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Service Provider Assessment Framework A Platform for Building Synergies between Clients and Service Providers for Trusted Global Sourcing

A Study Report

Data Security Council of India in collaboration with Ernst & Young

December 2010

Under Cyber Security Awareness Program, Department of Information Technology, Government of India

Data Security Council of India (DSCI) is a section 25, not-for-profit company, setup by NASSCOM as an independent Self Regulatory Organization (SRO) to promote data protection, develop security and privacy codes & standards, and encourage the IT/BPO industry to implement the same.

For more information about DSCI or this report, please contact:

Data Security Council of IndiaNiryat Bhawan, 3rd Floor, Rao Tula Ram Marg, New Delhi – 110057, IndiaPhone: +91-11-26155070Fax: +91-11-26155072Email: [email protected]

© 2010 DSCI. All rights reserved.

About DSCI

DisclaimerThis document contains information that is Intellectual Property of DSCI. DSCI expressly disclaims to the maximum limit permissible by law, all warranties, express or implied, including, but not limiting to implied warranties of merchantability, fitness for a particular purpose and non-infringement. DSCI disclaims responsibility for any loss, injury, liability or damage of any kind resulting from and arising out of use of this material/information or part thereof. Views expressed herein are views of DSCI and/or its respective authors and should not be construed as legal advice or legal opinion. Further, the general availability of information or part thereof does not intend to constitute legal advice or to create a Lawyer/ Attorney-Client relationship, in any manner whatsoever.

3

Service Provider Assessment Framework


The IT (Amendment) Act, 2008 has established a strong data protection regime in the country, by requiring body corporates to implement ‘reasonable security practices’ to protect ‘sensitive personal information’. What is ‘reasonable security’ though? An organization is expected to have a comprehensive information security program, with appropriate controls that are commensurate with its information assets and risk assessment. In the event of a security breach, it should be able to demonstrate that its practices were in conformance with its written security policy, and that its controls were adequate. It is, however not that easy, since enterprises are outsourcing some of their work, and they must manage information risk across a vast global network of Service Providers. Outsourcing thus brings into focus the practices followed by Service Providers, and their accountability.

Service Providers are subjected to ongoing assessments and on-site audits, which are labor-intensive and costly for both the sides. Likewise, Service Providers with hundreds of Clients distributed in various geographies must submit themselves to several audits by the Clients. Moreover, the multiple assessments are based on different frameworks, questionnaires and audit approaches – clearly they result in wasted effort and time; and, of course, higher costs. It is the wish of both - Clients and Service Providers - that third-party evaluations that are standards-based, or framework-based, may ease the assessment burden. But how do they view the implementation of a standard, or best practices for security; and an assessment framework to validate that this has indeed made the organization secure? Again both of them will have a different perspective on this.

Can enterprises take a methodical approach to assessing and managing the risks through frameworks like ISO 27001; BITS Shared Assessment Program, Moody’s Vendor Information Risks ratings, Information Security Forum, COSO, NIST or COBIT? Will attestation of a Service Provider’s practices necessarily be in the form of a third-party certification, or a maturity rating of its practices?

Foreword

With DSCI best practices and data-centric methodology, we’ve rolled out a solution for adoption by Service Providers to make them secure. DSCI Security Framework (DSF©) is based on a number of security principles, that help make the security program of an organization dynamic, instead of a static checklist approach that relies on bulky documentation. We wanted to review the available assessment frameworks, to see how DSF© could fit into them, and how rating of practices may give a sense of security to organizations, and also show them the direction for improvements. In short, it’ll help realize an effective security program, and transparent assessment framework, that may address the concerns of both Clients and Service Providers. In the process, ‘reasonable security practices’ will get implemented.

It is with this in view that DSCI partnered with Ernst & Young Pvt. Ltd. (EY) in this study, which required extensive knowledge and experience in the domain, to review the existing frameworks and think through the advantages of certification/ratings. Survey of Clients and Service Providers, based on an in-depth questionnaire gives key pointers to the concerns of both the groups, and points towards a possible third-party ratings approach that may be useful and acceptable to both, namely Clients and Service Providers.

I would like to acknowledge the great team effort of DSCI and EY in conducting this study, and creating a useful analysis. I hope this report will generate sufficient interest among Clients, Service Providers, and even governments and regulators that will help DSCI arrive at the right decisions in taking the next steps in certification/rating of Service Providers.

Kamlesh BajajCEO, DSCI


The study teamData Security Council of India

Mr. Vinayak Godse Director – Data ProtectionMr. Vikram Asnani Senior Consultant – Security PracticesMr. Rahul Jain Senior Consultant – Security Practices

Ernst & Young Pvt. Ltd.

Ms. Nity Singh Manager – Advisory ServicesMr. Taslimm Quraishi Manager – Advisory ServicesMr. Lalit Kalra Consultant – Advisory Services

DSCI Project Advisory GroupProf. N. Balakrishnan Chairman DSCI and Associate Director, Indian Institute

of Science (IISc), BangaloreMr. B.J. Srinath Senior Director, Indian Computer Emergency Response

Team (CERT-In)Prof. Anjali Kaushik Management Development Institute, GurgaonMr. Akhilesh Tuteja Executive Director, KPMGMr. Kartik Shahani Country Manager, India & SAARC, RSAMr. Satish Das CSO, CognizantMr. Baljinder Singh Global Head of Technology, Information Security &

Business Continuity, EXL Service (I) Pvt. Ltd.Mr. Vishal Salvi CISO, HDFC Bank Pvt. Ltd.Mr. Ashwani Tikoo CIO, Computer Sciences Corporation India Pvt. Ltd.Mr. PVS Murthy Global Head – Information Risk Management

Advisory, TCSMr. Deepak Rout CISO, UninorMs. Seema Bangera DGM – Information Security, Intelenet Global


Executive summaryBusinesses today are global, complex and fast evolving, and technology has made business transactions independent of space and time. This has enabled businesses to focus on its core competencies and outsource non-core business operations to Service Providers, who are capable of providing services to the businesses from around the world round the clock. Information Security and Privacy becomes crucial when it comes to outsourcing as technology enables free flow of information across borders between Clients and Service Providers. This information could be business sensitive information and / or sensitive personal information of the Clients’ end customers including but not limited to health related information, credit card details, social security number, etc. Also, stringent global data protection regulations make the businesses liable for loss, misuse, wrongful disclosure of any personal information of any citizen – irrespective whether the failure is at outsourcers’ end or Service Provider’s end.

The Indian IT/BPO Service Providers are striving hard to ensure that security and privacy of data is well maintained. They follow stringent security controls specified by the Clients through contractual obligations. The Clients conduct regular Information Security and Privacy assessments of the Service Providers to ensure compliance with the contractual obligations and / or regulatory requirements or to simply assess the security posture of Service Providers. In this outsourcing ecosystem, many Clients have developed and applied their own proprietary assessment frameworks for evaluating their Service Providers. Service Providers, on the other hand, strain their resources to respond to diverse client information requests. This isolated approach proves to be an inefficient and costly affair, both for the Clients and the Service Providers. Inconsistencies arising from use of different assessment methodologies cause delays, resulting in inefficient use of time and resources. Aggravating the problem is the unavailability of generally accepted standard for Service Provider assessments. To overcome these issues and challenges, DSCI as an industry initiative seeks to establish a well defined Service Provider Assessment Framework in order to have a common assessment approach that can be used to assess different Service Providers.

This study especially through its survey attempts to understand the perspective of Client and Service Provider organizations with respect to Service Provider assessments and takes inputs to define a Service Provider Assessment Framework.


The survey results reveal that:

DSCI should play a vital role in conducting Service Provider assessments and sharing •

the outcome in the ecosystem. It should:have an Service Provider assessment program that comprises of framework, processes, •

and methodology for assessmentsprovide an organization wide security and privacy maturity rating, and domain specific •

maturity rating that may be shared in the ecosystem after taking the due permission of the Service Providers

A new standard mapped to prevalent standards should be considered as a potential •

assessment standard for third party assessments of Service Providers

DSCI as an industry initiative and a Self Regulatory Organization having •

representation from both the Client and Service Provider organizations should empanel auditing firms for conducting independent third party assessments of Service Providers

The study also focused on understanding of various assessment models which included Malcolm Baldrige Framework, Capability Maturity Model Integration (CMMI), CRISIL Ratings, BITS framework, e-Sourcing Capability Model (eSCM), Moody’s assessment framework. The study of assessment models reveals that:

Service Provider Assessment Framework should be easy to comprehend and •

adaptable regardless of size of the organization and nature/ complexity of its processes

The framework assessment areas should be outlined in the form of best practices •

rather than a stringent set of controls. This would provide an opportunity to organizations for implementing / performing the control activities according to the needs of the organization specific environment

The framework should follow a process-approach and outline measurable •

assessment areas

It should be reviewed and updated (if required) on a periodic basis•

The maturity criteria should be transparent, and should help in assigning a formal •

maturity rating to a Service Provider

Overall, DSCI may develop a Service Provider Assessment Framework that is aligned to DSF© Best Practices & the maturity criteria defined for each of its sixteen security disciplines and the study results elucidated in this report; and make it popular in the ecosystem by performing pilot runs. The framework may follow a CMMI-like rating methodology which is assessment of the security and privacy practices at both the layers – capability/ maturity of the business processes, and maturity of the organization.

Introduction .................................................................................................................. 1

Survey Highlights......................................................................................................... 5

Detailed Survey Results ...............................................................................................7

Key drivers for Service Provider assessments ....................................................7

Scale of Service Provider assessments ..............................................................9

Current assessment program/ mechanism .......................................................11

Focus on Data Privacy in Service Provider assessments .................................13

Types of Service Provider assessments ...........................................................14

Level of perceived risk – IT services .................................................................15

Level of perceived risk – BPO services .............................................................17

Risk profiling of Service Providers .....................................................................18

Frequency of Service Provider assessments ....................................................19

Budget and cost for Service Provider assessments ..........................................21

Modes of Service Provider assessments ..........................................................23

Service Provider assessment challenges ..........................................................25

Service Provider assessments – solutions and future landscape .....................27

Influence of IT (Amendment) Act, 2008 on Service Provider assessments ......29

Third party assessments ...................................................................................31

Third party assessors ........................................................................................33

Standards for Service Provider assessments ...................................................35

Role of DSCI in Service Provider assessments ................................................37

Outcome of Service Provider assessments ......................................................39

Sharing of Service Provider assessment results ...............................................41

Recommendations......................................................................................................43

Annexure ....................................................................................................................45

Glossary .....................................................................................................................57

References .................................................................................................................57

Content

1


BackgroundAs buyers of Information Technology (IT) and Business Process Outsourcing (BPO) services become increasingly sophisticated and demanding, Service Providers are challenged to achieve new levels of efficiency, agility and transparency in service delivery and protection of information. Clients increasingly expect real evidence of robust process management, continuous improvement, effective governance, and measures adopted for ensuring Information Security and Privacy.

ObjectiveDSCI engaged EY to study the current landscape of Service Provider (IT/BPO organizations) assessments conducted by the Client organizations, and assist in documenting the assessment approach that may be adopted in order to minimize the challenges of both, Client and Service Provider organizations, with an intent of evaluating and reporting on Information Security and Privacy posture of the Service Providers.

