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EquaSiis Point of View

Opinions and Perspectives on the Global Business and IT Services Markets

The Security Imperative: New Approaches to Securing Data

and Software Applications in a Global Sourcing Environment
Part One – Data and Application Security in an Era of Global Sourcing
Stan Lepeak, Managing Director of Global Research, EquaTerra and EquaSiis

Overview: Data and Application Security in the Overall Scheme of Corporate Risk
There is no shortage of daunting challenges, threats and risks facing organizations in today’s
economic environment. Many of them are struggling – and sometimes failing – to simply remain
solvent and viable. Unfortunately, when their basic survival is threatened, a lot of important issues
go by the wayside and receive little or no executive or strategic attention, resources and

While ensuring that the next payroll deadline is met is an obvious priority, organizations can
jeopardize their long-term viability by ignoring other serious concerns. This holds true not just for
emerging risks, but for those that they already face or do not expect to increase in the short term.
The magnitude of these risks – which often lie in wait unnoticed under the surface – is growing,
driven by the same negative market forces making a more visible impact on operations. This is
especially the case when it comes to the broad, critical and often misunderstood area of
information technology (IT) security.

IT security was a major challenge for many organizations when economic times were good –
today it presents an even larger problem. Difficult times create desperate employees and
competitors and opportunities for criminals. For example, security breaches instigated by
disgruntled employees are on the rise as the economy continues to weaken. Corporate – and
even more so nation-state – espionage is increasing. Terrorist and criminal outfits worldwide are
aggressively assessing angles to exploit gaps created as distracted governments and
corporations focus more on addressing economic issues and less on ensuring the integrity of
operational processes.

A major hurdle organizations face in successfully mitigating IT security risks and issues is the
disconnect that typically exists between those who understand the threats and those with the
authority and control over funding to address them. This is partially due to the failure of
management and technologists to communicate effectively and technologists’ inability to translate
their issues and needs into qualified business cases. It is also because there are no quick, simple
or easy fixes to most IT security problems. Organizations cannot fix a problem through a simple
software purchase, policy change or executive mandate.

While chief security officers (CSOs) fight for budget dollars, respect and understanding and
executives continue to pursue security “lite” strategies, the threat continues to grow. As Melissa

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Hathaway, Acting Senior Director for Cyberspace for the National Security and Homeland Security
Councils (NSC/HSC), noted in the fall of 2008, “Our government and private sector networks and
information are being exploited at an unprecedented scale by a growing array of state and non-
state actors.”

Organizations, regardless of economic conditions, must identify, prioritize and determine how best
to remain vigilant against all core strategic and operational security risks. An increasingly
international, distributed and integrated economy – albeit one that is contorting in the current
downturn – makes this more imperative than ever. There are no secure fortresses or impenetrable
barriers to entry in today’s global markets and geopolitical environment. While IT risks, especially
those related to data and application security, are just some of many that organizations must
mitigate, they require proportionally more attention and investment than they have normally
received to date.

Defining the Scope of Data and Application Security

IT security is a very broad concept, and attempting to address it without first defining a scope is ill-
advised. There are several major components of security related to organizational and corporate
business operations.

• Physical: Facilities, sensitive operations centers, and IT hardware systems housing electronic
data and applications and connected to networks all pose physical security risks.

• Electronic data: Criminals can steal corporate, customer, intellectual property (IP) and
related data stored in IT applications and systems.

• Physical data: Physical documents – such as hard copies of corporate and IP data – are
vulnerable to theft.

• Application: IT software applications and systems are open to intrusion and compromise.

• Network: Software applications operate, data flows, and voice communications transmit over
IT networks. These networks take many forms and are increasingly converging, making them
susceptible to penetration.

• Personal: Often the most vulnerable point is humans. People design, build and operate IT
applications and systems and have access to their data. They are also at risk of personal
attacks of a physical (assault and kidnapping), coercive (blackmail), or manipulative (bribery)

There are also multiple means through which an organization’s security is put in jeopardy. The
most attention is commonly paid to external attacks that are carried out with specific goals in mind,
such as network hacking or corporate espionage. More often, however, threats come from internal
sources, often with little planning or forethought. This is slowly changing, though criminals’
propensity for internal attacks is not declining. Increasingly, organized crime or terrorist groups

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and rouge and not-so-rouge nation-states are targeting organizations and even individuals for
external assaults.

