The Importance of Vendor Risk Assessments

When buying a car, do you rush right out to the dealership and purchase the first car you find online? Or, do you perform your research and kick the tires, taking it for a test drive? Most of us will conduct our “due diligence” before buying a car and this includes researching the types of cars we’d like to buy, taking several test drives and checking out the mechanics of the car.  This same due diligence should be done for each of the vendors that you plan to use within your company in the form of a vendor risk assessment, regardless of their size. In fact, current vendors within your company should be reviewed every one to two years. For example, did someone review their financials? Do you know if you can get your data back if they go bankrupt? Do you know if they’re governed by laws outside of your country?

In larger companies, vendor risk assessments are typically performed by risk analysts, technology auditors, and information security folks, working in conjunction with the vendor management and procurement departments. In smaller companies, there may be a one or two person team responsible for conducting the vendor risk assessment. In many startup organizations, vendor risk assessments can be an afterthought. If you don’t perform a vendor risk assessment on your vendors today, take a look at this Risk Assessment Toolkit from the State of California’s Department of Technology, Information Security Office to get you started. There are many other sample templates and resources available online, as well. This is a great video on assessing technology vendor risk and security from Monte Ratzlaff, Security Manager, at UC Davis Health System, as he presents “Vendor Risks: Evaluating the Security of New Technology”.

At this point, some of you may think, “well, I don’t need a risk assessment on ____ vendor (insert name of vendor), they’re huge!”. Right? Wrong. I’ve worked with technology audit professionals on the review of hundreds (if not thousands) of technology vendors and yes, some of those “huge” vendors can have red flags for you and your company. Whether it’s the fact that they’re in the middle of a merger, they’re outsourcing their development team, or they don’t have enough insurance to cover you in the event of a breach, the scenarios can vary, depending upon what your company considers a risk and how that risk is categorized. If you need a tool to understand risks associated with the project you’re considering, take a look at this post by BrightHub PM, it has a lot of great info on creating a risk matrix and how to use it.

In the end, just think of a vendor risk assessment as a way to kick the tires of the prospective vendor before buying a lemon whose carburetor is going to explode once you drive it off the lot. If you’re interested in performing a proof of concept or proof of technology with the vendor once they pass the vendor risk assessment, check out a former post that I wrote on this topic and good luck!


Telling a Vendor Your Project Has Stopped

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One day your project’s on track, humming along. The next day, due to corporate changes, the project has basically stopped. It’s got a faint pulse, there’s talk of a “holding pattern until next quarter”, but you know that pulse is fading fast. The problem is that there have been several vendors involved in your project and they were hoping for some healthy first quarter revenue recognition once the technology solutions were chosen and the contracts were signed.

Breaking the news to your vendors that the project has stopped will suck. On top of this, expect them to be frustrated. So, this is something that needs to be handled carefully. Recognize that the vendors you’re breaking this news to will have probably worked on this potential deal for a year, maybe more. They’ve spent time on the road, away from their families, staying in hotels with bad beds, eating fast food, and basically reacting to your company’s every whim in hopes of closing the sale. You may be thinking, “yeah, but that’s what salespeople do, what’s the big deal?”. Well, it’s a big deal to them, and in breaking the news to them, let them know that things have slowed down and that it doesn’t look like it’s going to work out. Most importantly, don’t give them false hope. Now, if a vendor disrespectfully yells, curses or generally acts like a horses rear-end during the discussion, well…better to find out now then in the middle of your project.

The silver lining in all of this is that the good vendors will be frustrated, but they’ll hang in there with you. They may not return your call within five minutes of receiving it when you call next time, but they’re not going to blame you for issues that were out of your control. When the chips are down, you’ll know which vendors you can count on. The vendors that only cared about the sale and not you as a client will walk away. The ones that know their worth as a company, believe in their product and know that you’ll be an awesome client will stick with you through thick and thin.

Are You Using “Test” Data in the Cloud?

CloudSecurityKeyhole_468Yes, you read that correctly. The word test is in quotation marks, as in “is it really test data that you have in the vendor’s cloud?”. Astonishingly enough, at least 85% of financial institutions are using live data in their test environments [1]. Could this be you and are you protecting your organization against a data breach effectively?

When a cloud technology vendor makes an offhand remark like, “yeah, we can create a test environment for you and load your test data into the cloud while we work through a Non-Disclosure or Proof of Concept agreement with your legal team”, be afraid. Be very afraid.