ApproachIn order to achieve the project objectives, the joint study team undertook the following steps:

Primary research• : A survey of Client and Service Provider organizations was undertaken to gain an insight into the current Service Provider assessment program. The survey covered the following aspects:

Business drivers for Client organizations to conduct Service •

Provider Assessments

Introduction

2

The value that various Service Provider assessments conducted by •

Client organizations bring to the Service Providers

Investments made, and challenges faced by the Service Provider •

and Client organizations in driving such assessments

Possible solutions for overcoming the current challenges•

Role of DSCI and third parties in Service Provider assessments•

Secondary research• : A study was undertaken to document the pros and cons of prevalent assessment frameworks like Capability Maturity Model Integration (CMMI), BITS shared assessment program, Carnegie Mellon University e-Sourcing Capability Model (eSCM), etc. The list of assessment frameworks was documented on the basis their widespread use, and international recognition in performing assessments. The study areas included the following:

Assessment areas / ease of use by the organization being •

assessed

Assessment methodology / scoring pattern / process of sharing •

assessment results

Acceptability / popularity of the framework•

Independence of examiners•

Frequency of framework update to cater to future requirements•

The team also studied DSCI Security Framework (DSF©) Best Practices and maturity rating criteria for each of its sixteen disciplines to gather inputs (in addition to the inputs provided by primary and secondary research) for defining Service Provider Assessment Framework.

3


Profile of participantsThe survey respondents were a set of Client and Service Provider organizations. The respondents were majorly from Information Technology (IT), Business Process Outsourcing (BPO), Telecommunications and Financial Services verticals. Correspondingly, the survey results have been divided into two perspectives – Clients’ perspective and Service Providers’ perspective, and may be read accordingly.

Industry wise distribution

KPOBPO IT Services

42.00%50.00%

8.00%

Client organizations

Service Provider organizations

37.00%

18.00%

36.00%

9.00%

Industry wise distribution

Telecommunication BankingTechnology Financial Services

4


6$ 1 billion to $ 9 billion

4$ 100 million to $ 249 million

1$ 10 billion to $ 24 billion

1Less than $ 100 million

Number of Service Providers

Number of Client organizations

3

3

1

2

More than $ 24 billion

$ 1 billion to $ 24 billion

$ 100 million to $ 249 million

Less than $ 100 million

Client organizations

Service Provider organizations

The sample size selected for the survey was limited and this should be taken into consideration when interpreting the survey results.

5


Service Provider assessments are conducted by Client organizations •

in order to protect business sensitive information, and mitigate security & privacy risks while outsourcing work to Indian IT/ BPO companies. These assessments help Service Provider organizations to align security & privacy initiatives to their Client’s requirements and build on the existing relationship with the Clients

Comprehensive risk based assessments covering all the domains of •

security are carried out annually by majority of Client organizations. Vulnerability assessments and penetration testing continue to display strong acceptance (100%) by Client organizations in Service Provider assessment programs

Most of the Service Provider organizations reported that ISO 27001 •

controls checklist is used as a mechanism by their Clients for conducting assessments. On the other hand, Client organizations revealed that a proprietary Service Provider assessment program has been developed to conduct Service Provider assessments

Provisions of the IT (Amendment) Act, 2008 (ITAA 2008) need to be •

appropriately incorporated in the Client-Service Provider contracts

High number of assessments around the year is the most critical •

challenge faced by Service Providers at the time of assessments, followed by meeting diverse & varied assessment. Whereas for Clients, rising legal liabilities, regulatory requirements, level of security awareness in the Service Providers, ensuring compliance by Service Providers, and Service Provider commitment to ensure Information Security & Privacy are some of the critical challenges faced in assessing Service Providers

Survey highlights

6

Currently, Service Provider assessments are majorly conducted •

onsite by Client’s internal staff. Majority of the Client organizations indicated that auditing firms empanelled by a joint industry consortium of outsourcers and the Service Providers could act as the third party assessors for conducting independent Service Provider assessments

More than half of the Service Provider respondents suggested that •

DSCI should have a Service Provider assessment program that comprises of framework, processes, methodology for assessments

Clients and Service Providers reveal that third parties should conduct •

Service Provider assessments, based on a standardized assessment methodology. This would save costs and efforts by avoiding the need for conducting assessments of multiples Service Providers

Both Client and Service Provider respondents suggested a new •

standard mapped to ISO 27001, NIST –SP, COBIT, ITIL etc. that meets all the regulatory requirements like GLBA, HIPAA, PCI DSS etc., as a potential assessment standard for third party assessments of Service Providers

DSCI should provide organization wide security and privacy maturity •

rating, and also domain specific maturity rating

7


Key drivers for Service Provider assessmentsThe survey results reflect that majority of the Clients consider protecting business sensitive information, and mitigating security & privacy risks as the critical business drivers for conducting Service Provider assessments. On the other hand, Service Providers report that Client’s corporate policy requirements, and achieving end customer confidence are the main reasons which drive their Clients to conduct assessments.

Detailed survey results

Clients’ perspective

Business drivers for conducting Service Provider assessments

88.89%

88.89%

77.78%

77.78%

55.55%

44.44%

33.33%

Protecting business sensitive information includingintellectual property

Mitigating security and privacy risks that exist in outsourcing arrangements

To address the security and privacy concerns of some of the key stakeholders within our organization

Strengthening of data protection regime in the geographies where we operate, stipulating stringent

requirements and heavy fines for a data breach

Use Service Provider assessments as a mechanism to foster a culture of compliance at all Service Providers and

introducing a sense of competition among them with regardsto fulfillment of their data security and data privacy needs

Addressing security and privacy risks that arise from use of emerging technologies

Data protection regulations demand ourorganization to undertake regular assessments of

third parties

44.44%Our corporate policies require us to undertake a

comprehensive vendor risk assessment

Achieving end customer confidence and preventing loss of reputation by mitigating risks of privacy/

information leakage that may arise at Service Provider end

55.55%

8

‘Service Provider assessment as a mechanism to foster a culture of compliance’ was selected by the least number (thirty three percent) of Clients while the same response was selected by fifty percent of the Service Provider organizations, as a reason for conducting assessments.

Reasons that drive Clients to conduct Service Provider assessments

66.67%

66.67%

58.33%

58.33%

50.00%

50.00%

41.67%

41.67%To address the security and privacy concerns of

some of the key stakeholders in Client organization

Protecting business sensitive information includingintellectual property

Clients use Service Provider assessments as a mechanismto foster a culture of compliance at all its Service Providers

and introducing a sense of competition among them with regards to fulfillment of their data security and data privacy needs

Clients’ corporate policies require them to undertake a comprehensive vendor risk assessment

Achieving end customer confidence and preventing loss of reputation by mitigating risks of privacy/

information leakage that may arise at Service Provider end

Mitigating security and privacy risks that exist in outsourcing arrangements

Data protection regulations demand Client organization to undertake regular assessments of third parties.

Strengthening of data protection regime in the Client geographies that stipulate stringent

requirements and heavy fines for a data breach

Service Providers’ perspective

Protecting business sensitive information and mitigating security and privacy risks are the major drivers for conducting Service Provider assessments

9


Scale of Service Provider assessmentsThe survey results show that the number of Service Provider assessments is directly proportional to the number of Clients or Service Providers that an organization is engaged with. This is proven by the fact that Clients working with 500 Service Providers conduct more than 100 Service Provider assessments annually, and those with 200 & 300 Service Providers conduct 10-50 and 50-100 Service Provider assessments respectively. Also, Service Providers engaged with 800 Clients undergo 100-200 assessments annually, and those with 700 & 600 Clients undergo 50-100 assessments respectively 50-100 assessments respectively.

Number of Service Providers the organization is engaged with

0

100

200

300

400

500

600

1 2 3 4 5 6 7 8 9

Num

ber o

f S

evic

e P

rovi

ders

Clients

11.11%0-5

22.22%5-10

44.44%10-50

Number of Service Provider assessments conducted

11.11%

11.11%Above 100

Num

ber o

f an

nual

ass

essm

ents

50-100


10



Number of Clients serviced by the organization

0100200300400500600700800900

1 2 3 4 5 6 7 8 9 10 11 12

Num

ber o

f Clie

nts

Service Providers

Number of Service Provider assessments faced

9.09%

Num

ber o

f ann

ual a

sses

smen

ts

36.36%50-100

Above 400

27.27%200-400

9.09%100-200

18.18%10-50

0.00%0-10

11


Current assessment program/ mechanism Proprietary Service Provider assessments followed by SAS 70 and ISO 27001 checklist are the most commonly adopted assessment programs/ mechanisms by Client organizations.

On the other hand, more than ninety percent Service Providers reported that their Clients use ISO 27001 checklist for conducting assessments. This is closely followed by proprietary assessment programs and assessment programs of Client appointed external auditors (sixty seven percent each).

The survey further revealed that majority of the Client organizations do not consider ISO 27001 certification as an alternative to conducting Service Provider assessments.

Interestingly, the survey also highlighted that BITS Shared Assessment Program is not used by any of the Client organizations for conducting Service Provider assessments.

77.78%

44.44%

44.44%

33.33%

22.22%

22.22%

11.11%

0.00%

ISO 27001 controls checklist

BITS shared assessment program

Assessment program developed by ourorganization (proprietary)

Reliance on Statement on Auditing Standards(SAS) No. 70 report provided by the auditing

firm assessing your Service Providers

Asking the Service Providers to get ISO 27001 certified thereby eliminating the need for

getting assessed

Use pre-defined controls list provided by anassessment tool

Asking the Service Providers to provide self declaration/attestation for compliance to our

security policies/requirements

Assessment program of the appointed external auditor

Service Provider assessment program/mechanism used by the organization


12


78% Client organizations use proprietary assessment programs for conducting Service Provider assessments. However, the Service Providers report that their Clients use ISO 27001 checklist for conducting security and privacy assessments

Programs / mechanisms used by Clients for conducting assessments

91.67%

66.67%

66.67%

41.67%

25.00%

16.67%

16.67%

0.00%

ISO 27001 controls checklist

BITS shared assessment program

Others

Use pre-defined controls list provided byan assessment tool

Providing self declaration / attestation for compliance to client security policies/

requirements

Getting ISO 27001 certification eliminates the need for getting assessed

Assessment program of the client appointed external auditor

Assessment program developed by the client (proprietary)


13


Focus on Data Privacy in Service Provider assessmentsThe survey reveals that majority of the Client organizations cover privacy during Service Provider assessments. Contrastingly, majority of the Service Providers report that privacy is not covered as part of the assessments.

Eleven percent of the Client organizations also revealed that privacy is not covered as part of Service Provider assessments. Also, Client organizations seem to be satisfied with the current focus on privacy as no Clients foresee the need for a change in the privacy focus in Service Provider assessment programs.

Privacy is not covered

11.00%

56.00%33.00%

Coverage of privacy in Service Provider assessments

StronglyModerately Needs improvement (0%)

Coverage of privacy in Service Provider assessments

41.67%

25.00%

33.33%

Minority of clients’ Service Providers assessment programs cover Privacy

Majority of clients’ Service Providersassessment programs cover Privacy

Nearly half of the clients assessment programs cover Privacy

None of the clients’ Service Provider assessment programs cover Privacy (0%)



Majority of the Service Providers report that their Clients do not cover Privacy during assessments while Clients strongly perpetuate the coverage of Privacy in Service Provider assessments

14




Types of Service Provider assessmentsVulnerability Assessment and Penetration Testing as a methodology of Service Provider assessments has a strong acceptance (100%) from Client organizations.

