Inside 1to1:Privacy

Privacy In a Recession

February 1, 2009

By Larry Dobrow

Every day brings a new set of headlines that trumpet the recessed state of our economy--20,000 jobs here, 7,000 more there. To read the stories that accompany those headlines, the cuts have spared no function within the corporate hierarchy. Marketing, manufacturing, sales, human resources: the great recession of 2009 plays no favorites.

It comes as something as a surprise, then, to find that privacy and security functions have largely been spared the axe. According to Minnesota Privacy Consultants (MPC) president and former Carlson Companies chief privacy officer Jay Cline, companies don't appear to be trimming their privacy head count too severely. Last October, Cline's firm polled 340 individuals responsible for data protection at companies based in the Americas, Europe and Asia Pacific regions. It found that 31 percent were planning to increase budgets for outside privacy help; only 13 percent planned budget cutbacks.

Cline took his research one step further earlier this year, asking 100 privacy professionals from Midwest-based companies about their 2009 plans. While the sample size was small, 20 percent said they planned to increase privacy staff in 2009 and only three percent planned a reduction. "It seems that every other department except privacy is getting cut right now, regardless of industry," Cline notes.

The evidence may not be controvertible, but it sure seems that privacy and security have been elevated to the status of a business staple (as opposed to a business luxury). After all, if privacy and security haven't fallen by the wayside during a time when every expense comes under intense scrutiny, it stands to reason that they'll remain a high priority when the economy rebounds.

Experts are split on the precise reasons for privacy's resilience, so to speak, citing everything from the comparatively small size of some companies' privacy teams (you can only cut down a three-person operation so much) to larger-scale paranoia in the wake of financial institutions big and small crumbling (read: companies can't risk a meltdown of their own). They agree, however, that it mostly comes down to trust.

Specifically, they believe that companies are acutely aware of the effect that even a small-scale security breach could have on their customers' trust--and that, in times like these, they shouldn't hand even a single customer an excuse to shift his loyalties elsewhere.

"A very large number of companies now understand that it is critical for customers and consumers to have confidence in the way that they do business," says David Hoffman, Intel's director of security policy and global privacy officer. "Privacy and security are integral components of that confidence. Because of that, they make up a large part of the brand." The implications for companies that violate that confidence? "[Their customers] will work with somebody else, who values their trust," Hoffman responds.

Paul Argenti, a professor of corporate communications at Dartmouth College's Tuck School of Business, takes Hoffman's thinking a step further, identifying privacy and security as business staples for every industry, not just those that traffic in sensitive customer data. "It's not a nice-to-do; it's a have-to-do," he explains. "It doesn't matter if you sell shovels or if you're an accounting firm. If you're letting down your guard or shifting away your emphasis [from privacy/security] at a time when people can disrupt your business, you'll pay for it later. These are some of the most crucial pieces of protection we're talking about here."

Hoffman, for his part, states flatly: "I haven't talked to a single CPO who's laying off staff."

Despite their concerns about the economy, some pundits suggest that now could be the time to ratchet up privacy even further. Resources may remain limited, Hoffman says, but forward-thinking companies may deem it wise to trumpet their trustworthiness at a time when trust in large institutions is at a nadir. He notes that "change presents opportunity," pointing to A-list firms like Hewlett-Packard, Procter & Gamble, and Microsoft as ones that have stressed the importance of privacy and security in recent months.

Argenti doesn't necessarily agree: "I don't think it's time to expand anything right now, to be honest. Anything that smacks of excessive spending--you just can't do that." Still, he believes that there's room for creativity, especially among privacy-conscious managers who have been tasked to do more with less.

Cline has advice for managers who find themselves in that very situation, as well as for those at companies that view privacy and security as "extras." He suggests that privacy people "buried in the org chart without staff or budget" might attempt to drive grassroots efforts within their organizations.

"Most employees have very personal stories to tell about privacy and are generally glad to find out that someone in their organization is on top of it," he explains. "These kinds of employees can become de facto privacy champions within their own reporting structures and elevate the visibility of the privacy issue upward."

As for the future, Cline believes that companies not inclined to view privacy and security as core issues will eventually come around. "Because of the prominence that breach notifications have given to employee data, I think the companies that view privacy as a luxury [as opposed to a staple] are in a small and diminishing minority," he says. Hoffman agrees, adding that commitments made to privacy and security "must be real."

Argenti, on the other hand, doesn't see change taking place quite so fast. "Eighteen, 24 months from now, you'll see things turning around. Unfortunately, there will be infrastructure issues that prevent growth right away," he says. "So a company that hasn't started emphasizing [privacy and security] yet won't be able to hit the ground running."