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HomeGRC CentralSOC 2Who Needs SOC 2 Compliance

Who Needs SOC 2 Compliance? A Complete Breakdown

Who Needs SOC 2 Compliance?

What's Inside

Discover who needs SOC 2 compliance and why it matters for SaaS, MSPs, financial services, healthcare providers, and any business handling sensitive data.

Contents
SOC 2 Compliance: A Data Security FrameworkWhich Industries and Organizations Need SOC 2 Compliance?Indicators That Your Organization Needs SOC 2 ComplianceHow to Prepare for a SOC 2 AuditHow Drata Can Help You Streamline Your SOC 2 ComplianceSOC 2 Compliance Frequently Asked Questions (FAQs)

As organizations increasingly store, process, and transmit sensitive customer data through cloud-based services, they're creating new security risks. Every new cloud solution introduces potential vulnerabilities—vulnerabilities that are expensive to remediate if they’re exploited by malicious actors. IBM's Cost of a Data Breach Report found that the average cost of a data breach reached $4.88 million in 2024, a 10% increase over the previous year and the highest total ever. 

To protect against these escalating costs and security threats, SOC 2 compliance has emerged as the gold standard for data security and privacy. While not mandatory, SOC 2 gives organizations a framework to protect sensitive information and demonstrate commitment to strengthening their security posture.

Understanding whether your organization needs SOC 2 compliance doesn't have to be complicated. Below, we dive into what SOC 2 compliance means, who needs it, and how to determine if it's right for your business.

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SOC 2 Compliance: A Data Security Framework

SOC 2 (System and Organization Controls 2) is an auditing framework created by the American Institute of Certified Public Accountants (AICPA) to evaluate how organizations protect customer data.

Organizations can customize their SOC 2 compliance program based on their specific risk management needs and business operations. The framework's flexibility lets you implement security controls that fit your business, rather than following a one-size-fits-all checklist of requirements.

The Trust Services Criteria (TSC)

SOC 2 compliance revolves around five Trust Services Criteria (TSC). These criteria set the standards for how organizations handle sensitive data and maintain their systems.

The security criterion, also known as the Common Criteria, is the foundation for every SOC 2 audit. Your organization must include it in your assessment. The remaining four criteria are optional—you can select them based on your business needs and customer requirements:

  • Security protects your systems and data from unauthorized access through tools like firewalls, multi-factor authentication, and intrusion detection.

  • Availability focuses on system performance monitoring, disaster recovery, and incident handling to keep your services running when customers need them.

  • Processing Integrity validates that your systems work as intended, delivering accurate, timely, and authorized processing of data.

  • Confidentiality safeguards sensitive data using encryption, access controls, and strict data handling procedures.

  • Privacy governs how you collect, use, retain, disclose, and delete personal information.

SOC 2 Type 1 vs Type 2: What’s The Difference?

When a customer asks for a SOC 2 report, they'll specify whether they need a Type 2 or if they'll accept a Type 1. Both reports verify SOC 2 compliance, but they serve different purposes and require different preparation.

A Type 1 report captures your security controls at a single point in time. You can begin this audit immediately after setting up your compliance program. It answers one key question: Are your SOC 2 controls appropriately designed right now?

A Type 2 report examines your security controls’ operating effectiveness over a period of time—typically 6 to 12 months. It validates not just the design of your internal controls but also their consistent operation throughout the audit period. Most customers and business partners request Type 2 reports because they demonstrate a sustained commitment to information security.

In a nutshell, the key differences between SOC 2 Type 1 and Type 2 are:

  • Timeline: Type 1 is a snapshot of a point in time, while Type 2 covers months of operation.

  • Preparation: Type 1 requires current compliance, while Type 2 demands sustained compliance.

  • Customer preference: Most customers favor Type 2 for its comprehensive view of an organization’s compliance posture.

Which Industries and Organizations Need SOC 2 Compliance?

The rise in cloud services and digital data handling has expanded the scope of organizations that need SOC 2 compliance. Understanding whether your business needs SOC 2 starts with evaluating how you handle customer data and who your customers are.

SaaS Companies and Cloud Service Providers

Software-as-a-Service (SaaS) companies handle everything from customer data to financial records and internal communications. If you're running a SaaS platform, your customers are essentially trusting you with their operational backbone. Every time someone logs into your platform, uploads a file, or processes a transaction, they're placing their sensitive data in your hands.

Cloud service providers face similar scrutiny. Whether you're providing infrastructure, platform, or software services, your customers need assurance that their data won't end up in the wrong hands.

For both SaaS and cloud providers, SOC 2 compliance is becoming table stakes for winning enterprise contracts. Large organizations won't even consider providers without it, and smaller companies increasingly recognize its value when choosing vendors.