While only twenty five percent of Service Providers reveal line of service specific assessments is considered important by their Clients, Client organizations give more importance to these assessments.

Service Providers reveal that Client organizations display a strong propensity towards undertaking comprehensive risk-based assessments, and compliance based assessments

Different types of Service Provider assessments conducted by the organization

100.00%

88.89%

77.78%

77.78%

Risk based assessments

Lines of Service specific assessment (e.g.conducting application security assessment for

application development services)

Technical: vulnerability assessment and penetration testing

Regulatory / Compliance: Assessments to check compliance with applicable regulations (e.g. HIPAA,

GLBA) or Assessments based on compliance to Standards like ISO 27001 and PCI DSS

Different types of assessments conducted by Client organizations

100.00%

83.33%

75.00%

75.00%

25.00%

Comprehensive risk based assessmentcovering all the domains of security

Assessment based on well-knownstandards like ISO 27001

Comprehensive compliance basedassessment

Line of Service specific assessment (e.g.conducting application security assessment for

application development services)

Technical assessment of the IT systems including vulnerability assessment and penetration testing

15


Level of perceived risk – IT servicesResults indicate that Client organizations perceive that outsourcing Custom Application Development services (seventy eight percent) involves high risk. This is distantly followed by Infrastructure, Network and Desktop Outsourcing and Software Deployment and Support at sixty seven percent each.

Service Providers cited Infrastructure Outsourcing followed by Network and Desktop Outsourcing as the critical risk areas for Service Provider assessments.

Clients as well as Service Provider organizations do not attach importance to IT Education and training services for assessments.

33.33% 11.11% 33.33%Hardware deployment and support

Level of perceived risks in the services outsourced by Client organizations: IT services

High Medium Low

77.78% 11.11%Custom application development

55.56% 33.33%Application management

66.67% 11.11% 11.11%Infrastructure services outsourcing

66.67% 11.11% 11.11%Software deployment and support

44.44% 22.22% 22.22%System integration

44.44% 44.44%Software testing

66.67% 22.22%Network and desktop outsourcing

44.44% 33.33%Hosted application management

44.44% 33.33%Hosted infrastructure services

33.33% 22.22% 22.22%Network consulting and integration

11.11% 22.22% 44.44%IT education and training

22.22% 22.22% 33.33%IT consulting

Custom Application Development, Network and Desktop Outsourcing together with Infrastructure outsourcing are current watchwords in the context of Service Provider assessments


16


41.67%

33.33%

25.00%

25.00%

25.00%

16.67%

8.33%

8.33%

8.33%

16.67%

8.33%

33.33%

8.33%

16.67%

8.33%

Infrastructure services outsourcing

Level of perceived risks in the services outsourced by Client organizations: IT services

Network and desktop outsourcing

Application management

Hosted application management

Hosted infrastructure services

System integration

Software testing

Custom application development

8.33% 16.67%Software deployment and support

8.33% 16.67%Hardware deployment and support

16.67% 8.33%Network consulting and integration

8.33% 16.67%IT education and training

16.67% 8.33%IT consulting

High Medium Low


17


Level of perceived risk – BPO servicesThe survey results indicate that sixty seven percent of Client organizations and forty two percent of Service Provider organizations consider that Finance and Accounting services involve high risk.

66.67% 11.11%Finance and accounting

44.44% 22.22%Customer interaction and support

44.44% 33.33% 11.11%Human resource management

44.44% 22.22% 11.11%Knowledge services

44.44% 22.22% 11.11%Vertical specific BPO services

22.22% 33.33% 11.11%Procurement services

High Medium

Level of perceived risks in the service outsourced by Client organizations: BPO services

Low

41.67%

25.00%

25.00%

25.00%

16.67%

8.33%

8.33%

8.33%

16.67%

16.67%

8.33%

8.33%

8.33%

8.33%

Finance and accounting

Level of perceived risks in the service outsourced by Client organizations: BPO services

Customer interaction and support

Human resource management

Knowledge services

Vertical specific BPO services

Procurement services

High Medium Low



Finance and Accounting services are considered important by majority of the organizations in the context of Service Provider assessments

18



Risk profiling of Service ProvidersThe growing awareness of the risk management in the Indian IT/BPO industry was clearly evident from the survey, which displayed that almost ninety percent of the Client organizations undertake a risk profiling for their Service Providers.

The survey results also emphasize the importance of Information Security and Privacy with nature and criticality of the business outsourced along with sensitivity of the data exported to Service Providers being given the most important criterion for risk profiling.

Undertake risk profilingDo not undertake risk profiling

11.00%

89.00%

88.89%

88.89%

88.89%

66.67%

55.56%

44.44%

44.44%

Sensitivity of data exported to the Service Providers

Type of connectivity with the Service Providers

Dependency on the Service Providers

Size and maturity of the Service Providers

ISMS certification achieved by the Service Providers

Nature & criticality of the business/services outsourced

Security incidents/breaches in the past

Criteria used for risk profiling of Service Providers

89% of the Client organizations rely on risk profiling to determine the frequency of Service Provider assessments

19


Frequency of Service Provider assessmentsThe fact established in the previous question gets reestablished by the frequency of Service Provider assessments undertaken by Client organizations that perform risk profiling; the survey results show that the Service Providers identified under critical risk category undergo quarterly assessments.

A similar trend is observed for the Service Providers identified under ‘Medium’ and ‘Low’ risk categories, undergoing half yearly and yearly assessments by fifty six and forty five percent respondents respectively.

Organizations that do not undertake risk profiling, yearly assessments are preferred by almost twenty three percent of the organizations. Also eleven percent of Client organizations believe that the frequency depends on the trust and relationship between Client and Service Providers.

Frequency of assessing the Service Providers

33.33%

22.22%

11.11%

22.22%

55.56%

22.22%

11.11%

22.22%

22.22%

11.11%

44.44%

33.33%

Critical risk

High risk

Medium risk

Low risk

Negligible

Quarterly Half yearly Yearly

Clients’ perspectiveThe Service Providers with critical risk undergo quarterly assessments as per thirty three percent of Client organizations

20


21


Clients’ perspectiveThe cost of periodic Service Provider assessments is built into the service delivery cost of Service Providers, and is a part of the contractual terms

Budget and cost for Service Provider assessmentsThis question was aimed at identifying the cost impact of Service Provider assessments on Clients and Service Providers.

Results highlight that majority of the Client organizations allocate only a small portion of IT security budget for Service Provider assessments. Only one of the respondents indicated that the organization allocates significant portion of IT security budget for Service Provider assessments. On the other hand, majority of the Service Providers allocate a considerable portion of the IT security budget towards assessments. This is because the cost for periodic Service Provider assessments is built into the service delivery cost of Service Providers and is part of the contract with the Service Providers.

Service Provider respondents in the ‘Others’ category indicated that cost of the assessment could be borne by either party, and it depends on the relationship and understanding between the Client and the Service Provider.

Portion of the IT security budget allocated for conducting Service Provider assessments

44.44%

22.22%

22.22%

11.11%

Small

Considerable

Negligible

Significant

Cost of Service Provider assessments

55.56%

44.44%

22.22%

22.22%

11.11%

11.11%

11.11%The cost is borne at the time of the Service Provider assessments by the Service Provider

Efforts spent by the Service Provider resources in coordinating / facing the assessments are

billed by the Service Providers

Significant cost of the Service Provider assessmentscomprises of overhead expenses like travel, etc

for our assessors

The cost is borne at the time of the ServiceProvider assessments and is shared between

Client and Service Provider as per the contract

The cost is borne at the time of the Service Provider assessments by the Client

We allocate a portion of our IT security budget for conducting Service Provider assessments

The cost for periodic Service Provider assessments is a part of the contract

22


Portion of IT security budget allocated for facing assessments

66.67%

25.00%

8.33%

0.00%

Considerable

Small

Significant

Negligible

Cost of Service Provider assessments

66.67%

33.33%

33.33%

25.00%

16.67%

8.33%

8.33%

16.67%Others

The cost for periodic Service Provider assessments is apart of the contract

The cost is borne at the time of the Service Providerassessments by the Client

Efforts spent on Service Provider assessments is billed to the clients

The cost is borne at the time of the Service Providerassessments and is shared between Client and Service

Provider as per the contract

The cost is borne at the time of the Service Providerassessments by the Service Provider

Significant cost of the assessments comprises ofoverhead expenses like travel,and stay arrangements

for clients and/ or their sourced assessors We allocate a portion of our IT security budget for

Service Provider assessments


23


Modes of Service Provider assessmentsClient organizations prefer conducting onsite assessments post a self assessment by the Service Provider organizations either by their internal staff or by sourced assessors.

The survey results highlight that higher the risk perceived during risk profiling, more is the focus on assessments. Majority of the respondents conduct onsite assessments for critical, high and medium risk Service Providers. For low risk category of Service Providers, majority of the Client organizations adopt offshore self assessments.

Client organizations that do not perform the risk profiling of their Service Providers prefer to undertake onsite assessment by sourced assessors from auditing firms.

Type Self Assessment

(offshore)

Telephonic (offshore)

Onsite by Org Internal

staff

Onsite by org internal staff and sourced assessors

from auditing firms

Onsite by sourced

assessors

Third Party AssessmentsCategory

Critical risk 2 2 6 4 3 3

High risk 2 2 6 3 4 3

Medium risk 4 2 6 3 1 2

Low risk 5 3 4 1 0 0

Negligible 3 2 4 1 0 0

Clients’ perspective*For Client organizations that undertake risk profiling of Service Providers

*This data table is for eight Clients. Eight out of nine Clients interviewed undertake risk profiling.

24


*This data table is for eight Clients. Eight out of nine Clients interviewed undertake risk profiling.

Modes adopted by Clients for conducting Service Provider assessments

100.00%

75.00%

66.67%

66.67%

25.00%

25.00%

8.33%

8.33%

Onsite assessments are conducted by client’s internal staff

Onsite assessments are conducted by sourced assessors

Onsite assessments are conducted by an independent Third party

Telephonic assessments are conducted by sourced assessors hired by client organization

Telephonic assessments are conducted by client’s internal staff

Self assessment questionnaire are provided in an assessment tool available online; we directly

upload our responses and evidences inthe tool without any intervention of the client

Onsite assessments jointly conducted by sourced assessors and client’s internal staff

Self assessment questionnaire are sent through email and we revert with the filled questionnaire and

evidences without any intervention of the client


Onsite assessments by Client’s internal staff or sourced assessors is the preferred mode of assessment by Clients

25


Service Provider assessment challengesThe survey results provide insight into the factors that influence Information Security and Privacy assessments in IT/BPO organizations.

Subcontracting by Service Providers and comfort provided by certifications like ISO 27001 are the critical challenges faced by Client organizations in assessing Service Providers on Information Security & Privacy according to forty four percent of Client organizations. This is one of the reasons why Client organizations do not consider ISO 27001 certification as an alternative to Service Provider assessments.

