There’s all sorts of technology currently available that aims to help businesses digitally transform their processes and operations to run more efficiently. Digital transformation is highly appealing, as time typically spent on manual execution can instead be dedicated to driving new opportunities and growth. But, while this practice is essential to staying ahead in today’s digital-first era, it also comes with its own set of adverse effects that many don’t consider until damage is done.
What is a digital transformation strategy?
A digital transformation strategy targets four areas of business:
- Process – This is typically the first area businesses seek to transform, as the results include lower costs and increased efficiency. Processes like reporting and analytics, payroll and customer service can be digitally transformed using third-party vendor applications and platforms.
- Model – This requires a bit more creativity than process transformation, as it involves revamping an entire business model so it’s best suited for digital use. Apple revolutionized how we listen to music when it introduced iTunes, but as platforms like Pandora and Spotify became more popular, Apple had to transform its business model once more to cater to this new emerging market of streaming music. Hence, Apple Music.
- Domain – This transformation involves creating new value by broadening one’s offerings. Think Amazon, the online retailer, entering the cloud software service space with AWS, or Google, the search engine, entering the email and cloud-based collaboration-and-productivity application spaces with Gmail and Google Workspace, respectively.
- Culture – A culture, or organizational, transformation involves refining talent and abilities for the digital world. This could include training existing employees on efficiency-boosting methodologies like agile, or bringing in new talent dedicated to working with a specific platform, like a Salesforce specialist.
For the purposes of this article, we’ll focus on process transformation, as it relies heavily on the use of third-party vendor technology. The more parties that have access to your customer information and sensitive data, the greater the potential for unauthorized access to confidential information or data breaches. Yes, this can be concerning, but it also doesn’t need to be a roadblock to your company’s overall goals. To keep your enterprise digital transformation going at full speed, you just need to take the right precautions to ensure data privacy and security.
What technology is used to digitally transform processes?
Third-party vendor technology can be used to digitally transform day-to-day business processes like:
- Team collaboration – Think: Google Workspace, which allows team members to simultaneously work on the same project in Docs or Sheets and communicate with one another in real-time.
- Customer relationship management – CRM software helps to build, nurture and maintain relationships with customers by automating things like data analysis and interactions. We mentioned Salesforce earlier, but HubSpot is another well-known example of CRM software.
Content management – Content management services like WordPress can simplify digital content distribution and management across websites and apps. - Storage – A digital transformation strategy isn’t complete without transitioning a portion, if not all, of storage responsibility to cloud solutions. The good news is, popular vendors like Dropbox and OneDrive understand the importance of keeping data secure, so there’s peace of mind as far as transforming that process goes.
- Project management – Asana, Basecamp, ClickUp, Trello, Jira — the options for this genre of technology, which boost productivity, communication and collaboration across teams and departments, are endless.
Accounting – Finances are not an area where mistakes can be made, but even with the best accountants on your side, they’re still possible. Platforms like NetSuite can help automate tasks to reduce human error. - Payroll – What is typically a very tedious process when handled manually can be simplified and executed efficiently with technology like Paycom or Workday.
- Communication – Many businesses likely use an assortment of tools to facilitate communication across teams, especially with remote work environments here to stay. Think: Google Chat, Zoom and Slack.
How is data security at risk from digital transformation?
The primary threat to sensitive data security resulting from digital transformation is a data breach, which can occur when an unauthorized user gains access to sensitive data via third-party vendor technology. Since these applications, software or systems typically reside outside of your own company’s infrastructure, you can’t be certain that sensitive data will be handled the same way your team safeguards it, nor can you enforce compliance with third parties like you can with your own employees. A breach can result in the following harmful repercussions to an enterprise.
Reputation damage
Your organization’s relationship with customers and prospective clients is paramount. Communicating the measures your organization is taking to keep customer data secure goes a long way in building trust. Cyber attacks and data breaches can chip away at that established trust. Depending on the severity of the breach and how your organization responds to it, these occurrences can seriously damage your company’s reputation — not only with customers and potential customers, but also with business partners who may no longer feel comfortable being affiliated.
