CMMC Compliance for Subcontractors: Are You at Risk of Losing DoD Contracts?

by Nadya Shkurdyuk | Oct 30, 2024 | Business IT Best Practices, Compliance

Compliance with the Cybersecurity Maturity Model Certification (CMMC) is no longer an option for companies involved in Department of Defense (DoD) contracts—it’s a necessity. But what if your business doesn’t have a direct DoD contract? Could you still be subject to CMMC requirements?

The answer is likely “yes.” Many businesses, from materials suppliers to parts manufacturers, could be classified as DoD subcontractors without knowing it. This means that even if you don’t handle classified information, your company may still need to implement specific cybersecurity practices to continue working with prime contractors who fulfill DoD contracts. Failure to meet these requirements could put your contracts at risk.

In this guide, we’ll explore how to identify if your business is considered a DoD subcontractor, what CMMC compliance entails, and how companies like Centurion Data Systems (CDS) can help you navigate the compliance process to protect your business.

1. What is CMMC? A Practical Overview

The Cybersecurity Maturity Model Certification (CMMC) is a DoD initiative designed to secure the defense supply chain by ensuring that all companies involved follow rigorous cybersecurity standards. CMMC introduces a tiered system, assigning compliance levels based on the sensitivity of data each company handles. From protecting basic contract details to securing highly sensitive information, the CMMC framework holds both direct and indirect DoD suppliers to consistent standards.

CMMC Compliance Levels:

Level 1: Basic Cyber Hygiene – Designed for companies handling basic Federal Contract Information (FCI), requiring fundamental security practices.
Level 2: Advanced Cyber Hygiene – For companies dealing with Controlled Unclassified Information (CUI), with more advanced controls to secure sensitive information.
Level 3: Expert Cyber Hygiene – For companies handling the most critical defense data, requiring the highest level of cybersecurity protections.

Why is CMMC Important for All Suppliers? The DoD’s commitment to secure its supply chain means that any business handling FCI or CUI—whether directly contracted by the DoD or indirectly supporting a DoD prime contractor—may be required to comply with CMMC. Many companies are unaware of this indirect responsibility, which can put them at risk of non-compliance and contract loss. CMMC compliance not only ensures contract eligibility but also strengthens cybersecurity across the supply chain.

2. Who is Considered a DoD Subcontractor?

Many businesses might assume they’re exempt from CMMC requirements if they don’t have a direct contract with the DoD. However, indirect suppliers are just as crucial in the defense supply chain and may still need to meet CMMC standards. Any business that provides goods or services essential to a DoD contract is considered a subcontractor—even if they’re several layers removed from the prime contractor.

Direct vs. Indirect Subcontractors

Direct Subcontractors: Companies directly contracted by the DoD or a primary contractor.
Indirect Subcontractors: Companies further down the supply chain that support DoD-related work but aren’t directly contracted by the DoD. Examples include parts suppliers, logistics firms, and specialized material providers whose products or services contribute to fulfilling DoD contracts.

Indicators of Subcontractor Status

Your business might be considered a subcontractor if:

Contract terms mention Federal Contract Information (FCI) or Controlled Unclassified Information (CUI).
You receive flow-down clauses from prime contractors that specify cybersecurity or data handling requirements.
You supply goods or services integral to a DoD contract’s completion, such as raw materials or specialized parts.

Examples of Indirect Subcontractors

A parts supplier for a military vehicle manufacturer: This supplier may need to meet CMMC requirements because their components are essential for producing DoD assets.
A logistics provider transporting equipment for a DoD project: The provider might handle data like routing information or delivery schedules, which could classify as FCI.
A metals supplier providing raw materials for aerospace components: This business indirectly supports DoD projects and may be required to secure sensitive information about production and delivery schedules.