44.44%

44.44%

33.33%

22.22%

22.22%

22.22%

22.22%

22.22%

11.11%

11.11%

11.11%

11.11%

11.11%

11.11%

11.11%

33.33%

11.11%

33.33%

44.44%

33.33%

55.56%

22.22%

55.56%

44.44%

22.22%

22.22%

22.22%

22.22%

33.33%

55.56%

44.44%

44.44%

11.11%

44.44%

22.22%

11.11%

33.33%

55.56%

11.11%

22.22%

55.56%

55.56%

44.44%

55.56%

44.44%

11.11%

44.44%

44.44%

Comfort/ assurance provided by certifications like ISO 27001

Challenges faced by Client organizations

Subcontracting by the Service Providers

Inadequate budget

Auditor accreditation and Auditors’ management

Service Provider commitment

Meeting multiple customer requirements

Quantum of assessments

Rising legal liabilities/regulatory requirements

Level of security awareness in the Service Providers

Ensuring compliance by your Service Provider

Sensitizing key resources of Service Providers

High direct and indirect costs

Nature of outsourced work

Tracking and closure of assessment findings

High Medium Low

Adoption of Non standardized Information Security and Privacy framework

Availability of skilled resources for conducting the assessments

Multiple Service Providers for different lines of services in multiple geographies


Subcontracting by the Service Providers and comfort provided by certifications like ISO 27001 are most significant assessment challenges faced by Client organizations

26



Factors such as cost, quantum of assessments were the least important challenges as perceived by Client organizations. Whereas, majority of Service Providers perceive high number of assessments around the year as one of the most significant challenges.

This difference in opinion regarding the challenges faced by Client and Service Provider organizations clearly indicates development of a robust assessment solution that meets the requirements of both parties.

50.00%

33.33%

33.33%

25.00%

16.67%

8.33%

33.33%

41.67%

25.00%

50.00%

33.33%

8.33%

8.33%

33.33%

33.33%

16.67%

25.00%

High number of assessments around the year

High Medium Low

Meeting diverse and varied assessment requirements of different clients

Closing the findings by providing evidences andsatisfying the client / auditors

High direct and indirect costs associated withgetting assessed multiple times

Ensuring availability of time and resources for coordinating/facing the assessments

Aligning to different areas of assessment/assessment methodologies adopted by

different clients High number of assessments around the year, and meeting diverse Client requirements are critical challenges faced by most of the Service Providers

27


Service Provider assessments – solutions and future landscapeAn attempt was made to identify the possible solutions for the challenges faced by organizations. The survey results reveal that approximately thirty three percent of Clients and forty two percent of Service Provider organizations prefer the development and adoption of an international standard for Service Provider assessment. Also, usage of BITS shared assessment program was selected by forty four Client Organizations as a first preference among solutions.

Results indicate that more than forty percent of Service Providers regard development and adoption of an internal standard as a first preference. Independent third party assessments conducted by Self Regulatory Organizations (SRO) promoted by the Service Providers tops the chart for Service Providers as a second preference.


Possible solution to overcome identified challenges

44.00%

33.00%

22.00%

22.00%

11.00%

11.00%

11.00%

11.00%

33.00%

22.00%

11.00%

11.00%

11.00%

11.00%

First reference Second preference Third preference

Industry & Service Provider promoted and standardized third party assessment

programs like BITS

Development and adoption of international standards for Service Provider

Assessment

There is no need for Service Provider assessments as data security and privacy

risks are already addressed through contracts

Self declaration by Service Providers for complying / fulfilling clients’ security requirements, thereby

making them liable for any security incident/databreach / violation should suffice

ISO 27001 certification should be accepted globally as a seal of trust and assurance; eliminating the need for Service Provider assessments

Independent third party assessments conducted by Self Regulatory

Organizations (SRO) promoted by the Service Providers

As per Client organizations, industry and Service Provider promoted and standardized third party assessment program can be used for assessments. This is closely followed by development and adoption of an international standard

28


Development and adoption of an international standard is the first preference chosen by Service Providers

Possible solution to overcome identified challenges

41.67%

33.33%

25.00%

8.33%

8.33%

0.00%

8.33%

25.00%

8.33%

41.67%

25.00%

8.33%

8.33%

33.33%

8.33%

16.67%

First preference Second preference Third preference

Development and adoption of international standards for Service Provider assessment

ISO 27001 certification should be accepted by all the clients globally as a seal of trust and

assurance; eliminating the need for Service Provider assessments

Industry & Service Provider promoted and standardized third party assessment programs

like BITS

Independent Third Party assessments conducted by Self Regulatory Organizations (SRO)

promoted by the Service Providers

There is no need for Service Provider assessments as data security and privacy risks

are already addressed through contracts

Self declaration by Service Providers for complying/fulfilling clients’ security requirements, thereby

making them liable for any security incident/data breach/violation should suffice


29


Influence of IT (Amendment) Act, 2008 on Service Provider assessmentsThere is widespread awareness about IT (Amendment) Act, 2008 in the industry.

More than fifty percent of Service Provider and thirty three percent of Client organizations report that IT (Amendment) Act, 2008 will assist in strengthening the data protection initiatives of Indian Service Providers, and would provide greater assurance to the Clients. Approximately thirty three percent of Client organizations believe that IT (Amendment) Act, 2008 will have no impact on their Information Security and Privacy needs as they need to comply with their country’s regulations outside of India.

A similar number of Service Provider organizations revealed that they were not sure about the impact/ influence of IT (Amendment) Act, 2008 on Clients’ assessment strategy.

Influence of IT (Amendment) Act, 2008 on Service Provider assessment strategy

66.67%

33.33%

33.33%

11.11%

0.00%

Provisions of IT (Amendment) Act, 2008 need to be appropriately incorporated in

the client-Service Provider contracts

IT (Amendment) Act, 2008 will have noimpact as we need to comply with regulations

we are subjected to

IT (Amendment) Act, 2008 will strengthen the data protection initiatives of Indian

Service Providers and therefore will help provide greater assurance to us for

outsourcing our work to India

I’m not aware of IT (Amendment) Act, 2008

Self declaration by Service Providers for complying/fulfilling clients’ security requirements,

thereby making them liable for any security incident/data breach/violation should suffice

IT (Amendment) Act, 2008 needs to be incorporated in Client-Service Provider contracts this would assist in strengthening the data protection initiatives of Service Providers


30



Influence of IT (Amendment) Act, 2008 on Service Provider assessment strategy

58.33%

33.33%

0.00%

8.33%Others

Not sure what will be the impact of IT(Amendment) Act, 2008

IT (Amendment) Act, 2008 will strengthen the dataprotection initiatives of Indian Service Providers andtherefore will help provide greater assurance to the

clients outsourcing their work to India

IT (Amendment) Act, 2008 will have no impactas clients need to comply with regulations

they are subjected to

31


Third party assessmentsThird party assessments have gained importance in the Indian IT/BPO industry. Both Clients and Service Providers revealed that third parties should conduct Service Provider assessments based on a standardized assessment methodology.

Majority of respondents emphasized that use of third parties would not only help in ensuring transparency and independence of the assessments but also save cost and efforts.

A few Clients also reported that their organization’s Executive Management may not approve/ recognize third party assessments.

Options for third party assessments

66.67%

66.67%

55.56%

55.56%

55.56%

55.56%

22.22%

11.11%

11.11%

Third parties can conduct assessments of theService Providers, based on a standardized

assessment methodology, at a defined frequency

Third Party assessments would save costs andefforts by avoiding the need for conducting

assessments of multiple Service Providers

Our regulators / customers may not approve or recognize Third Party assessments

Third party assessments can be successful only if it is accepted by the outsourcing community

and regulators

Third Party assessments will bring transparencyand independence

Adopting Third Party assessments may raisetrust and accountability issues

My organizations’ Executive Management may not approve or recognize Third

Party assessments

The Third Party assessments will ensure that our resources are able to focus on improving security

& privacy posture

Third Party assessments may not be able to address the specific assessment requirements arising out

of a particular Client-Service Provider relationship

Majority of Clients and Service Providers report that third parties should conduct Service Provider assessments, based on a standardized assessment methodology at a defined frequency


32


Third party assessments would save cost and efforts by avoiding multiple assessments from different Clients


Options for third party assessments

66.67%

41.67%

41.67%

41.67%

33.33%

16.67%

16.67%

Third party assessments may not be able to address the specific assessment requirements arising out a particular client– Service Provider relationship

Adopting Third Party assessments may raise trust and accountability issues

Third parties can conduct assessments of theService Providers, based on a standardized

assessment methodology, at a defined frequency

Third Party assessments would save costs andefforts by avoiding multiple assessments from

different clients

Third Party assessments will bring transparencyand independence

Third party assessments can be successful only ifall our clients accept it, irrespective of industry,

geography, Line of Service, etc.

The Third Party assessments will ensure that our resources are able to focus on improving security &

privacy posture instead of supporting multiple assessments

Thirty three percent of Service Providers expressed their concerns regarding the use of third party assessments stating that they third party assessments could be helpful if their Clients accept these.

33


Third party assessorsThe survey highlighted that the auditing firms empanelled by a joint industry consortium of outsourcers and the Service Providers are the most potential third party assessors for conducting independent Service Provider assessments, seemingly acceptable to both the Client and Service Provider organizations. This option was selected by sixty six and fifty percent of the Client and Service Provider organizations respectively. Such an industry consortium will represent the interests and challenges of both the sides – the Clients and Service Providers.

Potential entity acting as third party for conducting independent Service Provider assessments

66.67%

55.56%

33.33%

0.00%

Auditing firms empanelled by a joint industry consortium of outsourcers and the

Service Providers

Auditing firms empanelled by the outsourcers’ industry consortium

Self Regulatory Organizations (SRO)promoted by the Service Providers

Auditing firms empanelled by the Service Providers


Auditing firms empanelled by a joint industry consortium of Client and Service Providers can serve as third party assessors for conducting Service Provider assessments

34


Service Providers’ perspectivePotential entity acting as third party for conducting independent Service Provider assessments

58.33

50.00%

25.00%

8.33%

Self Regulatory Organizations (SRO)promoted by the Service Providers

Auditing firms empanelled by a jointindustry consortium of outsourcers and the

Service Providers

Auditing firms empanelled by the outsourcers’ industry consortium

Auditing firms empanelled by the Service Providers

35


Standards for Service Provider assessmentsNew domains of Information Security and Privacy have evolved. The domains which were not perceived to be critical are now among the most important security domains. Organizations have to comply with various models/standards/frameworks to adhere to the changing domains/rules and regulations. The organizations do no prefer to comply with so many standards and frameworks and this perception of the organizations was clearly evident from the survey results.

The survey results highlighted that Client organizations are keen on adopting a new standard mapped to ISO 27001, NIST – Special Publications, COBIT, ITIL etc. that meets all the regulatory requirements like GLBA, HIPAA, PCI DSS etc., as a potential standard for third party assessments. While this view was common amongst Client organizations and Service Provider organizations with eighty nine and sixty seven percent respondents respectively selecting this option, in reality Clients may be more inclined towards new standard than the Service Providers because they demonstrate compliance to different regulations. Though this has an indirect impact on Service Providers but they are primarily driven by contractual obligations.

Both Client and Service Provider organizations have similar number of respondents who selected ISO 27001 (sixty six percentages). It seemed that organizations are satisfied with the acceptance of ISO 27001 as a

A new standard mapped to ISO 27001, NIST-SP, COBIT, ITIL etc. that meets all the regulatory requirements like GLBA, HIPAA, PCI DSS etc. as a standard for third party assessments

Potential assessment standards for third party assessments of Service Providers

88.89%

66.67%

22.22%

22.22%

11.11%

ISO 27001 standard

A new standard mapped to ISO 27001, NIST– SP, COBIT, ITIL, etc. that meets

all the regulatory requirements like GLBA,HIPAA, PCI DSS, etc.

