SOC for MSPs Explained: Achieve Compliance

Managed service providers (MSPs) handle IT infrastructure, security, and data management for clients across various industries.

However, with new cyber threats emerging and regulations becoming stricter, more customers now demand proof that their MSP partners follow industry-recognized security and compliance standards.

Service Organization Control (SOC) compliance is a widely recognized framework. It helps your MSP business demonstrate you have the proper controls in place to protect client data.

In this guide, we will explain SOC compliance, why it matters for MSPs like you, and the steps to achieve it.

What Is SOC for Managed Service Providers?

Service Organization Control is a compliance framework developed by the American Institute of Certified Public Accountants (AICPA). It evaluates how well an MSP business protects client data, security services, and internal controls.

SOC compliance is important for MSPs handling network security monitoring, cloud computing, and IT management for businesses that require high security and regulatory adherence. These include healthcare organizations, finance corporations, and educational institutions, among others.

SOC compliance should not be confused with a Security Operations Center, which also uses the SOC abbreviation.

Security Operations Center focuses on continuous monitoring and cyber-security threat detection. Meanwhile, SOC compliance emphasizes the need to follow strict security and operational standards through independent audits.

Types of SOC Compliance

The AICPA developed three SOC frameworks to assess various aspects of security and operational controls. It’s important to know these different types of SOC reports and how they apply to your MSP business.

SOC 1

SOC 1 focuses on financial reporting controls. It is primarily used by service providers that process or impact a client’s financial data.

This type of report is relevant for MSPs handling cloud-based accounting, payroll processing, or financial IT systems.

SOC 2

SOC 2 is the most relevant framework for MSPs that provide cloud monitoring and IT cybersecurity services.

It evaluates how well an organization complies with trust service principles: security, availability, processing integrity, confidentiality, and privacy.

Achieving SOC 2 certification means an MSP business follows best practices for securing client information and preventing unauthorized access.

SOC 3

SOC 3 is similar to SOC 2 but is intended for public distribution.

The SOC 3 framework offers a simplified summary for marketing and sales purposes. It differs from SOC 2, which provides detailed reports with technical insights.

SOC 3 is commonly used by MSPs who prefer to demonstrate strong security and vulnerability management practices without disclosing confidential audit details.

Why Is SOC Compliance Important for MSPs?

As an MSP, your clients trust you to handle their IT infrastructure, protect sensitive data, and maintain secure systems.

However, sometimes, trust alone is not enough. Clients want proof that your security controls are reliable and meet industry standards. SOC certification provides this validation.

Here are the main reasons why SOC compliance matters:

Avoid Legal and Financial Risks

Failing to meet security compliance standards can result in regulatory penalties, lawsuits, and reputational damage.

It's important to comply with SOC standards to protect your MSP business from legal and financial consequences.

Strengthen Security

SOC compliance helps you build a stronger security framework by improving risk management, data protection, and internal security policies.

Regular SOC audits make it easier to detect threats and implement incident response controls.

Endpoint detection also plays a key role in this process. It continuously monitors devices, prevents unauthorized access, and stops malware before it spreads.

Improve Client Trust

Clients want MSPs they can rely on to secure their data and systems, making a managed SOC a valuable addition to your security strategy. SOC compliance reassures clients that a service provider's security practices have been independently audited and verified.

Customers are more likely to partner with MSPs that demonstrate a commitment to security and compliance.

If your MSP business provides SOC reports, you can prove that you follow best practices in security and data protection. You can improve trust and build stronger relationships with clients.

Gain a Competitive Advantage in the MSP Market

SOC certification can set your MSP apart from competitors that have not gone through the compliance process.

Many clients prioritize security when choosing a third-party IT service provider. They may also require proof of compliance before signing agreements, especially in industries where data protection is a top concern.

How to Achieve SOC Compliance as an MSP Business

After learning the importance of SOC compliance, it's time to focus on the steps to achieve certification. Here is a simple guide you can follow:

1. Identify Which SOC Framework You Need

Start by determining whether you need SOC 1, SOC 2, or SOC 3 compliance. Choosing the correct framework is important to ensure your compliance efforts align with your business needs.

SOC 1 is required if your MSP deals with financial data or IT systems affecting financial reporting. However, if you provide network monitoring, intrusion detection, and other security services, you need SOC 2 certification.

But if you simply need a public-facing report to showcase security commitments, SOC 3 is the right option.