Managed Service Providers (MSPs)

Managed Service Providers (MSPs) often have admin-level access to their clients' networks, systems, and data. They're responsible for keeping business-critical systems running, managing security updates, and handling sensitive information across multiple clients.

This privileged position comes with heightened security expectations. When you're an MSP, a security breach doesn't just affect your organization—it could potentially compromise all your clients' systems. 

For MSPs, SOC 2 compliance is a powerful competitive advantage in a crowded market. It shows potential clients that you take their security seriously and have the controls in place to protect their assets. 

Data Centers and Financial Services

Data centers and financial services organizations deal with a perfect storm of sensitive information and regulatory requirements. Data centers store everything from intellectual property to customer records. Financial services firms handle people's life savings, process millions in transactions, and maintain detailed records of their customers' financial lives.

The stakes couldn't be higher. A single breach could expose sensitive financial data, trigger regulatory investigations, and shatter customer trust built over decades. Financial technology companies are watched even more closely as they bridge the gap between traditional banking and digital innovation. Without SOC 2 compliance, these organizations struggle to prove their security practices meet the rigorous standards their industry demands.

Just like in other industries, SOC 2 compliance helps these companies compete effectively. Large enterprise customers often require their financial services providers and data centers to maintain SOC 2 compliance before signing contracts. The certification demonstrates that an organization has the controls and processes in place to protect sensitive financial data throughout its lifecycle.

Healthcare Service Providers

Healthcare organizations manage some of our most sensitive personal information. Between electronic health records, insurance details, and genetic data, these service providers handle information that could devastate patients' lives if exposed. While HIPAA compliance covers patient privacy, many healthcare organizations find it's no longer enough on its own.

Modern healthcare increasingly relies on digital platforms and cloud services to deliver care, process claims, and manage patient data. Healthcare technology providers build tools that integrate directly with hospital systems and insurance databases, creating new security challenges that extend beyond HIPAA's scope.

SOC 2 compliance fills important security gaps for these organizations, especially those working with enterprise clients or handling data across multiple platforms. For healthcare technology vendors, SOC 2 compliance is often a requirement when selling to hospitals, insurance companies, or other enterprise healthcare providers who need assurance that their vendors maintain rigorous security standards.

Indicators That Your Organization Needs SOC 2 Compliance

Even if your organization doesn't neatly fit into the above categories, certain situations signal that it's time to pursue SOC 2 compliance. 

You Handle Sensitive Customer Data

If your organization processes, stores, or transmits sensitive customer information, you need to get on the SOC 2 compliance train. This includes personal data, financial records, confidential business information, or any data your customers trust you to protect. 

Many organizations don't realize how much sensitive data they handle until they map it out. Your CRM system contains customer contact details, your billing platform processes financial data, and your support tickets might include confidential customer information. If any of these sound familiar, SOC 2 compliance should be on your radar.

Potential Customers Require SOC 2 Reports

Pay attention to your sales team's feedback. If they frequently field questions about security documentation or lose deals because you’re not SOC 2 compliant, that's a clear signal. 

Enterprise customers often make SOC 2 compliance a requirement during vendor security assessments. These requests typically surface in several ways:

  • Security questionnaires asking specifically about SOC 2 compliance

  • RFPs listing SOC 2 attestation as a requirement

  • Prospects choosing competitors who have SOC 2 reports

  • Contract renewals contingent on obtaining SOC 2 compliance

Once customers start asking for SOC 2 reports, you're already playing catch-up. Given the time required to achieve compliance—especially for a Type 2 report—waiting until customers demand it could mean missing out on profitable opportunities.

You’re Expanding Into Regulated Markets

Growth often triggers the need for SOC 2 compliance, especially when entering new markets or moving upmarket. As your organization scales, you'll likely encounter more stringent security requirements from larger clients or regulated industries.

Consider these expansion scenarios:

  • Moving into enterprise sales where security reviews are standard

  • Targeting regulated industries like healthcare or finance

  • Expanding into countries/areas where data protection laws are strict (e.g. GDPR in the European Union and the CCPA in California)

  • Adding features that process more sensitive data

  • Pursuing government contracts that demand security certifications

You should start your SOC 2 compliance journey before these opportunities arise. The compliance process takes months, and waiting until a major deal depends on it puts unnecessary pressure on your team.

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How to Prepare for a SOC 2 Audit

Preparing for your SOC 2 audit requires careful planning and preparation. Let's break down the key steps.

Define Your Scope

The type of SOC 2 report you pursue affects your entire compliance journey. While Type 2 reports carry more weight with customers, starting with a Type 1 report might make sense for your organization.