Others

Security and Privacy practices defined by SRO

BITS shared assessment framework


36


Potential assessment standards for third party assessments of Service Providers

66.67%

66.67%

16.67%

8.33%

ISO 27001 standard

Security and Privacy practices defined by SRO

BITS shared assessment framework

A new standard mapped to ISO 27001,NIST-SP, COBIT, ITIL, etc. that meets all the regulatory

requirements like GLBA, HIPAA, PCI DSS, etc.


standard bearing in mind the challenge faced by Client organizations with respect to the comfort/ assurance provided by Service Providers through ISO 27001 certification.

Respondents in the ‘Others’ category also suggested the use of a unified compliance framework for assessments.

37


Role of DSCI in Service Provider assessmentsThe question aimed to identify the role that DSCI could play as a Self Regulatory Organization (SRO), representative of both Client and Service Provider organizations, for conducting Service Provider assessments.

Majority of the Client organizations (sixty seven percent) indicated that DSCI should create a panel of competent auditors to conduct Service Provider assessments on behalf of DSCI, develop code of practices for Data Security and Privacy that should be adopted by the industry and define some criteria for assessing the maturity of the Service Providers.

Fifty eight percent of the Service Provider organizations indicated that DSCI should develop a Service Provider assessment program that comprises of framework, processes and methodology for conducting Service Provider assessments. This option was also highlighted by a similar number of Client organizations (fifty six percent).


Role of DSCI in Service Provider assessments

66.67%

66.67%

66.67%

55.56%

55.56%

55.55%

33.33%

11.11%

DSCI should establish a mechanism to managethe assessment results including sharing of results

with clients and respective Service Providers

Others

DSCI should have code of practices for securityand privacy that need to adopted by its members

The code of practices should have some criteria for assessing the maturity of the

Service Providers

Code of practices should take a note of existingpreparedness and initiatives of Service

Providers in the areas of security and privacy

DSCI should have mechanism to reviewthe Service Provider assessments results

on a regular basis

DSCI should have a Service Provider assessmentprogram that comprises of framework, processes,

methodology for the assessment

DSCI should create a panel of competentauditors who will conduct the assessments on

behalf of DSCI

Majority of Clients and Service Providers perpetuated that DSCI should have a Service Provider assessment program that consists of framework, processes and methodology of assessments


Role of DSCI in Service Provider assessments

58.33%

33.33%

25.00%

25.00%

25.00%

8.33%

8.33%

8.33%Others

DSCI should have a Service Provider assessmentprogram that comprises of framework, processes,

methodology for the assessmentsDSCI should create a panel of competent

auditors who will conduct the assessmentson behalf of DSCI

DSCI should have code of practices for security andprivacy that need to adopted by its members

The code of practices should have some criteria forassessing the maturity of the Service Providers

DSCI should have mechanism to review the ServiceProvider assessments results on a regular basis

DSCI should establish a mechanism to manage theassessment results including sharing of results with

clients and respective Service Providers Code of practices should take a note of existing

preparedness and initiatives of Service Providersin the areas of security and privacy


39


Outcome of Service Provider assessmentsThe survey results have unequivocally established that there should be organization-wide Security and Privacy maturity ratings, and domain specific ratings.

It was also indicated that the both Client organizations as well as Service Provider organizations prefer ratings over certifications.

Outcome of Service Provider assessments — Data Security

77.78%

55.56%

44.44%

DSCI should provide organizationwide security maturity rating

DSCI should provide domain specificmaturity rating (e.g. Application

security maturity rating)

DSCI should provide organization wide security certification to

Service Providers

Outcome of Service Provider assessments — Data Privacy

88.89%

44.44%

DSCI should provide organizationwide privacy certification to

Service Providers

DSCI should provide organizationwide privacy maturity rating


Organization-wide security and privacy maturity ratings may be provided as a result of Service Provider assessments

40



Outcome of Service Provider assessments — Data Security

58.33%

33.33%

16.67%

DSCI should provide organization wide security maturity rating

DSCI should provide organization wide security certification to Service Providers

DSCI should provide domain specific maturity rating (e.g. Application security maturity rating)

Outcome of Service Provider assessments — Data Privacy

75.00%

50.00%

DSCI should provide organization wide privacy maturity rating

DSCI should provide organization wide privacy certification to Service Providers

41


Sharing of Service Provider assessment resultsMajority of Client organizations (sixty seven percent) confirm that if DSCI assumes the role of a third party assessor, DSCI should conduct the assessment of the targeted Service Provider and share the report with the Client. Client organizations are also in favor of DSCI conducting assessments of the Service Providers and sharing the report with Service Providers’ Clients based upon the authorization of Service Provider (thirty three percent), while only eleven percent of the Client organizations suggested DSCI conducting the assessment of the Service Provider and submitting its report to the Service Provider.

In case DSCI assumes the role of a third-party assessor, Client and Service Provider organizations strongly support DSCI conducting the assessments of the targeted Service Provider and sharing the report with the Client on receiving requests from the Client

Most suitable assessment process in case DSCI assumes the role of a third party assessor

66.67%

33.33%

11.11%

11.11%

On receiving request from the client, DSCIconducts the assessment of the targeted

Service Provider and shares the report with the client

On receiving request from the ServiceProvider, DSCI conducts the assessment of the

Service Provider and based on theauthorization of Service Provider, DSCI shares

the report with Service Providers’ clients

On receiving request from the Service Provider,DSCI conducts the assessment of the Service

Provider and submits its report to the Service Provider.Service Provider then shares this report with his

clients when requested or otherwise

Based on DSCI assessments, ServiceProviders are benchmarked against defined

parameters and the report is made public


42


Most suitable assessment process in case DSCI assumes the role of a third party assessor

41.67%

41.67%

33.33%

8.33%

8.33%Others

Based on DSCI assessments, Service Providers are benchmarked against defined parameters and

the report is made public

On receiving request from the Service Provider, DSCIconducts the assessment of the Service Provider and

based on the authorization of Service Provider,DSCI shares the report with SPs’ clients

On receiving request from the client, DSCI conductsthe assessment of the targeted Service Provider and

shares the report with the client

On receiving request from the Service Provider, DSCIconducts the assessment of the Service Provider and

submits its report to the Service Provider. ServiceProvider then shares this report with his clients


More than forty percent of the Service Provider respondents suggested that in case DSCI assumes the role of a third party assessor, DSCI should conduct the assessment of the targeted Service Provider on receiving request from the Client and share the report with the Client. Same number of Service Provider organizations also supports the process of DSCI conducting the assessment on receiving request from the Service Provider and submitting the report to Service Providers’ Clients upon authorization.

43


The survey revealed some interesting findings and facts, both from Client and Service Provider perspective which were further validated by the secondary research. Based on the study of different assessment frameworks and findings of the survey, following are some of the salient preliminary recommendations for developing a Service Provider Assessment Framework:

DSCI should play a vital role in conducting Service Provider •

assessments and sharing the outcome in the ecosystem. It should:

Have an Service Provider assessment program that comprises of •

framework, processes, and methodology for assessments

Provide an organization wide security and privacy maturity rating, •

and domain specific maturity rating that may be shared in the ecosystem after taking the due permission of the Service Providers

A new standard mapped to prevalent standards should be •

considered as a potential assessment standard for third party assessments of Service Providers

DSCI as an industry initiative and a Self Regulatory Organization •

having representation from both the Client and Service Provider organizations should empanel auditing firms for conducting independent third party assessments.

The advantages of prevalent assessment frameworks like •

adaptability, flexibility, comprehensibility of assessment areas, process-driven, and measurement-based assessment process should be the characteristics of the Service Provider assessment framework that may be developed.

Recommendations

44

The assessment model should not become an overhead for an •

organization. It should be able to provide specific improvement opportunities that an organization should be able to imbibe. The assessment criteria should be transparent to the extent possible. The framework should be reviewed at least on an annual basis by a competent set of technical and process experts, preferably comprising DSCI members, members from third party assessors, and the industry.

The assessment framework should be applicable regardless of •

size of the organization and nature/ complexity of its processes. For this purpose, the assessment methodology adopted should contain a preliminary set of questions that can be self-assessed by an organization.

The Service Provider assessment framework should provide •

opportunities to organizations for implementing / performing the control activities according to the needs of the organization’s specific environment.

The framework should follow a process-approach and outline •

measurable assessment areas. The assessment areas that would link to specific business processes in an organization will be easy to align with overall business goals and objectives.

The framework should provide both – assessment area/ domain •

based maturity rating and organization-wide security and privacy maturity rating that summarizes the appraisal results and permit comparison amongst organizations.

The assessment model should be easy to comprehend and •

companies should be able to adopt on their own. All assessment areas should be broken down into a detailed list of specific and measureable steps that are easy to comprehend for assessment purposes.

45


AnnexuresThe study team analysed the shortlisted assessment frameworks for their advantages and disadvantages when applied to Client-driven Service Provider assessments. A summary of each framework is provided below:

Malcolm Baldrige National Quality ProgramThe Malcolm Baldrige National Quality Award program uses Malcolm Baldrige Assessment framework to assess the Quality of applying organization on seven critical areas for an organization. The framework is based on the processes implemented and the results achieved. The assessment methodology requires a self-assessment by the company applying for the award which assists in dissolving the disparities between small, medium and large sized companies, and the way the control is implemented at the organization level. The framework has assigned separate weights to each individual area. However, the framework does not provide quantitative requirements for the criteria laid down. The requirements are subjective, and there are chances that the results when examined by different examiners may not be reproducible.

Capability Maturity Model Integration (CMMI)The framework was developed by Software Engineering Institute (SEI) in an attempt to integrate several disciplines such as Process and Product development, Acquisition and Supplier Sourcing. The framework is focused towards software development organization however the framework can be implemented across various organizations. The framework can be implemented using Staged or Continuous representation. The Staged representation provides the Maturity level for organizations and the Continuous representation provides Capability Levels for as a measure assigned individually against each process area. The framework is flexible and provides opportunities to organizations for undertaking the

46

activities according to their organization specific environment. For assessments the framework undertakes a Process based approach thereby adding value to the organization in the process of being assessed for maturity.

BITS Shared Assessment ProgramThe financial services industry increasingly relies on information technology (IT) Service Providers to support the delivery of financial services. The BITS shared assessment framework was developed by BITS IT Service Providers Working Group to address the concerns, arising out of increased regulatory scrutiny of financial institution risk assessment and management of outsourced IT services. The framework adopts a risk based approach for conducting the assessments. The framework can be used as a reference by to create a common understanding of the financial services industry’s needs among Service Providers and help to address known control weaknesses in outsourced IT services, resulting in more consistent and appropriate levels of management by financial services companies that outsource IT services.