There are threats to organizational security that are proactive and calculated and those that occur
by accident as a result of unintended circumstances. Breaking and entering and accessing a
network via a software backdoor that was intentionally left open is an example of a deliberate,
premeditated attack. Leaving a building’s back door to the street open while going for a smoke or
unintentionally exposing a network to penetration via a forgotten software backdoor are examples
of threats created by chance.

The Discipline and Rigor of Risk Management

While there are many unique characteristics and nuances associated with data and application
security, organizations are advised to address them in the context of established risk management
frameworks. These models are the same ones they should employ to address the overall risks
associated with global sourcing efforts. Organizations must keep in mind that managing sourcing
risk is a formal and disciplined process. Enforcing this discipline is critical to ensuring
vulnerabilities are not overlooked or underemphasized.

Just as there are different components to security, there are different categories of overall risk.

• Human: personal, societal, cultural and political

• Operational: process, organization, communication, performance and financial
• Technology: interoperability, resilience and recoverability
• Legal: statutes, regulations, self-regulation and liability
• Economic: inflation, currency, and tax and tariff
• Geographic: climate, geology and time
• Geopolitical: war, terrorism and nationalization

There are qualitative and quantitative aspects to each of these categories related to complexity,
volume and maturity. Organizations involved in any sort of major sourcing effort must identify the
threats that exist in each of these categories, which can impact the level and severity of risks to
data and applications.

These risks are by no means static. Organizations must consider and assess them across the
entire sourcing life cycle, from strategy through renewal and replacement. Similarly, they must
address data and application security risks across their entire business life cycle. At each stage
the risks are different in nature and severity. The bottom line is that while new tools and
techniques are needed to better address data and application security, organizations must also
rigorously apply defined and tested processes to deploy these new capabilities.

Keeping in mind the need to maintain rigor and discipline, the balance of this paper will
focus on security threats to electronic data that is created and manipulated by IT software
applications and enabled both covertly and overtly by people and personnel. It will lay out
new means and techniques that organizations have at their disposal to combat data and

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application security threats. These are not panaceas or quick fixes, but combined with other tools,
techniques and processes they can enable organizations to potentially regain more of an upper
hand in the IT security battle.

The Pervasiveness of the Data Threat

The reason for the increase in the magnitude and volume of threats to organizational and
corporate data and applications is straightforward. There is simply much more stored data today,
and it is accessible – intentionally or otherwise – via a burgeoning array of interconnected global
networks. Most of the time, this is a good thing. There is no need to sing the praises of the Internet
and near-real-time worldwide communications. It is important to recognize, however, that sensitive
data is often closer to the other side of the world and the nefarious characters lurking there than
many individuals, at least those in management, understand.

If documents were stolen from an executive’s wall safe in the not-so-distant past, there was no
way that thousands of copies of the information could instantaneously make their way around the
world. Similarly, stealing the combination to a bank safe might lead to riches, but nowhere near
the level of return garnered by hacking into a credit card processor’s multimillion-record customer
database via an open backdoor.

Much emphasis has been placed on securing networks – the routes into and out of an
organization. While this is critical, the focus is often just on the spot where internal and external
networks meet. However, in most cases this is not the only point of entry. Applications that are
perceived as existing safely behind a firewall are often vulnerable, even if the firewall is not
breached. There are two main reasons for this. One is that organizations need to link multiple
internal and external data stores and applications to perform core business activities. If an
application opens the firewall door to legitimately pass data to the outside but does not close the
door properly, it creates a risk that the firewall often cannot address. The other issue is the ever-
growing complexity of the software applications that use and manipulate data and the varied
sources from which organizations procure said applications.

While organizations can often do a better job of walling off sensitive data and applications from
external or high-risk sources of penetration, their efforts can only go so far before they begin to
diminish the value and usefulness of the data and applications. Walling off data and applications
from external threats also does nothing to address internal threats. A more far-reaching approach
is to address the security vulnerabilities in the software applications themselves.