Now, I’m not knocking the technology vendors. In fact, to them this is a natural part of the engagement. What you have to be aware of is whether your company’s test data is truly “test data” or not. For example, if you’re in the financial or healthcare sectors where a data breach could expose Personal Health Information (PHI) or Personally Identifiable Information (PII), you should understand your test data thoroughly.

Once you understand your test data, think about putting together a more robust agreement with the vendor besides a Non-Disclosure or Proof of Concept agreement. Non-Disclosure and Proof of Concept agreements typically do not contain the language to protect your company against a data breach. A Master Services Agreement or Subscription Services Agreement should be reviewed by your legal or contracts team to determine if your company will be protected while using the vendor’s cloud if there is a breach with regard to the test data.

Karen Hsu of Informatica explains that “because data stored in a cloud-based ‘sandbox’ environment for testing purposes is vulnerable, it should be masked to protect sensitive information” [2]. She recommends using an automated masking tool to assist with the protection of your data. Regardless of what tools you use, your “test” data should be understood before loading any of it into a vendor’s cloud environment.


[1] Dark Reading News. (2010, March). Live Data In Test Environments Is Alive And Well — And Dangerous. Retrieved from—-and-dangerous/d/d-id/1133220?

[2] Hsu, Karen. (2013, March). Masking Test Data in the Cloud. Retrieved from

Preventing a Cloud Data Breach

Breach-WordsMany of you reading this have not (thankfully) experienced a cloud data breach with your technology vendors. However, a cloud data breach is always on the forefront as more businesses embrace cloud technology.

What are the chances that your organization could have a cloud data breach? According to research performed by the Ponemon Institute most companies will have small data breaches rather than large data breaches [1]. Does this mean you can breathe easy? Not so fast. For those of you in the retail and public sectors, your likelihood of experiencing a data breach is higher than those of you in the transportation, communications or even financial sectors [1]. However, each sector is impacted and the average cost of managing a data breach per organization is approximately $5.9 million with the average cost spent per breached record at $201 [1]. 41% of the respondents surveyed in the Ponemon Institute’s research said that malicious or criminal attacks were responsible for their data breach and 31% said that employee negligence was the root cause [1].

With those facts in mind, how do you prevent a cloud data breach?  The Ponemon Institute’s research states that “the most profitable investments companies can make seem to be an incident response plan, a strong security posture, the involvement of business continuity management and the appointment of a CISO with enterprise-wide responsibility” [1]. In addition to this, asking potential (and current) vendors about their cloud technology is also key. This is a nice article written by Julie Lopez that focuses on the right questions businesses should ask their technology vendors.  Her article mainly focuses on health care, but makes a lot of great points that everyone should read regarding vendor management. Speed to market is critical these days and cloud technology gives organizations this benefit. However, this speed to market mentality must be tempered with a sound risk mitigation strategy in order to reduce the chances of a costly data breach.


[1] Ponemon Institute. (2014, May). 2014 Cost of Data Breach Study: United States. Retrieved from

What Happens to Bad Software?

sadThere are a lot of things that happen to bad software. Back in the early 80’s, Atari decided to bury their bad software in the New Mexico desert. Literally, bury it.

It’s not 1983, but bad software still gets buried. It gets buried in a different sense. It gets bought by another vendor and “updated”, it’s “transformed” from a server-side application to a “cloud-based platform”, and lest we forget the “let’s customize the heck out of it until it’s unrecognizable and works better” (or worse in many cases) approach.

If you’ve been in technology for any length of time, you’ve probably worked with bad software. What makes it so bad? The bugs? The worthless GUI? The endless hours of futile user acceptance testing?  To me, it seems that there’s a gradual tipping point for bad software where the project goes from “Wow, let’s buy it” to “Well, let’s see how the requirements and design phases play out” to “did they even unit test this?” to “the end users hate user acceptance testing because the bugs are so bad”.

How can bad software be fixed? Or, can it be fixed at all?  Honestly, bad software is a real challenge.  You’ve got users who are being told by their managers that they have to use it, senior managers who are trying to ensure that they’re not scalped by their CEO / CFO for purchasing bad software, and a technical team managing so many workarounds related to the bad software that there are workarounds to the workaround.