The eSourcing Capability Model for Client Organizations (eSCM-CL)The eSCM was developed by a consortium led by Carnegie Mellon University’s Information Technology Service Qualification Center (ITSqc). The eSCM is best practices capability models with two purposes (1) to give Client organizations guidance that will help them improve their capability across the sourcing life-cycle, and (2) to provide Client organizations with an objective means of evaluating their sourcing capability. The model aims at assisting Client organizations to continuously evolve, and improve their capabilities to develop stronger, enduring and more

47


trusting relationships with other Service Providers, and to meet the dynamic demands of business. The eSCM model provides the organizations the flexibility to choose from framework based (using the framework as best practices) or evaluation based (using the framework to undertake a formal assessment). The eSCM for Client organizations is composed of 95 practices covered under three dimensions Sourcing Life-cycle, Capability Area, and Capability Level.

Crisil Rating MethodologyCRISIL rates companies in variety of sectors. Since each sector has its own nuances, CRISIL has customized rating criteria and methodology for each sector to make the ratings exercise apt and meaningful. Extensive research is undertaken by Crisil before assigning rating to an organization. The rating methodology adopts a “risk-based” approach thereby helping the organization to align its activities in-line with the risks that matter.

Moody’s Working PaperMoody’s rates companies/covenants in various sectors/industries. Moody’s also report on market norms which are dynamic and may vary over time, by sector and by region. Moody’s covenant framework focuses on providing “point in time” assessment, with ongoing monitoring of covenants. Moody’s assessment is also based on the risk associated with the covenant.

The following criteria were chosen for comparing the assessment frameworks/ models:

Assessment Areas/ ease of use by the organization being •

assessed

Assessment Methodology/ scoring pattern•

Sharing of assessment results•

Acceptability/ popularity of the framework•

Independence of examiners•

Frequency of framework update to cater to future requirements•

48


49


Advantages and disadvantages of prevalent assessment frameworks/ models

Sl. no. Comparison Criteria Malcolm Baldrige Framework Capability Maturity Model Integration (CMMI) CRISIL Ratings BITS framework e-Sourcing Capability Model (eSCM)

Moody’s assessment framework

1. Assessment areas/ Ease of use by the organization being assessed

Advantages

The assessment criteria are non-•

prescriptive and adaptable by any organization regardless of its nature and size. It covers adequate details of the assessment criteria for any company to implement in a manner they desire and yet meet the expectations of the framework. In other words, the framework is not dictative or stringent in nature, thus making it easily usable by any organization.

The assessment areas are designed to •

cover the breadth of the organization which would be an expectation from any good assessment framework for greater adaptability in the industry regardless of the nature or size of the organization.

Disadvantages

The flip side is that the framework does •

not provide quantitative requirements for the criteria laid down. The requirements are subjective and hence there are chances that the results when examined by different examiners may not be reproducible.

The implementation of the assessment •

areas is person-dependent even for the organizations applying for the award. In other words, the judgment of the Point of Contact (POC) from the company applying for the award would greatly matter.

Advantages

The framework is flexible and provides •

opportunities to organizations for undertaking the activities according to their organization specific environment. The assessment model uses areas of assessment that are process driven namely, process management, project management, engineering, and support.

The framework is beneficial in aligning the •

organization’s business processes to business goals and objectives.

Disadvantages

Apart from specific goals and practices against •

each Process Area (PA) being assessed, the model contains generic goals and generic practices which an organization is required to meet and implement. This leads to unnecessary redundancies and are a major source of complaints on the standard in its current form.

The ease of use of the CMMI model by smaller •

organizations is a challenge due to its very nature of being long drawn. The model was originally designed for large companies for them to be able to streamline the processes surround the software development and engineering.

Advantages

CRISIL rates companies •

in variety of sectors. Since each sector has its own nuances, CRISIL has customized rating criteria and methodology for each sector to make the ratings exercise apt and meaningful. Therefore, these are easy to use and understand by the organization being assessed. Moreover, the rating criteria are publicly available.

CRISIL performs extensive •

research when finalizing the rating criteria for an industry.

Disadvantages

The assessment areas are •

limited to specific risks and issues, and do not help in tying to the overall business goals and objectives of an organization.

Advantages

The BITS assessment is non-•

prescriptive and is intended for consideration in conjunction with overall risk map of the organization.

The framework serves as •

a best-practices guide for financial organizations to implement. The guidelines are fairly detailed and easily used/ understandable without the need of a formal training.

The BITS shared assessment •

program has proved to be a boon for the Service Providers because it allows the companies to offset the cost, time and resources which would otherwise be spent in catering to the need of multiple financial companies.

Disadvantages

The BITS framework does •

not provide quantitative criteria, and therefore the implementation carried out by organizations using BITS may be difficult to measure or compare against another organization.

Advantages

The model not just helps in •

evaluating the capability of Service Providers; sourcing capability of Clients but also helps both, Service Provider and Client organizations to improve their capability across the sourcing lifecycle.

The assessment/ capability •

areas are fairly detailed and serve as best practices guidelines for the organizations to adapt.

The model clearly defines •

the purpose, outcome, team, sponsor, and model scope of the assessment which makes it clear and easy to use by the organization adopting the model.

Disadvantages

The eSCM model defines •

capability areas and capability levels in a subjective fashion. The demarcation between different capability levels cannot be measured in absolute terms.


way too many and this may make the implementation/ evaluation process time consuming.

Advantages

The assessment is specific •

to a particular instrument/ covenant and the outcome may be used as a comparison factor with other covenants.

Disadvantages

The assessment is point-in-•

time, and for new securities only. There is no ongoing monitoring of the assessed securities.

The assessment model does •

not draw inference from specific assessments to be able to rate the maturity/ capability of the organization issuing the instrument/ covenant.

50




1. Assessment areas/ Ease of use by the organization being assessed

Advantages

The assessment criteria are non-•

prescriptive and adaptable by any organization regardless of its nature and size. It covers adequate details of the assessment criteria for any company to implement in a manner they desire and yet meet the expectations of the framework. In other words, the framework is not dictative or stringent in nature, thus making it easily usable by any organization.

The assessment areas are designed to •

cover the breadth of the organization which would be an expectation from any good assessment framework for greater adaptability in the industry regardless of the nature or size of the organization.

Disadvantages

The flip side is that the framework does •

not provide quantitative requirements for the criteria laid down. The requirements are subjective and hence there are chances that the results when examined by different examiners may not be reproducible.

The implementation of the assessment •

areas is person-dependent even for the organizations applying for the award. In other words, the judgment of the Point of Contact (POC) from the company applying for the award would greatly matter.

Advantages

The framework is flexible and provides •

opportunities to organizations for undertaking the activities according to their organization specific environment. The assessment model uses areas of assessment that are process driven namely, process management, project management, engineering, and support.

The framework is beneficial in aligning the •

organization’s business processes to business goals and objectives.

Disadvantages

Apart from specific goals and practices against •

each Process Area (PA) being assessed, the model contains generic goals and generic practices which an organization is required to meet and implement. This leads to unnecessary redundancies and are a major source of complaints on the standard in its current form.

The ease of use of the CMMI model by smaller •

organizations is a challenge due to its very nature of being long drawn. The model was originally designed for large companies for them to be able to streamline the processes surround the software development and engineering.

Advantages

CRISIL rates companies •

in variety of sectors. Since each sector has its own nuances, CRISIL has customized rating criteria and methodology for each sector to make the ratings exercise apt and meaningful. Therefore, these are easy to use and understand by the organization being assessed. Moreover, the rating criteria are publicly available.

CRISIL performs extensive •

research when finalizing the rating criteria for an industry.

Disadvantages


limited to specific risks and issues, and do not help in tying to the overall business goals and objectives of an organization.

Advantages

The BITS assessment is non-•

prescriptive and is intended for consideration in conjunction with overall risk map of the organization.

The framework serves as •

a best-practices guide for financial organizations to implement. The guidelines are fairly detailed and easily used/ understandable without the need of a formal training.


program has proved to be a boon for the Service Providers because it allows the companies to offset the cost, time and resources which would otherwise be spent in catering to the need of multiple financial companies.

Disadvantages

The BITS framework does •

not provide quantitative criteria, and therefore the implementation carried out by organizations using BITS may be difficult to measure or compare against another organization.

Advantages

The model not just helps in •

evaluating the capability of Service Providers; sourcing capability of Clients but also helps both, Service Provider and Client organizations to improve their capability across the sourcing lifecycle.

The assessment/ capability •

areas are fairly detailed and serve as best practices guidelines for the organizations to adapt.

The model clearly defines •

the purpose, outcome, team, sponsor, and model scope of the assessment which makes it clear and easy to use by the organization adopting the model.

Disadvantages

The eSCM model defines •

capability areas and capability levels in a subjective fashion. The demarcation between different capability levels cannot be measured in absolute terms.


way too many and this may make the implementation/ evaluation process time consuming.

Advantages

The assessment is specific •

to a particular instrument/ covenant and the outcome may be used as a comparison factor with other covenants.

Disadvantages

The assessment is point-in-•

time, and for new securities only. There is no ongoing monitoring of the assessed securities.

The assessment model does •

not draw inference from specific assessments to be able to rate the maturity/ capability of the organization issuing the instrument/ covenant.

51




2 Assessment methodology/ Scoring pattern

Advantages

The assessment methodology requires •

a self-assessment by the company applying for the award which assists in dissolving the disparities between small, medium and large sized companies, and the way the control is implemented at the organization.

There are weights assigned to each •

criterion of the framework, which gives the organization a sense of direction on emphasis or focus for implementation/ assessment purposes.

The calculations involve an aggregate •

rather than an average of the evaluation dimensions, thus giving the overall picture more accurately despite being “result-focused”.

Disadvantages

The framework lays down the criteria •

for assessment but it is silent (in other words not transparent) about the method of assessment. Therefore, an organization applying for the award may not know what it missed vis-à-vis other companies, and why it did not receive the award.

The assessment methodology is •

subjective, and the scoring patterns assigns discrete percentage values to the evaluation dimensions. Which of the percentage would be chosen for a particular company is left to the judgment of the examiner.

In the self assessment process, the •

guidelines for High, Medium, and Low levels of importance are not defined.

The highest weights are assigned to •

the Results criteria and therefore, the framework is very “result-focused” rather than “process focused”. A highly result oriented approach may lead to dissolution of importance that processes play in an organization.

Advantages

The maturity model adopts a process •

approach, thereby adding value to the organization in the process of being assessed for maturity. An organization being assessed against this model would see increased number of processes under statistical control.

The model adopts a measurement based •

process improvement.

Individual processes operating in the company •

can be assessed or assigned capability levels namely, Optimizing, Quantitatively managed, etc.

Disadvantages

The assessment model may be complicated for •

companies to comprehend and adopt on their own. Hence, training by Software Engineering Institute (SEI’s) licensed consultants becomes imperative for companies. Consequently, the associated costs and administrative overheads required to undergo and maintain the assessment increases.

The model consists of two representations •

– continuous and staged which may lead to conflicting situations at some point during the assessment.

The numbering scheme of goals and practices •

is complicated. Example, goals of a process area are numbered “1 to n”. A specific goal of a process area therefore may have the label “SG 3” and a generic goal “GG5”. The practices corresponding to a goal use the index of the related goal and another index “1 to m” numbering it as one of the practices of this respective goal. Specific practices also have a capability rating indicated by a dash and the respective capability level. A specific practice therefore may have the label “Service Provider 3.3-1” and a generic practice “GP 5.1”.

The rating is subjective to the extent of the •

examiner’s understand of the business processes. The framework is rigid as the organization has to complete level 3 before completing level 4.