3. Understanding Federal Contract Information (FCI) and Why It Matters

Federal Contract Information (FCI) is defined as unclassified information generated for or provided by the government under a contract that isn’t meant for public release. FCI may include anything from pricing details to delivery timelines, and it requires basic safeguarding. If a business handles FCI, it must comply with CMMC Level 1, the most basic cybersecurity standard.

Examples of FCI:

Contract Specifications: Details about order quantities, timelines, and delivery expectations.
Pricing Information: Sensitive pricing or bid-related data that is not publicly available.
Operational Documents: Work orders, delivery schedules, and packing lists for shipments linked to a DoD project.
Quality Assurance Documents: Inspection standards and quality control requirements provided by the DoD or a prime contractor.

Example Scenario

A textile company providing fabric for military uniforms receives detailed order specifications, delivery schedules, and testing standards from a DoD prime contractor. This contract-related information qualifies as FCI, meaning the company must implement CMMC Level 1 requirements to continue working with the prime contractor and protect these basic contract details.

4. What is Controlled Unclassified Information (CUI)?

Controlled Unclassified Information (CUI) is a category of unclassified but sensitive information that requires safeguarding due to its potential impact on national security. Unlike FCI, CUI is more sensitive and requires compliance with CMMC Level 2 or higher, depending on the type and criticality of the data. Companies that handle CUI must implement more advanced cybersecurity measures to protect this information.

Examples of CUI:

Technical Drawings: Detailed schematics or engineering designs for parts used in defense systems, such as turbine blades.
Testing and Evaluation Data: Results from durability tests or stress tests conducted on materials like protective coatings.
Proprietary Manufacturing Processes: Unique techniques or formulas that are integral to producing DoD-specific products.
Personnel Data: Sensitive payroll or contact information for employees working on a DoD contract.

Example Scenario

A metals processing company handles proprietary processes for coating military vehicle parts to enhance durability. Because these processes are classified as CUI, the company needs to meet CMMC Level 2 requirements, which include more advanced access control, encryption, and incident response practices to protect sensitive information.

5. CMMC Levels and Compliance Requirements

CMMC compliance levels vary based on the sensitivity of the information being handled. The requirements escalate from basic controls for FCI (Level 1) to advanced cybersecurity measures for CUI (Levels 2 and 3).

CMMC Compliance Levels:

Level 1 – Basic Cyber Hygiene: Basic practices like access control, data disposal, and physical security to protect FCI. Requires annual self-assessment and affirmation in the Supplier Performance Risk System (SPRS).
Level 2 – Advanced Cyber Hygiene: Requires 110 cybersecurity controls aligned with NIST SP 800-171 for protecting CUI. Depending on data sensitivity, it may require self-assessment or third-party assessment.
Level 3 – Expert Cyber Hygiene: The highest security level, incorporating advanced controls aligned with NIST SP 800-172, often assessed by government-led bodies for companies handling the most critical DoD information.

Why Each Level Matters

Each level of CMMC compliance is crucial for securing the DoD’s supply chain, ensuring that sensitive data is protected across every supplier and contractor. Even if a business only handles FCI, compliance with Level 1 requirements is essential to continue supporting DoD projects and to meet legal obligations.

6. How Vendor Consolidation Can Impact Subcontractors Who Aren’t CMMC Compliant

Vendor consolidation is a growing trend in the defense industry, as prime contractors and large suppliers streamline their operations by reducing the number of vendors they work with. Through consolidation, they aim to work with fewer suppliers who can handle a wider range of products and services, making it easier to manage security requirements and compliance standards across their supply chains. For subcontractors, however, this trend means that falling behind in CMMC compliance can directly lead to lost business.

What is Vendor Consolidation?

Vendor consolidation occurs when a prime contractor combines multiple supply needs—such as raw materials, manufacturing, and logistics—under a single vendor or supplier. This reduces complexity for the prime contractor, as they only need to manage and verify compliance for one vendor instead of several. But for subcontractors, this consolidation means they must meet all relevant CMMC requirements across the services they provide, especially if those services involve handling Federal Contract Information (FCI) or Controlled Unclassified Information (CUI).

