Firms expect fines, new costs from Safe Harbor changes

Survey says 70 percent of IT decision makers expect to increase spending next year as a result

world privacy
Credit: Thinkstock

IT budgets are expected to see a rumble of activity in the wake of the Safe Harbor earthquake.

In a new Ovum survey of IT decision makers at international companies, 70 percent said they expect to increase spending next year, 66 percent expect to have to make changes in their European business strategy, and 52 percent expect to be facing fines.

In October, the European Court of Justice, citing a lack of privacy protections in the U.S., invalidated the Safe Harbor agreement that had previously governed the sharing of data between Europe and the United States.

Ovum report fines graphic Ovum

A new framework is currently being negotiated, but it is likely that companies will face stricter controls about moving data between countries, will need to encrypt or tokenize more data, and may even have to move data centers closer to their users and customers.

Intralinks, a global cloud-based collaboration software provider and sponsor of the report, is one of the companies affected, and has already begun investing in technology to cope with the expected regulatory changes.

"We've actually seen this coming, so we've been architecting our solutions and putting controls in place to give customers protections that they need so they don't need to make drastic changes," said Daren Glenister, the company's field CTO. "We secure and encrypt documents in motion, even if you email documents outside the organization and keep it encrypted and safe and restrict access to that document to only people who need to have access to that document. We use customer-managed keys as well."

Ovum report business strategy graphic Ovum

Intralinks claims 99 percent of the Fortune 1000 as customers, including the majority of the worlds 20 largest banks.

And a third of its customers are now asking for logical control of their data, Glenister said.

This means that Intralinks can store the data in any location, but in secure, encrypted form. When the customer accesses that data, from their location, that is the only time it is decrypted and shown in plain text -- and only the customer has those encryption keys.

Some regulators already accept these kinds of logical controls, where the keys are kept inside the customer's country, as a safe equivalent to keeping all the data inside the country.

Ovum report budget graphic Ovum

"I think we'll see more of a legal and logical control rather than just a physical control," he said.

Companies that do business in both the U.S. and Europe -- and their service providers -- will also need to be able to track who has access to the data, have controls in place, and monitor for data policy violations, he said. And those with more than 250 employees will also need to appoint a data privacy officer.

However, according to the Ovum report, only 44 percent of respondents monitor user activities and generate alerts when data policies are violated. Only 53 percent have data classification systems in place to align data with access controls. And 47 percent have no policies or controls related to the use of consumer-grade cloud storage and filesharing services.

Ovum spy graphic Ovum

"Businesses will have to change business processes and strategies," Glenister said. If they don't, the fines are "substantial" -- up to 2 percent of global revenues.

New rules are expected to come out at the beginning of 2016, he said, and it's likely that companies will have 12 to 18 months to get into compliance.

This story, "Firms expect fines, new costs from Safe Harbor changes" was originally published by CSO.