Advantages

The rating methodology •

adopts a “risk-based” approach as compared to CMMI that adopts a “process-based” approach and Malcolm Baldrige that adopts a “results- focused” approach. The advantage of risk based approach is the prioritization of the organization’s activities in-line with the risks that matter or high risks.

The rating methodologies and •

criteria are clearly spelt out, published and consistently applied. The rating/ grading scales are also publicly available.

CRISIL gives a detailed •

analytical report on the company’s strengths and weaknesses along with the ratings. The report helps in strengthening operations and improving the working of the company.

The rating scale used •

is objective and easily understood.

Disadvantages

The assessment methodology •

does not focus on overall strengths, weaknesses, processes operating in the organization, rather specific instruments.

Advantages

The framework adopts a risk-•

based approach and unlike CRISIL, applies to the overall risk map of the company.

The assessment is asset •

driven, helps in improving processes and controls in the organization. A by-product for financial organizations is compliance to the requirements laid down by the Federal Financial Institutions Examination Council (FFIEC).


framework is flexible and can be as detailed and as objective driven as required by an organization.

Disadvantages

There is no scoring pattern •

or rating guidelines provided to measure the effectiveness of implementation of the BITS framework. In other words, the assessor’s knowledge, competence and understanding of processes would play a big role in the deciding the final results.

While the assessment has •

resulted in lowering the overall cost of assessments. However, the assessments are fairly detailed and carry on for 3 to 8 weeks. The time and resources that an organization would spend may be difficult to offset for smaller organizations.

Advantages

The assessment model •

helps Service Providers to objectively differentiate themselves from the rest.

The model provides for •

two methods of adoption – framework-based (which is using the practice area details as best practice guidelines for an organization to implement), and measurement-based (which allows the organization to undertake a formal assessment of its practices and obtain certification).


contains evaluation types namely mini self-appraisal and mini evaluation which allows the flexibility to an organization to use only a sub-set of the practice areas.

Disadvantages

The model uses five different types of assessment methods, and does not require the organization to undertake a formal assessment by an external party. This may lead to the model being used mainly as a reference guide and lead to non-seriousness in adoption by many companies.

The mini evaluation and mini self-appraisal assessment strategies may give comfort over existing controls to the management of the organization without realizing that in reality these may be covering just some aspects of the overall areas of assessments.

Advantages

The framework adopts a •

risk-based approach, and looks after the needs of the investors.

The framework uses a •

qualitative rating scale of Strong/ good/ weak across a number of parameters associated with the level of protection offered to an investor. The definitions of Good, Strong, etc. levels are objectively defined and easy to understand.

The framework’s assessment •

methodology in assigning a rating is transparent and objective.

The assessments are •

quantitative in nature.

Disadvantages


does not relate back to the business goals and objectives of the company issuing it.

52




2 Assessment methodology/ Scoring pattern

Advantages

The assessment methodology requires •

a self-assessment by the company applying for the award which assists in dissolving the disparities between small, medium and large sized companies, and the way the control is implemented at the organization.

There are weights assigned to each •

criterion of the framework, which gives the organization a sense of direction on emphasis or focus for implementation/ assessment purposes.

The calculations involve an aggregate •

rather than an average of the evaluation dimensions, thus giving the overall picture more accurately despite being “result-focused”.

Disadvantages

The framework lays down the criteria •

for assessment but it is silent (in other words not transparent) about the method of assessment. Therefore, an organization applying for the award may not know what it missed vis-à-vis other companies, and why it did not receive the award.

The assessment methodology is •

subjective, and the scoring patterns assigns discrete percentage values to the evaluation dimensions. Which of the percentage would be chosen for a particular company is left to the judgment of the examiner.

In the self assessment process, the •

guidelines for High, Medium, and Low levels of importance are not defined.

The highest weights are assigned to •

the Results criteria and therefore, the framework is very “result-focused” rather than “process focused”. A highly result oriented approach may lead to dissolution of importance that processes play in an organization.

Advantages

The maturity model adopts a process •

approach, thereby adding value to the organization in the process of being assessed for maturity. An organization being assessed against this model would see increased number of processes under statistical control.

The model adopts a measurement based •

process improvement.

Individual processes operating in the company •

can be assessed or assigned capability levels namely, Optimizing, Quantitatively managed, etc.

Disadvantages

The assessment model may be complicated for •

companies to comprehend and adopt on their own. Hence, training by Software Engineering Institute (SEI’s) licensed consultants becomes imperative for companies. Consequently, the associated costs and administrative overheads required to undergo and maintain the assessment increases.

The model consists of two representations •

– continuous and staged which may lead to conflicting situations at some point during the assessment.

The numbering scheme of goals and practices •

is complicated. Example, goals of a process area are numbered “1 to n”. A specific goal of a process area therefore may have the label “SG 3” and a generic goal “GG5”. The practices corresponding to a goal use the index of the related goal and another index “1 to m” numbering it as one of the practices of this respective goal. Specific practices also have a capability rating indicated by a dash and the respective capability level. A specific practice therefore may have the label “Service Provider 3.3-1” and a generic practice “GP 5.1”.

The rating is subjective to the extent of the •

examiner’s understand of the business processes. The framework is rigid as the organization has to complete level 3 before completing level 4.

Advantages

The rating methodology •

adopts a “risk-based” approach as compared to CMMI that adopts a “process-based” approach and Malcolm Baldrige that adopts a “results- focused” approach. The advantage of risk based approach is the prioritization of the organization’s activities in-line with the risks that matter or high risks.

The rating methodologies and •

criteria are clearly spelt out, published and consistently applied. The rating/ grading scales are also publicly available.

CRISIL gives a detailed •

analytical report on the company’s strengths and weaknesses along with the ratings. The report helps in strengthening operations and improving the working of the company.

The rating scale used •

is objective and easily understood.

Disadvantages


does not focus on overall strengths, weaknesses, processes operating in the organization, rather specific instruments.

Advantages

The framework adopts a risk-•

based approach and unlike CRISIL, applies to the overall risk map of the company.

The assessment is asset •

driven, helps in improving processes and controls in the organization. A by-product for financial organizations is compliance to the requirements laid down by the Federal Financial Institutions Examination Council (FFIEC).


framework is flexible and can be as detailed and as objective driven as required by an organization.

Disadvantages

There is no scoring pattern •

or rating guidelines provided to measure the effectiveness of implementation of the BITS framework. In other words, the assessor’s knowledge, competence and understanding of processes would play a big role in the deciding the final results.

While the assessment has •

resulted in lowering the overall cost of assessments. However, the assessments are fairly detailed and carry on for 3 to 8 weeks. The time and resources that an organization would spend may be difficult to offset for smaller organizations.

Advantages


helps Service Providers to objectively differentiate themselves from the rest.

The model provides for •

two methods of adoption – framework-based (which is using the practice area details as best practice guidelines for an organization to implement), and measurement-based (which allows the organization to undertake a formal assessment of its practices and obtain certification).


contains evaluation types namely mini self-appraisal and mini evaluation which allows the flexibility to an organization to use only a sub-set of the practice areas.

Disadvantages

The model uses five different types of assessment methods, and does not require the organization to undertake a formal assessment by an external party. This may lead to the model being used mainly as a reference guide and lead to non-seriousness in adoption by many companies.

The mini evaluation and mini self-appraisal assessment strategies may give comfort over existing controls to the management of the organization without realizing that in reality these may be covering just some aspects of the overall areas of assessments.

Advantages

The framework adopts a •

risk-based approach, and looks after the needs of the investors.

The framework uses a •

qualitative rating scale of Strong/ good/ weak across a number of parameters associated with the level of protection offered to an investor. The definitions of Good, Strong, etc. levels are objectively defined and easy to understand.

The framework’s assessment •

methodology in assigning a rating is transparent and objective.

The assessments are •

quantitative in nature.

Disadvantages


does not relate back to the business goals and objectives of the company issuing it.

53




3 Outcome of the assessment/ Sharing of assessment results

Advantages

An organization, upon receiving the •

award becomes ineligible to apply for it after for a period of 5 years. This means that the framework allows more and more companies to become eligible to receive the award.

Disadvantages

The award restriction is 18 in a year •

and looking at the subjectivity or, non-transparency of the assessment methodology, this number may not be a good picture of the processes implemented by an organization applying for the award.

No communication is sent to the •

organizations whose applications are not selected by the Board of examiners.

Advantages

The model provides a single maturity rating •

that summarizes the appraisal results and permits comparisons across and among organizations.

The process of sharing results is transparent •

and the maturity ratings for assessed organizations are publicly available.

Disadvantages

The assessment model contains a •

unidirectional mapping between staged and continuous representations. However, if an organization chooses a maturity rating (staged representation); it does not indicate a reverse mapping to the capability levels at which the processes are operating.

Advantages

The ratings are under constant •

surveillance. They are revised as and when circumstances so warrant, and disseminated through the news media.

A rating history is maintained •

for a period of 5 years which gives an idea of an organization’s progression/ regression in the risks that matter.

Disadvantages

The outcome of the CRISIL •

ratings are issued in the form of an opinion on specific instruments, which does not have a fixed format that highlights what are the positives versus the negatives. Therefore, the results of the rating exercise cannot be directly used to improve on processes in the organization.

Relating the opinion issued •

back to the business goals, objectives and processes may be a tedious task.

Advantages

The outcome of the •

assessment is an Agreed Upon Procedures report which the Service Provider is free to share with all its Clients or outsourcers.


assessment also includes a remediation plan in-line with the requirements of the organization.

Disadvantages

There is no maturity rating •

or score provided to the organization that can be used to compare the company’s practices to other organizations.

Advantages

The outcome of each •

assessment method is clearly defined.


assessment gives the interested parties the comfort that the sourcing capabilities are indeed working fine.


assessment may be used as a differentiating factor by the organization thereby supporting the outsourcing process.

Disadvantages

The model focuses on capabilities and does not give a clear indication of the maturity of those processes.

Advantages


assessment is a rating assigned to a covenant which is easy to understand basis the guiding factors issued.

Disadvantages

The results are available in •

the form of opinion and do not always brings out the positives.

4 Acceptability / Popularity of the framework

Advantages

The results are conferred by the •

highest office in the United States which helps in making the framework widely acceptable.

The framework is acclaimed by the •

President of the country, thus making it popular and trusted.

The framework is promoted by public-•

private partnership, thus making it more acceptable.

Disadvantages

The flip side of the popularity is the •

bureaucracy and red-tapism that the adoption of the assessment framework may bring with it.

The value brought by the assessment •

framework to the organization while going through the assessment process cannot be measured or, is not visible. It does not influence or change the way things happen in an organization. Thus, many organizations may construe it as an overhead of documentation rather than being able to use it to bring about improvements in the organization.

Advantages

While going through the assessment process, •

the organization sees direct benefits / improvements being brought about in the organization. Thus, the assessment process is not seen as an overhead but something that adds value.

Disadvantages

The bodies of knowledge captured in CMMI •

models are only available for systems engineering, software engineering, product/ process development, supplier sourcing. Consequently, the maturity model is system/ software focused, and as such its tenets may not apply to industry sectors other than Services/ Technology/ Hardware.

Advantages

The CRISIL ratings are widely •

acceptable owing to the strong independence, right amount of confidentiality, and transparency of the final ratings.

Disadvantages

None noted.•

Advantages

The assessment is popular •

among financial institutions and helps them regulate the environment they operate in.