Compliance Challenges in a Consolidated Environment

When prime contractors consolidate their vendors, they tend to favor suppliers who are already CMMC compliant across all applicable levels. Subcontractors that lag behind in achieving CMMC compliance—particularly those that haven’t yet met even basic Level 1 requirements—risk being dropped from consideration in favor of more compliant competitors. This trend increases the pressure on subcontractors to proactively achieve compliance to stay competitive.

Example Scenario

Imagine a metal parts manufacturer that supplies fasteners and specialized components for a military vehicle contract. The fasteners themselves might only require CMMC Level 1 compliance because they don’t involve sensitive information. However, the specialized components use proprietary designs and data classified as CUI, requiring CMMC Level 2 compliance.

If this subcontractor hasn’t taken steps to secure CMMC Level 2, the prime contractor may choose a different vendor who can handle both parts at the necessary compliance levels. By consolidating these roles under a compliant vendor, the prime contractor reduces risk and ensures the entire contract meets DoD security standards. In this scenario, the original parts manufacturer loses out on future contracts due to lack of proactive CMMC compliance.

Why Lack of Compliance Means Missed Opportunities

In a consolidated vendor environment, prime contractors expect their suppliers to be ready to meet CMMC requirements across all relevant data levels. Non-compliant subcontractors are seen as liabilities, as any lapse in security can jeopardize the prime contractor’s entire contract with the DoD. Suppliers that proactively achieve compliance are more likely to secure long-term contracts, while those who delay risk losing business to competitors who have already met CMMC standards.

The Importance of Proactive Compliance

For subcontractors, being proactive about CMMC compliance isn’t just about meeting government regulations—it’s essential to staying competitive. Prime contractors are increasingly unwilling to work with vendors who aren’t CMMC certified because non-compliance poses risks that could affect the prime’s own contract eligibility. By ensuring compliance, subcontractors position themselves as reliable partners, more likely to retain and grow their role in consolidated vendor relationships.

7. Why Prime Contractors Are Responsible for Ensuring Supply Chain Compliance

The CMMC framework places responsibility on prime contractors to ensure that their entire supply chain is compliant with the appropriate cybersecurity standards. This approach, known as “flow-down,” is designed to prevent weak links within the defense supply chain that could compromise sensitive DoD information. Here’s how it affects subcontractors.

Understanding Flow-Down Requirements

“Flow-down” refers to the obligation of prime contractors to pass on specific requirements to subcontractors, especially around cybersecurity. This means that if a prime contractor’s DoD contract includes CMMC requirements, these obligations must flow down to all subcontractors who handle FCI or CUI, even if they’re indirect suppliers several layers removed from the DoD.

Implications for Subcontractors

For subcontractors, flow-down means that compliance is not optional. Prime contractors have an incentive to vet each supplier’s cybersecurity practices, as any non-compliance within the supply chain can jeopardize the prime’s contract eligibility and expose them to penalties.

Example Scenario

A logistics provider is hired by a DoD prime contractor to transport specialized equipment. Although the provider may not handle CUI directly, the operational details—like delivery routes and schedules—could be classified as FCI. The prime contractor would need to ensure that the logistics provider meets CMMC Level 1 standards, including basic security controls for data handling and regular self-assessment in SPRS.

8. Steps to Determine If Your Business Needs CMMC Compliance

For businesses unsure of their subcontractor status or cybersecurity obligations, a few essential steps can clarify their responsibilities. Taking the time to evaluate contracts, data handling practices, and communication with prime contractors can help companies make an informed decision about CMMC compliance.