Consider your timeline and customer requirements:

  • Type 1 lets you demonstrate compliance faster, showing customers you're on the right track

  • Type 2 requires at least 6 months of evidence but proves your controls work consistently

  • Some customers accept a Type 1 initially if you're actively working toward a Type 2

  • Many enterprises require Type 2 reports for final vendor approval

Think about your business goals too. If you're racing to close deals that require SOC 2, a Type 1 report might unblock sales while you work toward Type 2. If you're preparing for long-term growth, starting directly with Type 2 might better serve your needs.

Start Evidence Collection Early

Many organizations underestimate the evidence-gathering requirements for SOC 2. Your auditor needs proof that your controls work—and collecting this evidence retroactively is nearly impossible.

Set up your evidence collection systems from day one. Configure system logs to capture required information, document all security incidents and responses, and maintain records of access changes and user permissions. Employee training records, security assessment results, and vendor reviews are all part of your compliance documentation.

Where possible, set up automated evidence collection. Having a central repository for compliance documentation helps your team stay organized and ensures nothing falls through the cracks before your audit.

Conduct a Gap Analysis

Where does your security program stand today compared to where it needs to be? A gap analysis reveals the distance between your current practices and SOC 2 requirements.

Some organizations may already have a few of the required controls in place but need to formalize or document them better. Others find significant gaps that require new tools or processes. Common areas to evaluate include:

  • Access control systems: How do you manage user permissions? Are you enforcing strong passwords and multi-factor authentication?

  • Security monitoring: What tools do you use to detect and respond to security incidents?

  • Data encryption: How do you protect data in transit and at rest?

  • Employee training: Do you have formal security awareness programs?

  • Vendor management: How do you assess and monitor third-party risks?

  • Documentation: Can you prove your security controls work as intended?

Complete a Readiness Assessment

A readiness assessment is a practice run with lower stakes that helps you prepare for your formal audit. Working with an experienced auditor, you'll evaluate your entire security program—from technical controls to documentation and team procedures.

During this phase, you might uncover surprising control deficiencies. Your logging systems might miss critical security events, access reviews might happen irregularly, and incident response plans might exist only in your team's heads. Finding these issues during a readiness assessment lets you address them methodically without the pressure of a looming audit deadline.

How Drata Can Help You Streamline Your SOC 2 Compliance

Ready to start your SOC 2 compliance journey? We’re here to help. Drata continuously collects evidence, monitors your security controls, and alerts you to compliance gaps. Instead of chasing down screenshots and documentation, your team can focus on addressing actual security needs.

Get Audit-Ready Faster With Drata's SOC 2 Compliance Solution

Book a demo of Drata’s SOC 2 compliance solution to learn how to get audit-ready faster.

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SOC 2 Compliance Frequently Asked Questions (FAQs)

Below we answer some of the most common questions about SOC 2 compliance.

What is SOC 2 compliance, and why does it matter?

SOC 2 is an auditing framework that evaluates how well organizations protect customer data. It matters because data breaches and security incidents continue to rise. With the average cost of a data breach reaching $4.88 million in 2024, organizations need a proven way to demonstrate their security practices. SOC 2 provides that validation through independent audits.

Do all organizations need SOC 2 compliance?

Not every organization needs SOC 2 compliance, but it's crucial for businesses that:

  • Handle sensitive customer data.

  • Provide cloud-based services.

  • Work with enterprise clients.

  • Operate in regulated industries.

  • Process, store, or transmit confidential information.

What's the difference between SOC 1, SOC 2, and SOC 3?

SOC 1 applies to the controls a company has over financial reporting.

SOC 2 examines security, availability, processing integrity, confidentiality, and privacy controls. It's designed for service organizations that handle customer data.

SOC 3 is a simplified version of SOC 2, providing a general-use report that can be shared publicly. While SOC 2 audit reports contain detailed control information, SOC 3 offers a high-level overview suitable for marketing purposes.

How long does it take to become SOC 2 compliant?

The timeline for SOC 2 compliance varies based on your organization's size, complexity, and current security posture. For a Type 1 report, expect up to six months to implement controls and complete the audit. A Type 2 report can take anywhere from three to 12 months.

When should you start preparing for SOC 2?

The best time to start your SOC 2 compliance journey is before you need it. Many organizations make the mistake of waiting until a customer demands a SOC 2 report. Starting early gives you time to build a proper security program without the pressure of looming customer deadlines.

How much does SOC 2 compliance cost?

SOC 2 costs vary widely depending on your organization's size, complexity, and chosen Trust Services Criteria. Type 1 reports also tend to be cheaper than Type 2:

  • With SOC 2 Type 1, small to midsize companies can expect to pay from $7,500 to $15,000 for the audit process alone. For larger businesses, this cost could be anywhere between $20,000 and $60,000.

  • With SOC 2 Type 2, the audit alone costs an average of $12,000 to $20,000 for a small to midsize company. For large organizations, the total cost can range from $30,000 to $100,000.

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