Disadvantages


program is not popular among industries other than financial.

Advantages

The model’s acceptability •

may be reasonable in the outsourcers-outsourcing community.

Disadvantages

The model may not gain as •

much popularity because it does not force a formal evaluation or certification.

The model may not be very •

popular because of the cost, time and resources required to be spent in reading, interpreting, implementing, and then evaluating (if need be) the detailed requirements.

Advantages

The objective and quantitative •

nature of the assessment framework makes it popular and acceptable in the community.

Disadvantages

The framework cannot be •

extended to other industries.

54




3 Outcome of the assessment/ Sharing of assessment results

Advantages

An organization, upon receiving the •

award becomes ineligible to apply for it after for a period of 5 years. This means that the framework allows more and more companies to become eligible to receive the award.

Disadvantages

The award restriction is 18 in a year •

and looking at the subjectivity or, non-transparency of the assessment methodology, this number may not be a good picture of the processes implemented by an organization applying for the award.

No communication is sent to the •

organizations whose applications are not selected by the Board of examiners.

Advantages

The model provides a single maturity rating •

that summarizes the appraisal results and permits comparisons across and among organizations.

The process of sharing results is transparent •

and the maturity ratings for assessed organizations are publicly available.

Disadvantages

The assessment model contains a •

unidirectional mapping between staged and continuous representations. However, if an organization chooses a maturity rating (staged representation); it does not indicate a reverse mapping to the capability levels at which the processes are operating.

Advantages

The ratings are under constant •

surveillance. They are revised as and when circumstances so warrant, and disseminated through the news media.

A rating history is maintained •

for a period of 5 years which gives an idea of an organization’s progression/ regression in the risks that matter.

Disadvantages

The outcome of the CRISIL •

ratings are issued in the form of an opinion on specific instruments, which does not have a fixed format that highlights what are the positives versus the negatives. Therefore, the results of the rating exercise cannot be directly used to improve on processes in the organization.

Relating the opinion issued •

back to the business goals, objectives and processes may be a tedious task.

Advantages


assessment is an Agreed Upon Procedures report which the Service Provider is free to share with all its Clients or outsourcers.


assessment also includes a remediation plan in-line with the requirements of the organization.

Disadvantages

There is no maturity rating •

or score provided to the organization that can be used to compare the company’s practices to other organizations.

Advantages


assessment method is clearly defined.


assessment gives the interested parties the comfort that the sourcing capabilities are indeed working fine.


assessment may be used as a differentiating factor by the organization thereby supporting the outsourcing process.

Disadvantages

The model focuses on capabilities and does not give a clear indication of the maturity of those processes.

Advantages


assessment is a rating assigned to a covenant which is easy to understand basis the guiding factors issued.

Disadvantages

The results are available in •

the form of opinion and do not always brings out the positives.

4 Acceptability / Popularity of the framework

Advantages

The results are conferred by the •

highest office in the United States which helps in making the framework widely acceptable.

The framework is acclaimed by the •

President of the country, thus making it popular and trusted.

The framework is promoted by public-•

private partnership, thus making it more acceptable.

Disadvantages

The flip side of the popularity is the •

bureaucracy and red-tapism that the adoption of the assessment framework may bring with it.

The value brought by the assessment •

framework to the organization while going through the assessment process cannot be measured or, is not visible. It does not influence or change the way things happen in an organization. Thus, many organizations may construe it as an overhead of documentation rather than being able to use it to bring about improvements in the organization.

Advantages

While going through the assessment process, •

the organization sees direct benefits / improvements being brought about in the organization. Thus, the assessment process is not seen as an overhead but something that adds value.

Disadvantages

The bodies of knowledge captured in CMMI •

models are only available for systems engineering, software engineering, product/ process development, supplier sourcing. Consequently, the maturity model is system/ software focused, and as such its tenets may not apply to industry sectors other than Services/ Technology/ Hardware.

Advantages

The CRISIL ratings are widely •

acceptable owing to the strong independence, right amount of confidentiality, and transparency of the final ratings.

Disadvantages

None noted.•

Advantages

The assessment is popular •

among financial institutions and helps them regulate the environment they operate in.

Disadvantages


program is not popular among industries other than financial.

Advantages

The model’s acceptability •

may be reasonable in the outsourcers-outsourcing community.

Disadvantages

The model may not gain as •

much popularity because it does not force a formal evaluation or certification.

The model may not be very •

popular because of the cost, time and resources required to be spent in reading, interpreting, implementing, and then evaluating (if need be) the detailed requirements.

Advantages

The objective and quantitative •

nature of the assessment framework makes it popular and acceptable in the community.

Disadvantages

The framework cannot be •

extended to other industries.

55




5 Independence of Examiners Advantages

The Panel of judges for the award work •

without compensation and nothing except limited travel expenses are reimbursed to them, which serves s a step towards ensuring unbiased assessments.

The Panel chairperson is reviewed •

every year by the Secretary of Commerce in the US.

Disadvantages

Panel member has a chance of serving •

a term of 6 years at a stretch, and yet continue to work with the company to which they belong. Hence, the independence of assessment process may be jeopardized.

There are no licensed personnel made •

available for spreading training and awareness on the framework.

Advantages

The Software Engineering Institute (SEI) •

provides a list of licensed consultants who can provide appraisal/ training services.

Disadvantages

None noted.•

Advantages

The rating committee •

comprises members who have the professional competence to meaningfully assess the credit analysis that underlies the rating, and have no concern with the company being rated. This makes the rating highly independent.

Disadvantages

None noted.•

Advantages

There are a set of listed •

companies that conduct the assessment of organizations.

Disadvantages

None noted.•

Advantages

The assessors are trained •

and certified by Carnegie Mellon University’s IT Services Qualification Center (ITSqc).

Disadvantages

Apart from the university’s •

ITSqc, the success of the model depends largely on the industry adopting it. Therefore, independence may be construed as an issue.

Advantages

The assessment makes use of •

analytics software which gives a sense of reliability to the assessees.

Disadvantages

In case the software solutions •

were not to work, the people trained in carrying out the assessment may not be available.

6 Frequency of framework update to cater to future requirements

Advantages

Over the period time, the framework •

has matured to keep in mind the future and dynamism associated with the marketplace, and is therefore now slated for a review once every two years.

Disadvantages

None noted.•

Advantages

The assessment framework has matured •

from the time of its inception, and released guidelines for implementation, and list of licensed consultants, since then.

Disadvantages

The framework does not have a set frequency •

of review/ revision.

Advantages

The ratings provide both •

short-term and long-term ratings, and the rating are re-evaluated as and when required.

CRISIL evaluates its rating •

criteria, methodologies, and procedures on a regular basis; and modifies or enhances them as necessary to respond to the needs of the markets.

Disadvantages

There is no specific frequency •

of review/ revision of CRISIL rating methodology.

Advantages

The Agreed Upon Procedures •

(AUPs) are updated at least once annually.

Disadvantages

None noted.•

Advantages

None noted.•

Disadvantages

The eSCM model does not •

have a fixed frequency for revision. It was last updated in the year 2004.

Advantages

None noted.•

Disadvantages

The model does not have a •

fixed frequency for revision.

56




5 Independence of Examiners Advantages

The Panel of judges for the award work •

without compensation and nothing except limited travel expenses are reimbursed to them, which serves s a step towards ensuring unbiased assessments.

The Panel chairperson is reviewed •

every year by the Secretary of Commerce in the US.

Disadvantages

Panel member has a chance of serving •

a term of 6 years at a stretch, and yet continue to work with the company to which they belong. Hence, the independence of assessment process may be jeopardized.

There are no licensed personnel made •

available for spreading training and awareness on the framework.

Advantages

The Software Engineering Institute (SEI) •

provides a list of licensed consultants who can provide appraisal/ training services.

Disadvantages

None noted.•

Advantages

The rating committee •

comprises members who have the professional competence to meaningfully assess the credit analysis that underlies the rating, and have no concern with the company being rated. This makes the rating highly independent.

Disadvantages

None noted.•

Advantages

There are a set of listed •

companies that conduct the assessment of organizations.

Disadvantages

None noted.•

Advantages

The assessors are trained •

and certified by Carnegie Mellon University’s IT Services Qualification Center (ITSqc).

Disadvantages

Apart from the university’s •

ITSqc, the success of the model depends largely on the industry adopting it. Therefore, independence may be construed as an issue.

Advantages

The assessment makes use of •

analytics software which gives a sense of reliability to the assessees.

Disadvantages

In case the software solutions •

were not to work, the people trained in carrying out the assessment may not be available.

6 Frequency of framework update to cater to future requirements

Advantages

Over the period time, the framework •

has matured to keep in mind the future and dynamism associated with the marketplace, and is therefore now slated for a review once every two years.

Disadvantages

None noted.•

Advantages

The assessment framework has matured •

from the time of its inception, and released guidelines for implementation, and list of licensed consultants, since then.

Disadvantages

The framework does not have a set frequency •

of review/ revision.

Advantages

The ratings provide both •

short-term and long-term ratings, and the rating are re-evaluated as and when required.

CRISIL evaluates its rating •

criteria, methodologies, and procedures on a regular basis; and modifies or enhances them as necessary to respond to the needs of the markets.

Disadvantages

There is no specific frequency •

of review/ revision of CRISIL rating methodology.

Advantages

The Agreed Upon Procedures •

(AUPs) are updated at least once annually.

Disadvantages

None noted.•

Advantages

None noted.•

Disadvantages

The eSCM model does not •

have a fixed frequency for revision. It was last updated in the year 2004.

Advantages

None noted.•

Disadvantages

The model does not have a •

fixed frequency for revision.

57


Glossary

References

BPO Business Process Outsourcing

Client organization or Client

Organizations that outsource work to Service Providers

CMMI Capability Maturity Model Integration

COBIT Control Objectives for Information and related Technology that provide a set of best practices for Information Technology management

COSO Committee of Sponsoring Organizations

DSF DSCI Security Framework

GLBA Gramm-Leach-Bliley Act

HIPAA Health Insurance Portability and Accountability Act

ISO 27001 An Information Security Management System standard published in October 2005 by International Organization for Standardization (ISO) and the International Electrotechnical Commission (IEC)

IT Information Technology

ITIL Information Technology Infrastructure Library is a set of concepts and practices for Information Technology Services Management (ITSM), Information Technology (IT) development and IT operations.

NIST National Institute of Standards and Technology

PCI DSS PCI DSS or Payment Card Industry Data Security Standard is a worldwide information security standard defined by the Payment Card Industry Security Standards Council. The standard was created to help payment card industry organizations that process card payments prevent credit card fraud through increased controls around data and its exposure to compromise.

SAS 70 Statement on Auditing Standards No. 70

Service Provider or SP Organization that work for Client organizations in an outsourcing model

Malcolm Baldrige Framework: •

http://www.baldrige.com/

Capability Maturity Model Integration (CMMI): •

http://www.sei.cmu.edu/cmmi/

Crisil rating methodology: •

http://www.crisil.com

BITS framework for managing technology risks •

for IT service provider relationships: http://www.bitsinfo.org/

Carnegie Mellon University-e Sourcing •

Capability Model: http://itsqc.cmu.edu/models/escm-cl/downloads.asp

Moody’s Working Paper: •

www.moodys.com

DSCI Security Framework: •

http://www.dsci.in/

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