How Much to Spend on Digital Security

A blog reader recently asked the following question:

I recently accepted a position and was shocked to learn, I know this shouldn't have happened, that Information Security/Warfare is largely an afterthought even though this organization has had numerous break ins. Many of my peers have held their position for one or even two decades and are great people yet they are not proactively preparing for modern threat/attack vectors. I believe the main difference is that they are satisfied with the status quo and I am not.

I have written a five-year strategic plan for IT security which I am now following with a tactical plan on how to get there. with respect to the tactical plan I was wondering what percentage of the IT budget you think an organization should allocate for their InfoSec programs?

It would seem that, using Google, many people advocate somewhere between ten and twenty percent of the IT budget. I have no knowledge of our overall IT budget but I do know we aren't anywhere near ten percent.

Additionally, how important is the creation and empowerment of a CISO in as organization? Many places still place security under the CIO which I have seen both good and bad examples of. Thank you for your time, it's much appreciated.

Regarding the cost question: I don't think anyone should use a rule of thumb to decide how much an organization should spend on digital security. Some would disagree. If you read Managing Cybersecurity Resources, the authors create some fairly specific recommendations, even saying "it is generally uneconomical to invest in cybersecurity activities costing more than 37 percent of the expected lost." (p 80) Of course, one could massage "expected loss" to be whatever figure you like, so the 37% part tends to become irrelevant.

When one tries to define digital security spending as a percentage of an IT budget, you face an interesting issue. First you must accept that the value of the organization's information is the upper bound for any security spending. (In other words, don't spend more money than the assets are worth.) If you base security spending on IT spending, then the entire IT budget becomes the theoretical upper bound for the supposed value of the organization's information. If you arbitrarily decide to shrink the IT budget, following this logic, you are also shrinking the value of the organization's information. This situation holds even if you don't spend more than "37%" of the value of the organization's information on security it. Clearly this doesn't make any sense.

I have not met anyone with a really solid approach for justifying security spending. "Calculating risk" or "measuring ROI/ROSI" are all subjective jokes. All I can really offer are some guidelines that I try to follow.

  1. First, focus on outputs, not inputs. It doesn't matter how much you spend on security (inputs) if the organization is horribly compromised (outputs). Determining how compromised the enterprise is becomes the real priority.

  2. Second, like I said in cheap IT is ultimately expensive, "security is an IT problem, not a 'security' problem. The faster asset owners realize this and be held responsible for the security of their systems, the less intrusion debt will mount and the greater the chance that enterprise assets will survive digital earthquakes." Security teams don't own any assets, other than the infrastructure supporting their teams. Asset owners are ultimately responsible for security because they usually make the key decisions over the asset value and vulnerabilities in their assets.

    The best you can do in this situation is to ask asset owners to imagine a scenario where assets A, B, and C are under complete adversary control, and could be rendered useless in an instant by that adversary, and then let them tell you the impact. If they say there is no impact, you should report that the asset is worthless and should be retired immediately. That will probably get the asset owners' attention and start a real conversation.

  3. Third, continue to tell anyone who will listen what you need to do your job, and what is lost as a result of not being able to do your job. Asset owners have a perverse incentive here, because the less they let the security team observe the score of the game (i.e., the security state of their assets), the less able the security team is able to determine the security posture of the enterprise. You've got to find allies who are more interested in speaking truth to power than living in Potemkin villages.

Regarding this CISO question: I believe the jury is out on where the CISO should sit. When reporting to the CTO and/or CIO, the CISO is one of many voices competing for attention. When working for the CTO and/or CIO, the position of the CISO probably reinforces the notion that the CTO and/or CIO somehow own the organization's information, and hence require security expertise from the CISO to secure it.

However, I am developing a sense that the asset owners, i.e., the profit and loss (P/L) entities in the organization, should be formally recognized as the asset owners. In that respect, the CISO should operate as a peer to the CTO and/or CIO. In their roles, the CTO and/or CIO would provide services to the asset owners, while the CISO advises the asset owners on the cost-benefit of security measures.

Note that when I say "asset" I'm referring to the real information asset in most organizations: data. Platforms tend to be worth far less than the data they process. So, the CTO and/or CIO might own the platform, but the P/L owns the data. The CISO ensures the data processed by the CTO and/or CIO is kept as secure as possible, serving the asset owner's interests first.

I would be interested in hearing other opinions on both of these questions. Thank you.

Richard Bejtlich is teaching new classes in Las Vegas in 2009. Regular Las Vegas registration ends 1 July.


GamSec said…
Unfortunately, many people stick to the saying "if it ain't broke, don't fix it!" but this mentality when having to do with security is normally very dangerous.

I think that in security (especially in IT Security) we need a proactive approach as you did with the 5-year plan, but not everyone does this - in most cases, security is considered a luxury and they only realise the importance of security once they fall victims to some attacks - but by this time, most of the damage is already done.
cg said…
I agree with the comment the security is an afterthought for most organizations and only rears its ugly head after a major incident and blame is being passed around.

