What is Vendor Due Diligence in SaaS? 

In SaaS, vendor due diligence is the process of carefully examining potential SaaS providers before collaborating with them. This includes looking at various areas such as the:

• legal standing of the company
• financial stability
• product performance
• handling of sensitive customer information

These verifications are intended to protect businesses against harmful events such as data theft, service interruptions, and compliance issues. 

Here are the steps of the vendor due diligence process: 

1. Consider the financial situation of the vendor, whether it is strong enough to provide services over an extended period of time. 
2. Focus on their operational efficiency and technical effectiveness, including time-keeping, security policies, and disaster recovery plans. 
3. Analyze the legal issues and compliance with regulations to avoid any potential legal problems.

In the case of traditional, on-premise software, the company owns the infrastructure.

In the case of SaaS, the customer gives up the control of data, applications, and infrastructure security to the vendor. However, Variation drift monitoring (VDD) comes in handy in ensuring that there is accountability by the vendor regarding the management of the assets.

The due diligence process typically focuses on four critical areas:

• Security & Technical: Assessing the vendor’s data protection, encryption, network security, access controls, and incident response plan.
• Compliance & Legal: Reviewing adherence to regulations like GDPR, HIPAA, SOC 2, ISO certifications, and ensuring contracts include appropriate liability and data ownership clauses.
• Financial & Operational: Evaluating the vendor’s financial stability (to avoid service disruption or termination), infrastructure uptime, disaster recovery plans, and service level agreements (SLAs).
• Datenmanagement: Scrutinizing where and how data is stored, processed, and potentially transferred across borders, and the policy for data deletion upon contract termination.

A strong VDD process relies heavily on verifiable evidence. Key documentation sought includes:

It is advisable to carefully assess vendors who:

• decide not to share security documentation (e.g., SOC 2 report, pen test results) might be relevant.
• have an insufficient or absent Disaster Recovery (DR) plan that could be associated with less desirable RTO/RPO metrics.
• have ambiguous or overly restrictive terms regarding data ownership or data portability (getting your data back).
• utilize encryption methods for data, both when stored and during transfer, that may be vulnerable to compromise.
• may experience financial instability or demonstrate a history of difficulties in adhering to SLAs.

VDD is a cross-functional effort that requires input from several departments:

• Information Security/IT: Monitors technical controls, architecture, and network security. 
• Legal/Compliance: Reviews contracts, DPAs, and die Einhaltung von Vorschriften erfordern kann.
• Finance/Procurement: Evaluates cost, financial stability, and contract terms.
• Business Unit/User: Verifies the operational fit and functional capabilities of the solution.