The goal of writing good code from a security perspective is nothing new, but practically speaking
it is an impossible task to achieve. This is in part because most code is still developed by humans
who are inherently imperfect and occasionally operating with ulterior motives. The other challenge
is that, given the tens or hundreds of millions of lines of software code that support any
organization’s operations, there is no way humans can manually or through the use of traditional
testing techniques identify and remediate all or even most security risks. This is exacerbated by
the fact that software comes from many sources, including internal developers, third-party
commercial vendors and, increasingly, open-source code. Most mission-critical software is

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developed by third parties, and users typically do not have authorized or practical access to the
source code to perform the necessary testing.

Beyond Source Code Testing

There are two keys to improving the security integrity of software code developed by third parties
and, by definition, the data that it processes. The first is to improve the testing process itself by
automating it as much as possible and providing a means to test third-party code without having
direct access to it. Organizations can apply this first approach against internally-developed
software as well. Second, given the fact that users are dealing with third-party software obtained
through commercial transactions and contractual relationships, the terms and conditions of these
purchases must evolve to better define, address and mandate improved levels of application

There are now solutions available that enable automated testing of application binary code. Binary
code is software code at the layer below the source code. It uses the binary number system;
numbers and letters are translated into signals that a computer reads as sequences of ones and
zeros called bits. Any organization that possesses software code can access and test the binary
code, regardless of the source of said code.

Veracode (, a software security services vendor, pioneered the

commercialization of automated binary code testing. EquaTerra and EquaSiis have entered into a
nonexclusive business alliance with Veracode to further extend the reach of its testing services
with particular emphasis on applying it against software code developed by third parties, such as
that obtained through application development outsourcing efforts. The second half of this paper
describes in more detail how the Veracode technology and service operates.

While organizations can uses services like Veracode’s to test third-party binary code – or use
more traditional testing tools and techniques to test third-party source code – indentifying potential
security vulnerabilities is only the first step. They must then work with the code’s developers to fix
the identified problems. This can create additional issues.

• Who pays for these fixes, the buyer or the service provider?
• Do any of the problems identified imply a breach of any original contracted service levels or
application acceptance criteria?
• To what degree is it practically and legally possible to codify more rigorous testing standards
in service level agreements (SLAs) and contracts going forward?
• What is the appropriate level of application security to request and define in an SLA? What are
the industry standards and benchmarks?
• Once the problems are fixed, what can be done to ensure that they do not reoccur in the

Buyers may initially get significant push back from service providers on any demands that are out
of the scope of the original agreement and incur additional costs for the provider. There are
challenges inherent in defining appropriate service levels, which will vary depending on the

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application and sensitivity of the data that it processes. However, the fact that these and other
complexities exist does not mean buyers should not pursue much greater levels of data and
application security testing for their third-party software.

All contractual agreements with third parties to develop software applications include some sort of
testing and acceptance requirements. Typically, application security requirements are weak given
the historical limitations of testing programs and also because third parties often perform their own
testing. However, the tide is shifting as progressive buyer organizations institute more rigorous
testing and acceptance programs and bake them into contracts and service levels. The market
has reached an inflection point, and now is the time – given both increased testing capabilities like
those provided by Veracode’s solution and growing threat levels – to make these more thorough
and contractually-enforced testing regimes the industry standard and not the exception to the

Part Two – Anatomy of an Application Assurance Requirements Program

Matthew Moynahan, Chief Executive Officer (CEO), Veracode

Application Assurance Requirements

The assurance requirements of an application are determined by their business criticality and
dictate the security requirements or benchmark required for an application to be suitable for its
purpose. These security requirements are a balance between the security quality and acceptable
risk levels for the business. Security requirements include both presence of security features and
absence of vulnerabilities as specified through a requirements process and tested during an
acceptance process. These requirements are often gathered from government or industry
standards or best practices and include data encryption, logging and access control.
Vulnerabilities in an application can render the required security features ineffective, so testing for
the absence of vulnerabilities is as crucial as testing for the presence of the security features.

