SaaS Compliance: A Quick Guide for SaaS Buyers

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June 29, 2023
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In today's business landscape, organizations are well aware of the complications involved in implementing non-compliant SaaS solutions.

A study by Chargebee revealed that 41% of companies consider 'improving compliance management' a high-priority business goal.

Compliance is crucial for businesses striving for operational continuity while staying ahead in a dynamic market. Hence, SaaS vendors must be carefully vetted for the necessary compliance certifications.

This article aims to provide an overview of the SaaS compliance requirements a vendor should follow.  Additionally,  we'll walk you through the compliance checklist and the risks of non-compliant apps.

Our objective is for you to be aware of the necessary compliance certifications that vendors must have when signing a contract with vendors.

What is SaaS compliance?

SaaS compliance refers to the standards and norms that a SaaS vendor must follow. These rules, drawn up by various certifying organizations, seek to guarantee that companies operate legally and responsibly. Compliance obligations may differ depending on the location and data a SaaS company handles.

Specific SaaS compliance requirements address issues like cyber security (ISO 27001), revenue recognition (ASC 606), data protection (GDPR), and many more.

Typically, the security and legal teams in an organization stay on top of these compliance standards and ensure that the SaaS vendors or yourself (your products) adhere to the relevant rules based on where they operate and the type of their data.

Buyers can rely on SaaS compliance management to reduce risks, protect data integrity, and meet regulatory responsibilities. You can build confidence, maintain data privacy, and reduce the possible effect of security events by selecting compliant SaaS suppliers.

Why should buyers focus on SaaS compliance?

One of the biggest challenges for organizations using SaaS applications is compliance. Buyers should emphasize SaaS compliance for various reasons.

  • First, it guarantees that the SaaS applications they invest in comply with security and privacy standards. You can minimize the risk of third-party applications by choosing compliant vendors who are capable of securing sensitive data and ensuring regulatory compliance.
  • Second, concentrating on SaaS compliance management strengthens your relationship with your customers. By selecting vendors that adhere to industry standards and regulations, you can effectively communicate your dedication to protecting your customers’ data.
  • Further, SaaS compliance assists buyers in mitigating the dangers of data breaches and illegal access. Buyers can ensure that their data is treated with the highest care by dealing with compliant providers, lowering the risk of security incidents and costly repercussions.
  • Finally, SaaS compliance management protects buyers against legal obligations, litigation, and regulatory fines. Buyers can avoid financial and reputational implications by ensuring that their providers satisfy compliance standards.

SaaS compliance checklist for buyers

A SaaS compliance checklist clarifies where to start your compliance adventure and serves as a baseline to guide you through the execution phase.

You could also check out our SaaS agreement checklist to ace your contract negotiations.

SaaS vendors and their applications must adhere to some of the compliance regulations. SaaS compliance is divided into three broad groups: financial compliance, security compliance, and data privacy compliance.


Here is the checklist of key SaaS compliance certifications and requirements you can refer to during your procurement process to ensure that your SaaS vendors comply with the necessary regulatory standards.

1. Data security and privacy


71% of SaaS apps are GDPR-compliant, says a HackerNoon report.

The General Data Protection Rule (GDPR) is a rigorous regulation that governs the processing and storage of individuals' personal data in the European Union. While it was first developed for European data protection, its scope now includes worldwide enterprises.

This comprehensive European data privacy law empowers individuals to access, refresh, erase, object to processing, and export their data. Compliance with GDPR is crucial for organizations to safeguard individuals' data rights and avoid penalties imposed by regulatory authorities.


The California Consumer Privacy Act of 2018 (CCPA) strengthens and protects the privacy rights of California customers. This rule applies to businesses with clients and users in California, irrespective of where their headquarters are.

The CCPA allows customers more control over their personal information, including removing acquired data, opting out of data selling, and getting company privacy policy alerts.

For SaaS vendors operating in California, it is necessary to comply with the CCPA or risk facing penalties or legal action.


The Health Insurance Portability and Accountability Act (HIPAA) is a federal law that ensures that a patient’s sensitive information is protected from being shared with anonymous individuals without the patient’s consent.

It gives people access to their health records while protecting healthcare professionals' privacy. HIPAA compliance is required for vendors that deal with personally identifiable medical information, including healthcare and insurance providers.

Organizations must follow the rules, such as the Privacy Rule, HITECH and Omnibus Rules, and Security Rule, to satisfy HIPAA standards. Security protection and encryption for transmission and storage, safe data backup and deletion, and establishing Business Associate Agreements are all required. HIPAA compliance is critical for preserving patient privacy.


The Family Educational Rights and Privacy Act, also known as FERPA, protects the privacy of student education data. FERPA standards must be followed by educational facilities that receive federal funds. The Act gives parents and qualifying students several rights, including viewing and controlling their educational information.

FERPA compliance entails preserving the confidentiality and security of student records and their correct treatment and dissemination. It is done to ensure student privacy and retain the trust and confidence of students and their families.

2. Financial compliance

Financial compliance refers to observing financial, banking, and capital market regulations. This assures the integrity and security of financial transactions and reporting.


The Payment Card Industry (PCI) and Data Security Standard (DSS) are security guidelines for businesses that accept, transport, or store credit card information.

PCI DSS compliance assures that companies that deal with payments, credit card information, or authentication do so in a secure and safe environment.

PCI DSS frameworks apply to all businesses accepting payments, regardless of their geographic location, payment methods, or transaction volume.


