different processes that govern how the service provider will render the outsourced services and how to ensure business continuity even when something bad happens. This should also cover the responsibilities that your in-house employees will have–from due diligence to compliance reviews, management, and testing contingency plans.

This is also the time to set forth the terms of compliance. Who’s responsible for what when it comes to compliance issues? Who is responsible for the security of what data and when? What rules and restrictions are in place for the access, use, transfer, and storage of data? 

4. Know Your Compliance Rules

In some cases, the standards set forth by regulators or certification organizations offer guidance on how to go about outsourcing your IT. For instance, under the Health Insurance Portability and Accountability Act of 1996 (HIPAA), covered entities must use contracts called business associate agreements before they can turn over protected health information to a third-party company. 

When you hire a front-end or back-end developer, Python or Java developer, whether it’s the General Data Protection Regulation, HIPAA, the International Organization for Standardization, or any regulator, you should know what is necessary for continued compliance and ensure that all required processes, technologies, and systems are still in place when you outsource your IT tasks.

After You’ve Outsourced

Once the contracts have been signed and your service provider begins work, you have ongoing responsibilities, as well. 

5. Ongoing Reviews

IT outsourcing doesn’t stop when you sign the contracts. You should have a team that will constantly monitor the outsourced services and the provider. This team will: 

    • Make sure that the service provider and any of their sub-contractors are meeting the key performance indicators (KPIs) you’ve set for the integrity, security, and availability of your data and IT functions.
    • Oversee risk assessments, assurance reports, and internal audits as conducted by the service provider.
    • Maintain business continuity plans for your company and ensure that the proper precautions are in place on behalf of the service provider to ensure business continuity. 
  • Develop exit plans that outline what happens after the outsourced tasks end, such as what happens when the application testing is finished or how the service provider will dispose of the data they collected or maintained during the engagement.

6. Compliance and Security

Security is probably your biggest task when it comes to ensuring regulatory compliance. However, outsourcing your IT can inherently weaken your security. The moment you transmit data or open up your IT resources to a third party, you are making your systems, information, data, and IT assets vulnerable to attacks. You lose some control over these assets, which can severely impact how you implement security protocols.

There are things that you can do to heighten your IT security, while also ensuring compliance. It starts with knowing what type of data you must protect to comply with different regulations, such as:

  • Personally identifiable data
  • Financial details
  • Protected health information

For many businesses, there are several types of sensitive data that must be protected, such as credit card numbers, social security numbers, IP addresses, marital status, religion, names, medical histories, and prescription records, to name a few. After outlining what needs to be protected, you should have a compliance team in place. This team will be tasked with:

  • Doing risk analysis, such as identifying, assessing, and analyzing risk, as well as setting tolerance for risks. 
  • Setting up controls, such as encryption, firewalls, strong passwords, and vendor risk management.
  • Monitoring and responding to security threats, as well as continuous documentation.

Compliance and security should go hand in hand. It’s not a good practice to separate the two. In fact, meeting cybersecurity compliance requirements lays the groundwork for robust security. That said, security goes beyond just meeting the requirements set forth by an organization or regulator. It safeguards the company and its IT assets from continuous threats and attacks. 

There are benefits of compliance beyond avoiding fines and penalties. For instance, if you’re a ISO:27001 compliant, it can communicate to future customers and users that you can be trusted as far as security is concerned. Compliance will also help you avoid any problems when you’re doing business as it forces you to document your activities. 

7. Exit Plans

More than just knowing what to do when outsourced tasks are completed, you should also have a proper exit plan that governs the termination of your contract with the service provider.

There are things that could happen that may negatively impact your compliance. The service provider might fail at their outsourced tasks, they may go out of business, or they may suffer from an incident that prevents them from carrying out their functions.

The exit plan should clearly outline how you’ll going to get your IT assets and data back, as well as what the service provider can do with your information and how it will be disposed of.

To sum up, let’s review our steps one more time in the table below, with each step now succinctly encapsulated to facilitate easy understanding and implementation:

Stage Summary
Defining IT Tasks Identify tasks to outsource considering business and compliance impacts. Assess how outsourcing might disrupt business or affect regulatory compliance.
Service Provider Evaluation Ensure the service provider has the capacity, security, and compliance standards to deliver tasks successfully.
Creating Contracts Define processes, responsibilities, and terms of compliance. Include security, data handling, and contingency plans.
Compliance Rules Knowledge Be aware of the compliance rules specific to your industry, e.g., GDPR, HIPAA, and ISO regulations.
Ongoing Reviews Continuously monitor the service provider’s performance and adherence to key performance indicators (KPIs). Maintain business continuity and develop exit plans.
Compliance and Security Establish a compliance team responsible for risk analysis, security controls, threat response, and documentation. Compliance and security should be integrated.
Exit Plans Have a clear termination plan specifying how to recover IT assets and data and how the service provider will dispose of your information.

Compliance Considerations When Outsourcing IT

There are a lot of things you should consider when outsourcing IT, but compliance should be a top consideration every step of the way. Remember that when it comes to compliance, you can outsource the tasks, but not the responsibility. Ultimately, you are solely responsible for your company’s regulatory compliance. As such, careful planning is required before outsourcing any activities subject to regulatory oversight.

You will need to make sure that your service provider not only has the resources, talent, and ability to meet your needs but also that they are committed to compliance–and your contract should reflect that. Your work doesn’t stop when the service provider takes over. While outsourcing IT functions offers significant benefits, compliance must be top of mind to protect your business’s interests.

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Written by
Svetlana Shevchuk

Digital Marketing Specialist at YouTeam, a Y Combinator-backed marketplace for building remote dev teams.

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