To reduce the time and resources required to build an application, the security requirements are
proportional to the assurance level. Higher assurance software such as the software controlling
physical systems or high-value financial transactions have more security features than low
assurance applications where the loss of confidentiality, integrity or availability would cause little or
no damage. The quantity and severity of vulnerabilities tolerated in an application should likewise
be proportional to the assurance level as time and resources are required to both test for and
remediate vulnerabilities. A good resource that lists many of the most important vulnerabilities is
the SANS Top 25 1 or the OWASP Top 10 2 .

Security Rating Process

The security rating process measures whether or not an application is suitable for its purpose. It
can be used for a single application in an acceptance testing process or can be used to rank a set

SANS Top 25,
OWASP Top 10,

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of applications, much like Consumer Reports does. This is often done in a multi-vendor “bake off.”
It consists of the following steps:

1. Setting the assurance level

2. Performing assessments
3. Rating the application
4. Using ratings to determine mitigation
5. Monitoring rating on a regular basis

1. Setting the Assurance Level

The first step in determining if an application is suitable for its purpose is to determine its
assurance level. The assurance level helps measure impact caused by a system failure. For
simplicity, assurance levels are set on a five point scale, where AL5 is the highest assurance level
and AL1 is the lowest. If an organization has its own custom scale for system risk it can be
mapped to the Veracode scale of AL1 through AL5. Veracode provides an assurance level
mapping based on the process the U.S. Office of Management and Budget has specified in
memorandum M-04-04 3 for all U.S. Government agencies. The following six potential impacts of
an application failure are rated with their likelihood as Low, Moderate or High.

• Inconvenience, distress, or damage to standing or reputation

• Financial loss or organization liability
• Harm to organization programs or public interests
• Unauthorized release of sensitive information
• Personal safety
• Civil or criminal violations

On the table below, circle the likelihood for each impact category. Detailed definitions of Low,
Moderate and High can be found in the document listed in footnote 1. The assurance level is
specified by the header of the rightmost column with a circle selected.


Potential Impact Categories (Low) (Medium) (High) (Very High)
Inconvenience, distress, or damage to Low Mod Mod High
standing or reputation
Financial loss or organization liability Low Mod Mod High
Harm to organization programs or public N/A Low Mod High
Unauthorized release of sensitive N/A Low Mod High
Personal safety N/A N/A Low Mod or High
Civil or criminal violations N/A Low Mod High

Executive Office of the President, Office of Management and Budget, M-04-04,

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A large financial company has an Internet-facing application where customers can apply for loans.
A compromise of this application will lead to the following impacts as described in M-04-04:

1. Inconvenience, distress, or damage to standing or reputation – Mod

2. Financial loss or agency liability – Low
3. Harm to organization programs or public interests – Low
4. Unauthorized release of sensitive information – Mod
5. Personal safety – N/A
6. Civil or criminal violations – Low

There are two impacts for this application that are Moderate that would put this application in the
AL4 (High) assurance level.

2. Performing Assessments
The next step is to perform one or more of the following types of security testing based on the
assurance level of the application:

• Automated static analysis testing

• Automated dynamic analysis testing
• Manual penetration testing

The higher the assurance level the more analysis techniques need to be performed. This adds to
cost but is required since there is less tolerance for testing errors as assurance levels rise. The
following table lists the required and recommended tests to be performed for an application for
each assurance level.

Assurance Automated Static Automated Dynamic Manual Penetration

Level Testing Testing Testing
AL5 (Very High) Required Required Required
AL4 (High) Required Required Recommended
AL3 (Medium) Required Recommended
AL2 (Low) Recommended

3. Rating the Application

The security flaws found during testing are categorized by the Common Weakness Enumeration 4
(CWE) ID and assigned a severity using the base score of the Common Vulnerability Scoring
System 5 (CVSS). The severity of the flaws detected is aggregated using a formula where higher
severity flaws count more than lower severity flaws. The score is then normalized from 0 to 100
where 100 is a perfect application with no flaws detected.