If your project is using the Waterfall software development life cycle approach, the decision to pull or somehow salvage bad software has to be made early.  Don’t attempt optimism in the case of bad software.  If it’s broken and you know it, go back to the vendor and work with them to fix it before you roll it out to your end user population.  Keep in mind that this will probably throw your project into the red and you won’t be the most popular person until you get the project back on track, but it’s worth it. Talk to your stakeholders and explain the situation, because end users shouldn’t be held responsible for unit testing a bad software product.  However, if your project is using an Agile approach, you’re usually in a better place, as the 30 day sprints are more flexible and allow iterative changes to be made to the product.

As project managers, we’re responsible for the entire project, including (unfortunately) bad software. So, come up with a game plan to work with your vendors, stakeholders and project team to ensure that you aren’t rolling out bad software. Your end users will thank you!

Staying Relevant

trexA friend of mine recently mentioned that he was a “dinosaur” as we were discussing different mobile social media platforms. I started thinking, “How can we, as technology vendor management and procurement professionals, stay relevant in an age of such rapidly changing technology?” For all of you “dinosaurs” out there, here are a few things to assist you in coming out of the Mesozoic Era:

1) Create a Twitter account. Yes, I’m talking to you. Don’t roll your eyes! Twitter is an amazing place where information is spread so quickly that you’ll see it on Twitter before mainstream media picks it up. How does this affect you? Well, if you’re putting together a deal with a certain vendor (think successful start-up) and they’ve been bought out (say by a behemoth T-Rex vendor), you’ll typically find it on Twitter first.

2) Try Blogging. Now you’ve started to panic. “Blog?! I have to Blog?” If you’re just punching in and punching out, waiting for the next boat to Shangri-la, then don’t worry about it. However, if you’re passionate about your field and you have something to say, consider writing your own blog or posting for someone else’s blog. For me, it’s exciting to be able to share my knowledge but also learn from others as I read their blogs.

All in all, staying relevant in the field of technology vendor management and procurement is very important, so give it a try and find me on Twitter, @vendorchronicle!

Unlimited Liability for Breach of Confidentiality in SaaS / Cloud Contracts

I recently opened up a contact form for readers if they had any questions about technology vendor management and I received this great question from a reader. It does step into the legal realm of contract management and since I’m not an attorney, please understand that my below response isn’t legal advice, it’s based on years of working with technology vendors and technology contracts.

Unlimited liability for breach of confidentiality: Is it practical to expect SaaS suppliers to accept that risk in this era of very public security breaches?  

It’s not unreasonable or impractical to include this type of language in your SaaS (Software as a Service) / Cloud contract. From my experience, including unlimited liability for breach of confidentiality in your vendor’s contract hinges on one thing: your data.  What type of data do you want to remain confidential?  Is there financial, corporate information, protected health information (PHI), or personally identifiable information (PII) being stored within the SaaS / Cloud product?  Where will the confidential data reside? Offshore, onshore, nearshore, offsite, onsite? If it’s a true cloud provider, your data will be sliced and diced on servers across the globe. Do you have the option of a private or hybrid cloud with this vendor? Will there be any vendor resources performing patch / breakfix / maintenance work to the product that will see this confidential data? If so, where are they located and what data would they see as they performed this work?

In addition to the initial research regarding the type of confidential data to be stored, it’s important to perform a complete risk assessment of the project and the vendor’s products in the beginning of the purchasing engagement (preferably in the sourcing phase, not the contracting phase). My most recent post digs more into vendor vetting and it includes a great video from Monte Ratzlaff, Security Manager, at the UC Davis Health System, who elaborates on the issue of vendor risk.

From a contractual standpoint, vendors typically take issue with unlimited liability of any kind. That’s not to say that you can’t add the unlimited liability for breach of confidentiality language in your contract for the first draft and see what the vendor comes back with as far as redlines. Vendor pushback on unlimited liability is to be expected and I would recommend finding a back fence position if they don’t accept it. This back fence position could be anything from including a monetary cap in the contract (i.e. the vendor will pay $1 million related to the breach and then you’re responsible for any fees over the cap) to other remedies that would effectively make your company whole in the case of a breach. If you’re in an industry such as finance or healthcare, a public breach of confidential information could have severe ramifications for your business and if the monetary cap is too low, your company will be picking up the tab for any additional fines past the amount of the initial cap.

Overall, I would say that it’s perfectly reasonable to include unlimited liability for breach of confidentiality in your company’s SaaS / Cloud contracts depending upon the type of confidential data to be stored and your line of business. However, keep in mind that many vendors may take issue with it, and if this is the case, be prepared with a back fence position that will protect your company.