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A Sense of Insecurity

Hacking incidents and other computer-systems breaches are on the rise. But will they reach C-level?

While Doll favors the creation of a C-level security post, absent such a position (economic conditions don’t favor the creation of such a role, and some companies have actually eliminated the title), he says that a CFO or COO can work with more technically oriented staff to develop policies that protect the organization without limiting its operations. The value of a C-level executive’s involvement, he says, hinges on his or her awareness that security must be balanced against business opportunity. “A company could improve its security dramatically by simply disconnecting from the Internet,” says Doll, “but obviously that isn’t going to happen.”

A Need for Disclosure

What will happen, argues Mark Bouchard, an analyst at Meta Group Inc., is growing top-down pressure to implement an adaptive security architecture that addresses policies and procedures, and to communicate that policy publicly. “Major accounting firms now recommend that clients disclose their security plans in much the same way they disclose financial performance.” Many companies disclosed their Y2K-preparedness at length, he says, and security is analogous.

Creating a security program or architecture is time-consuming and potentially frustrating, because certain underlying standards don’t yet exist. But Bouchard says companies can take action now. Because the goals of the organization provide the foundation, C-level and even board-level involvement is critical. “Full implementation of a strategic plan takes up to three years,” says Mike Bilger, global practice leader for IBM’s security and privacy services unit, “but your security improves as you go, so you begin to see benefits immediately.”

A good plan, experts agree, is one that is flexible and reviewed often, because new technologies and changes in business strategy invariably affect the efficacy of current approaches. Bouchard says such a plan would draw a firm distinction between the blueprint, which should be visible and manageable, and the underlying details, such as standards for firewalls, intrusion detection, and the many other facets of actual implementation.

“Without a ‘living document’ of this sort,” he says, “companies waste resources, introduce new vulnerabilities even as they fix old ones, and leave themselves unprepared should a regulatory mandate come down that requires companies to have security architectures in place.”

Indeed, the FTC’s actions against Microsoft and Eli Lilly focused not on monetary fines but on a requirement that the companies establish and maintain security programs. If that’s a sign of where things are headed, then companies should be as wary of the “Washington Whammy” as they are of the SQL Slammer.

Security Ins and Outs

As with any other facet of IT, security is a function that can be outsourced. Managed security services providers (MSSPs), like their application service provider cousins, have had a rough time of it of late, but Gartner predicts 17 percent market growth this year, up from 10 percent last year. Eric Hemmendinger, research director for security and privacy at consulting firm Aberdeen Group Inc., says the companies that have survived have learned valuable lessons and may be poised to grow. “A lot of [venture capital] money was poured into this space in the late ’90s,” he says, “and companies generally took one of two tracks, either focusing on a specific security need, such as intrusion detection, or on a family of products and services.”

In part, the focused companies had better success because customers were wary of outsourced solutions that reached too far into the enterprise — they felt more secure with services that protected the edge of the network but did not, for example, monitor internal traffic or otherwise touch the “family jewels” of corporate data. And yet, “once clients get comfortable with a vendor providing a limited service,” says Hemmendinger, “they often look to that company to provide additional services. So we may see some M&A activity among these focused companies as they try to broaden their offerings.”

Leading makers of security software, such as Symantec and ISS, also act as MSSPs; their software revenues provide financial stability, although analysts say that to succeed as MSSPs they must move beyond a reliance on their own products and become technology-agnostic.

Major outsourcing firms, including IBM and EDS, also offer security services, which may prompt a CFO to ask: What level of security are such firms providing for routine IT outsourcing arrangements? Security expert Mark Doll says CFOs must scrutinize contracts because “in general, outsourcing deals are designed to reward efficiency, not security.” Some analysts say that outsourcers do take security seriously, because of the devastating publicity a hacker attack would produce. Kelly Kavanagh, a Gartner analyst focused on security, agrees that most service-level agreements for routine IT outsourcing balance security with efficiency. However, he recommends that contracts clearly spell out who is responsible for what forms of protection, because “it can be tough to determine how an intrusion happened, and even tougher to assign blame.” —S.L.

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