MITRE Common Weakness Enumeration,
FIRST.ORG Common Vulnerability Scoring System,

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An example of a very high (5) severity flaw would be a backdoor password or command injection
vulnerability, which would allow an attacker to have full control of the application. An example of a
low (2) severity flaw is information leakage, where an error message displayed to an attacker
could give information that would help them attack the system.

Application Security Ratings

The assurance level dictates the amount of security testing to be performed. It also specifies the
security quality score, which is generated during testing, that must be obtained for an application
to be suitable for its purpose. Veracode uses a rating system of the letters A, B, C, D and F where
A means the application has obtained a good enough security quality score so that it may be
deemed suitable for its purpose.

The scoring system is designed such that the higher assurance applications must be free of higher
severity flaws. The following table illustrates which severity flaws are an acceptable risk to remain
in an application and still meet its security quality suitability.

Assurance Example Severity 5 Severity 4 Severity 3 Severity 2 Required

Level (Very (High) (Medium) (Low) Score
High) for A
AL5 (Very Life or limb at risk None None None Some 90
High) or organization
mission critical
AL4 (High) Financial None None Some Some 80
transactions or PII
at risk
AL3 (Medium) Back office None Some Some Some 70
department critical
AL2 (Low) Back office Some Some Some Some 60

4. Using Ratings to Determine Migration

The application security rating can be used during an acceptance testing to determine if an
application is suitable. During acceptance testing the application is submitted to Veracode for
testing. Veracode produces a COTS report which specifies a letter rating for the application. If the
application receives an A rating then it can be accepted. If the application receives an B or C
rating the application should be accepted contingent on the application vendor following the
Veracode remediation roadmap, resubmitting the remediated application, and receiving an A
rating within a three-month period of time. If the application receives an D or F rating it is likely the
vendor will not be able to produce an A rating within the three-month period and there is too much
risk in the application to deploy it on even a temporary basis.

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About Veracode
Veracode is the world’s leader for on-demand application security testing solutions. Veracode
SecurityReview is the industry’s first solution to use patented binary code analysis and dynamic
web analysis to uniquely assess any application security threats, including vulnerabilities such as
cross-site scripting (XSS), SQL injection, buffer overflows and malicious code. SecurityReview
performs the only complete and independent security audit across any internally developed
applications, third-party commercial off-the-shelf software and offshore code without exposing a
company’s source code. Delivered as an on-demand service, Veracode delivers the simplest and
most-cost effective way to implement security best practices, reduce operational cost and achieve
regulatory requirements such as PCI compliance without requiring any hardware, software or

Veracode has established a position as the market visionary and leader with awards that include
recognition as a Gartner “Cool Vendor” 2008, Info Security Product Guide’s “Tomorrow’s
Technology Today Award 2008,” Information Security “Readers’ Choice Award 2008,” AlwaysOn
Northeast's "Top 100 Private Company 2008", NetworkWorld “Top 10 Security Company to Watch
2007,” and Dark Reading’s “Top 10 Hot Security Startups 2007.”

Based in Burlington, Mass., Veracode is backed by .406 Ventures, Atlas Venture and Polaris
Venture Partners. For more information, visit


Media Contact:
Linsey Krauss
Lois Paul & Partners
+1 512 638 5316

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About EquaSiis Media Contacts
EquaSiis, an EquaTerra company, provides software and services that Ron Walker, EquaSiis
improve the business support services lifestyle for shared services, +1 858 486 6035
outsourcing practitioners and service providers. The software,
EquaSiis Workbench and EquaSiis Enterprise, is a framework for
Lee Ann Moore, EquaTerra
collaboration used during the service delivery assessment and
+1 713 669 9292
sourcing process to assist in analysis and decision making for shared
services or outsourcing. EquaSiis provides intelligence and
optimization for the delivery of business support services across the
entire organization. The company also offers service providers market
intelligence, research, customer satisfaction and trending data through
its Insights group. For more details about EquaSiis’ research offerings,
please contact Stan Lepeak,

Copyright © EquaTerra 2009. All rights reserved. The prior written permission of EquaTerra is required to reproduce
all or any part of this document, in any form whether physical or electronic, for any purpose.

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