Steep noncompliance fines
Data privacy is becoming a more prominent issue in the U.S. with laws like the GDPR, HIPAA, CCPA and PCI-DSS strictly regulating sensitive data. Each privacy law has its own outlined set of fines for noncompliance. For example, violations of the CCPA that are deemed unintentional can cost $2,500 per violation. The financial penalty increases to $7,500 per violation if found to be intentional.
On top of fines, there are additional costs associated with repairing the breach, revenue loss and difficulty acquiring new customers. A data breach can easily add up to thousands or even millions of dollars in financial losses.
Legal battles
In the case of large data breaches that involve sensitive personal data, it’s not uncommon to see class-action lawsuits follow. In addition to a settlement or payout, there are also legal fees that your organization will need to account for. In some cases, organizations may even be restricted from performing certain business operations until legal investigations are complete. That pause can result in financial losses and can create other long-term issues within an organization.
Tips to mitigate data security risks during digital transformation
The potential risks of a data breach are significant, and when dealing with a third-party vendor, it can seem like an unmanageable situation. While you can never entirely eliminate risk, you can take steps to limit it.
Keep risks in mind when evaluating potential vendors
Think about the sensitive data a vendor will have access to. What is the level of confidentiality of this data? How is it stored and processed? Which compliance laws are relevant to the type of data in question? Is there a fourth-party vendor risk, meaning a risk posed by your third-party vendor’s third-party vendor that you don’t directly work with?
Incorporate risk management into vendor contracts
This will hold vendors accountable in the case that a cyberattack does happen. Privacy regulations like the GDPR require contracts between enterprises (the data controller) and any endpoint applications involved in their digital transformation strategies (the data processors) to explicitly define roles and responsibilities as they pertain to sensitive data handling. Not doing this is noncompliance, which will incur a severe penalty. If you experience a data breach from a third party but have that explicitly detailed vendor contract in place, the penalty will likely be much less severe.
Keep track of all active vendors
Enterprises, especially as a result of digital transformation, can end up engaging with an assortment of third-party vendors, so it’s important to have visibility into who all these vendors are, as well as what data they have access to.
This is where data privacy tools that can locate sensitive data across multiple endpoints, including the cloud, can help. Having an up-to-date record makes it easier for an organization’s security team to check in with vendors, make appropriate changes to the organization’s data privacy policies as needed and communicate important security news and updates with internal teams.
Create a culture of awareness
Because many employees within an enterprise will be engaging with at least one, but typically multiple, third-party vendor applications on a daily basis, it’s important to make everyone aware of the risks these applications pose to sensitive data security and what can be done to avoid risks becoming a reality, as well as ensure they’re always using security-focused best practices when dealing with these apps.
Invest in privacy tools to regularly monitor third-party vendors
Data privacy tools will come in handy once again, as they can continuously monitor the data third-party vendors have access to and identify any issues, enabling enterprises to prevent or rapidly respond to potential threats.
Take the digital communication tool Slack, for example, which allows teams to seamlessly send data from multiple sources — Dropbox, Google Drive, OneDrive and SharePoint or one’s own device — to each other. Of course, this is great for getting files and documents over to colleagues in a quick and direct manner, but should these files or documents contain sensitive information and should the company’s Slack platform be compromised, the resulting security violation could be disastrous if not quickly acted upon. In order to respond in a timely manner, the company should be immediately able to report what data was lost. This is something that only a data privacy solution with automated data discovery and continuous monitoring capabilities can provide. Consider it another piece of technology to support your digital transformation strategy.
Ensure your digital transformation strategy is secure
A digital transformation strategy is no longer a want for businesses, but a need. Still, it poses risks to sensitive data security that must be taken into consideration for successful execution. The point of digital transformation is to make things easier; engaging with third-party vendors without precautions in place will result in a bunch of difficulty.
Spirion helps enterprises efficiently roll out safe digital transformation strategies. Built and designed to scale, Spirion locates and continuously monitors sensitive information across multiple endpoints, from cloud-based applications to on-premise systems. This real-time monitoring is a huge, time-saving advantage when it comes to keeping tabs on third-party vendors, all while enabling your organization to hit transformation growth goals on time.
To see Spirion in action, schedule a free demo here.