International Financial Reporting Standards (IFRS) are widely acknowledged accounting standards that provide financial statement transparency, uniformity, and comparability for public corporations worldwide. Around 140 jurisdictions, including the European Union, Brazil, and India, have made IFRS standards a necessity.

They serve as standards for key financial documents like the statement of financial position, statement of total income, statement of modifications in equity, and statement of cash flows.

Companies that adhere to IFRS exhibit their commitment to standardized and accurate financial reporting methods, allowing for improved understanding and analysis of financial data across borders.


Generally Accepted Accounting Principles (GAAP) are a set of accounting standards created by the Financial Accounting Standards Board (FASB). It covers the complexities of accounting processes.

GAAP must be followed by companies that release public financial statements or are publicly listed on the stock exchange, per United States law.

It is designed to provide an organization’s relevant financial information to investors, creditors, and other users of financial statements. Private, non-profit organizations use GAAP certification as a benchmark to maintain credibility in their financial reporting.

ASC 606

ASC 606, established jointly by the FASB and the IASB (International Accounting Standards Board), is a strong revenue recognition standard for firms that enter into contracts to deliver products and services.

Built explicitly for the SaaS business, ASC 606 provides financial reporting clarity through a five-step process: contract setup, defining obligations, setting transaction prices, allocating prices, and recognizing income upon fulfillment of duties.

ASC 606 applies to all enterprises and helps account for client costs throughout the customer's lifetime to realize income from several sources.

3. Security compliance

Security compliance entails putting in place information security measures to protect the privacy, integrity, and accessibility of sensitive data. Do not sign contracts with SaaS vendors that do not adhere to these standards.


Just 18% of the 1,000+ SaaS applications have either secured SOC 2 or ISO 27001, says HackerNoon’s report.

A SaaS application must exhibit robust security protocols to ensure it is capable of keeping data secure. And this is why (Systems and Organization Controls) SOC 2 compliance is a must for SaaS vendors and their applications.

Widely regarded as the gold standard of compliance audits, the SOC 2 report audits client data management and demands adherence to at least one of the five Trust Services Criteria: security, privacy, confidentiality, processing integrity, and availability.

By acquiring a SOC 2 certfication, vendors can reassure buyers that they emphasize data security and proper management, fostering trust and confidence in their services.

ISO 27001

The International Organization for Standardization (ISO) has created a set of principles for information security called Information Security Management Systems (ISMS).

Organizations can use ISMS to identify, analyze, and mitigate security threats; and to create, implement, monitor, and continuously improve their security practices to safeguard data.

The primary focus of ISO 27001 is to help organizations protect sensitive information. By adhering to ISO 27001 standards, SaaS vendors demonstrate their commitment to maintaining a robust information security management system. This page on ISO 27001 certification can reassure clients of your utmost dedication to securing their sensitive information.

Risks of selecting non-compliant applications

To begin with, non-compliant apps lack adequate security measures, rendering them vulnerable to data breaches and cyberattacks. This puts sensitive customer data, intellectual property, and confidential information at risk.

Violations of data protection and privacy rules infringe on individuals' rights and subject the buyer to legal ramifications. This can lead to regulatory fines, legal challenges, and reputational damage, severely impacting the buyer's operations and relationships with stakeholders and clients.

Here's a quick rundown of the risks,

  • Data and security breaches
  • Data privacy hassles
  • Issues in running business operations
  • Penalties and lawsuits for loss of data
  • Reputational damage
  • Loss of market advantage

Buyers can reduce these risks by insisting on frameworks and ensuring that the SaaS vendors are secure, private, and legally compliant. It is safer to foster a secure and trustworthy business environment, reducing possible interruptions and protecting the buyer's interests.

How CloudEagle can help you with SaaS compliance

Ensuring all the vendors and their applications comply with the latest security regulations can be tedious when done manually. This is where a centralized SaaS management platform like CloudEagle can help.

CloudEagle is an ISO 27001, GDPR, and SOC 2 certified platform that integrates seamlessly with your internal systems and applications to gather relevant data. With centralized visibility, you can easily verify the trustworthiness and compliance certification of each applications without hassles.

The procurement workflows of CloudEagle and assisted buying experts will help you streamline your SaaS buying process. They'll ascertain that all your vendors are vetted for compliance requirements before signing contracts.

Make sure that all the applications in your SaaS stack comply with regulatory standards using a SaaS management and procurement platform before it is too late. Get onboarded in 30 minutes and keep your SaaS procurement process secure.

Frequently asked questions

1. How can organizations maintain compliance while employing third-party SaaS vendors?

Here are the key SaaS compliance requirements:

  • Make a list of all your vendors and identify any sensitive data.
  • Make sure you adhere to the SaaS compliance checklist.
  • Perform due diligence on vendors before signing any contract, and assemble a team to identify risks and ensure compliance.

2. What are some strategies for ensuring SaaS security?

Access controls, firewalls, encryption, vulnerability scans, incident management programs, and frequent internal audits are some essential SaaS security measures.

3. What are the SaaS compliance best practices?

  1. Establish policies and select a chief compliance officer (CCO).
  2. Schedule frequent monitoring and audits to verify that security and compliance rules are followed.
  3. Implement compliance across the software development lifecycle.
  4. To address security events, implement a strong incident management procedure.
  5. Provide extensive training to stakeholders on compliance obligations.
  6. Review policies on a regular basis and stay current on regulatory changes.
  7. Automate procedures to increase efficiency and accuracy, such as recognizing revenue and order-to-cash cycles, with technologies like CloudEagle.

Written by
Prasanna Naik
Co-founder, CloudEagle
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