If your at a company that is at all serious about security, fence funding your IT security operations is the best approach. IT operations should not dictate spending on security as their missions are at odds with each other.

Coming up with that budget number though is a difficult proposition as you have seen. Richard's guidance is very appropriate. I would add, that key to gaining budget is showing that you consistently drive projects to successful completion. Often times I see teams wasting money buying software/hardware and then never fully implementing them. Credibility at the executive management level is crucial.
sc said…
I find it interesting how circular the 'IT Security budget' task can be. Some 'facts' in information security are tough to gather and some are easy. This however can have nothing to do with the outcome or expected control derived from the 'facts'. I think a strong model is to look at the spend required to gain a degree of certainty, offsetting the expected loss of not having the information. In other words, how much does it cost me to know how vulnerable my devices/networks/applications are, and by NOT knowing what could it cost me? I wish there was a formula, but most of the ones I have seen result in a divide by 0 error.
Anonymous said…
It doesn't matter where a CISO sits as long as they are able to talk to the business, technology, operations, legal, HR, compliance, facilities and external regulators and have credibility.
Anonymous said…
Boaz Gelbord has been doing some research with regard to Security Spending Benchmarks for OWASP.
Boaz Gelbord said…
I don't think that the percentage of an IT budget dedicated to security is that important in determining an organization's overall level of security. Typically that figure is along the lines of 5-10%, but what matters much more is the amount of internal company resources and organizational capital that is dedicated to security. This broadened concept of spending is what we are trying to measure in the OWASP Security Spending Benchmarks Project referenced in the previous comment.

I have felt for a while that companies are spending too much money on security and too little internal resources. For most organizations, building a secure product is ultimately more expensive which is one reason ROI/ROSI calculations aren't a good tool for the boardroom. The real reason to build appropriate security into products is the market and regulatory expectation that an organization have an overall security narrative. In this way security is not different than other narratives a company is expected to have - fair labor practices, community involvement, consumer protection, etc. If the security narrative is critical enough to the company, they will hire a CISO (although I think that this function is in decline recently).

So while I agree with the title of your post from a few weeks back (Cheap IT is ultimately expensive), I think that cheap security is often just that - cheaper. Of course this depends a lot on the industry and the product, but often security flaws are not exploited in a way that reflects back on the victimized company. Or in other words, companies don't necessarily get called out on bad security. As a result there is no money either saved or earned by slowing down a release and locking down an environment to make sure everything is secure.

The lack of ROI doesn't imply that companies should build insecure products. There are some things that companies do not because they save or earn money but because they are a cost of doing business. In many industries security is precisely such a tax.
Captain Dude said…
Is there really such a thing as "ROI" when you aren't actually getting money back? I think cost/benefit analysis is probably a better term since you never really get more money back in IT.
Lots of great comments here though!
Pete said…
Richard -

"...if the organization is horribly compromised."

This is a huge IF, don't you think? How much should you spend IF the organization isn't compromised? How do you decide the circumstances under which one or the other will happen?

It is our profession in a nutshell, but to oversimplify like you have is much worse than the subjective jokes you call ROI and ROSI.

(Btw, to suggest it doesn't matter how much you spend is easily refuted. Of course it matters.)

mark said…
As a healthcare organization, we are trying the "CISO" as a dotted-line report to the CIO and the head of Compliance. This gives the position information from Legal, HR, Medical Records, etc. - through Compliance - and information from IT - through the CIO. In theory, this looks like a good solution. I'll keep you posted in practice on how this works out. Like you said, the jury is still out on where to position the CISO, and we've had numerous consultants give their opinions.
Pete, when I said

"It doesn't matter how much you spend on security (inputs) if the organization is horribly compromised (outputs)."

maybe I wasn't clear. I mean

It doesn't matter how much you spend on security (inputs) if the end result is the organization remaining horribly compromised (outputs).
Barry Anderson said…
I think what you meant to say is spending a lot on inputs without impacting outputs is adding insult to injury! B-)
Rick said…
From a company's perspective, they push $$$ into the various security programs only to learn later that they're still compromised! How does the company gain any confidence with security organization? (it's much like the weather forecast - how do we gain confidence in their next forecast?)

A comment on your first guideline - like any good control system, you have inputs and outpits and need a way to monitor your system via some feedback mechanism. As you see your outputs "grow", you need a way to "tighten" the inputs. So, I don't believe you can ignore either input or output.
KH said…
Having the CISO report to the CIO only works if the CIO supports and understands the importance of security. This directly relates to the culture of a company and can only be remedied (in my humble opinion) by direct reporting to Compliance or Operational Risk.
Unfortunately in an environment where the CIO marginalises security, it is far easier for projects to steam roll their way into the enviornment

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