2. Conduct a SOC Readiness Assessment

The next step involves undergoing a SOC readiness assessment. It helps you identify compliance gaps and address issues before the official audit.

This process involves reviewing security policies, data protection measures, and risk management strategies. You should also assess existing access controls, encryption protocols, and logging mechanisms.

3. Implement Security and Data Protection Controls

To pass a SOC audit, your MSP business should have strong security policies in place. This includes encrypting sensitive data, restricting access to critical systems, and implementing advanced threat detection systems.

You can also consider enforcing multi-factor authentication (MFA) and using secure backup procedures. These help you achieve SOC certification and reduce the risk of cyber threats.

4. Use SOC-Compliant Software

Many MSPs rely on remote monitoring and management (RMM) software to oversee client systems, automate IT tasks, and ensure system uptime. However, not all RMM tools meet SOC compliance standards.

It's important to choose SOC-compliant RMM software that adheres to CIS Critical Security Controls. This helps you securely handle client data, security logs, and access controls.

Additionally, using SOC-certified IT service management (ITSM) and documentation software reduces the risk of compliance failures linked to third-party vendors.

5. Undergo the SOC Audit Process

After implementing security controls and compliance measures, you are now ready for the official SOC audit. A licensed CPA firm will review your MSP’s security policies, operational controls, and risk management practices.

The audit process involves interviewing key personnel, conducting vulnerability assessments, and testing access control mechanisms.

Having a detailed security documentation process in place makes the audit smoother. Make sure all compliance records, logs, and security reports are readily available for the auditors’ review.

6. Address Findings and Make Improvements

Once the audit is complete, expect the auditors to leave feedback. You should act on the audit findings to strengthen security controls and address compliance gaps.

For example, if auditors detect inadequate logging or missing encryption policies, you should fix this before final approval.

After you resolve all issues, you can receive your SOC certification, proving your commitment to data security and compliance.

Challenges MSPs Face When Pursuing SOC Compliance

Although we shared tips on how to achieve SOC certification, meeting compliance isn't easy. Here are the biggest challenges you may face along the way:

Difficult to Understand

SOC compliance involves technical audits, strict security controls, and detailed documentation. The requirements are often confusing, especially for MSPs new to compliance standards. Without expert guidance, it’s easy to miss key controls or fail an audit.

Changing Security Standards

SOC frameworks constantly evolve to address new security threats and regulatory updates. Keeping up with these changes is difficult.

You need to continuously update policies, retrain staff, and refine security processes to remain compliant.

Lengthy Process

Preparing for a SOC audit takes months. The readiness assessment, security updates, and documentation process require careful planning.

Many MSPs underestimate the time required, which can lead to delays and missed compliance deadlines.

Steep Cost to Conduct Audits

SOC audits are expensive. The cost of hiring a CPA firm, upgrading security infrastructure, and implementing compliance tools adds up quickly. Small and mid-sized MSPs may struggle to budget for compliance while managing daily operations.

Simplify SOC Compliance for Your MSP With Level

Level, a SOC 2-certified RMM platform, helps your MSP business meet compliance requirements while managing IT operations efficiently.

Level includes built-in security tools, automated patching, and encrypted remote access. These help you follow industry best practices without extra complexity.

Unlike traditional RMM solutions, Level prioritizes security and compliance from the ground up. It keeps sensitive client data and systems confidential, which can build customer trust.

Secure your MSP operations today by signing up for a free 14-day trial. Or book a personalized demo to see Level in action.

FAQs About SOC for MSPs

What is SOC?

Service Organization Control is a compliance framework developed by the AICPA. It reviews how service providers, including MSPs, protect client data and maintain security controls. SOC audits make sure MSPs meet industry standards for data protection and compliance.

What is the difference between SOC 1, SOC 2, and SOC 3 for MSPs?

SOC 1 focuses on financial reporting controls and is mainly for MSPs managing financial systems. SOC 2 applies to data security, availability, and privacy, which suits MSPs handling IT infrastructure and cloud services. SOC 3 is a public-facing version of SOC 2, offering a simplified report that MSPs can share with clients.

What are the benefits of SOC compliance?

SOC compliance helps MSPs build trust with clients, improve security, and reduce legal risks. It also provides a competitive advantage, especially when working with clients in regulated industries.

What happens if an MSP fails a SOC audit?

If an MSP fails a SOC audit, the auditor lists issues that must be fixed. The service provider should address these weaknesses, improve security controls, and undergo another audit. Failing to comply can lead to loss of business opportunities, reputational damage, and potential security risks.