Self-Assessment Checklist

Review Contract Language: Look for terms like FCI, CUI, or references to data security clauses such as FAR 52.204-21 or DFARS 252.204-7012. These clauses typically indicate that cybersecurity protections are required.
Evaluate Data Handling Practices: Determine if any data received, stored, or shared could qualify as FCI or CUI. Examples include shipping records, production schedules, and technical drawings.
Check Flow-Down Requirements: If the contract specifies flow-down clauses or mentions “supplier compliance,” these are strong indicators that CMMC compliance applies.
Consult with Prime Contractors: Contact the prime contractor to confirm the level of data sensitivity in your contract and clarify whether compliance is required.

Practical Examples

A textile supplier reviewing its contract notices references to FAR 52.204-21, suggesting that it must meet CMMC Level 1 for basic data protection.
A precision parts manufacturer supplying DoD-specific parts with technical drawings should confirm if these designs are classified as CUI. If so, CMMC Level 2 would be necessary.

By conducting a self-assessment and clarifying obligations, businesses can determine their CMMC responsibilities and prepare for any needed compliance steps.

9. How to Comply with CMMC Level 1: Step-by-Step Implementation

CMMC Level 1, or “Basic Cyber Hygiene,” requires companies to implement foundational cybersecurity practices to safeguard FCI. For many small businesses and non-IT companies, these controls are manageable and designed to protect essential data without overwhelming resources.

Overview of CMMC Level 1 Requirements

CMMC Level 1 comprises 15 practices across several security domains, including access control, data disposal, and basic data protection measures. Here’s how companies can achieve Level 1 compliance, step-by-step:

Access Control:
- Limit Access to Authorized Users: Create individual accounts for authorized employees and require login credentials for any system handling FCI.
- Define Transaction Permissions: Set user permissions to limit access to only the data and functions employees need for their roles.
Media Protection:
- Sanitize or Destroy Media: Properly destroy or erase any media containing FCI before disposal. This applies to hard drives, flash drives, or other digital media used for contract-related information.
Physical Protection:
- Limit Physical Access: Control physical access to systems storing FCI. Implement basic security measures, such as locked storage for hard copies or restricted access areas for computers.
System and Information Integrity:
- Protect Against Malicious Code: Use antivirus software on all devices that access FCI. Regularly update and monitor antivirus systems for protection.
- Perform Regular Scans: Schedule regular scans to detect and address any vulnerabilities in your systems.

Example Scenario

A shipping company working with a DoD prime contractor restricts access to computers that store FCI, requires unique user IDs, and installs antivirus software to protect operational data. By implementing these controls, the company meets Level 1 requirements, safeguarding contract information and maintaining eligibility.

10. Introduction to SPRS and Compliance Affirmation

The Supplier Performance Risk System (SPRS) is the DoD’s central database for tracking and affirming CMMC compliance. Companies subject to CMMC Level 1 requirements must submit an annual self-assessment affirmation in SPRS to confirm their compliance. This provides the DoD and prime contractors with visibility into each supplier’s cybersecurity readiness.

What is SPRS?

SPRS is used to collect, manage, and track self-assessment results from companies within the DoD supply chain. By affirming compliance, businesses demonstrate their commitment to safeguarding FCI, which helps primes and the DoD assess the security posture of their suppliers.

How to Submit Your CMMC Level 1 Self-Assessment

Complete the Self-Assessment: Conduct a self-assessment using the CMMC Level 1 guidelines, ensuring all 15 practices are in place.
Document Compliance: Record your assessment results, listing each control and evidence of its implementation.
Log into SPRS: Submit your affirmation of compliance, including key details like company name, contract information, and a summary of the assessment results.

To simplify the process of self-assessment, you can also work with a company like Centurion Data Systems, that is a registered DoD contractor, understands this process intimately, and offers assistance services to take the burden of having to do this off the business principals.

Example Scenario

A packaging company working with a DoD prime contractor completes its CMMC Level 1 self-assessment, implementing basic cybersecurity controls. The company then submits its affirmation in SPRS, allowing the DoD and its prime contractor to verify their compliance status and maintain a secure supply chain.

11. CMMC Level 2: Requirements for Subcontractors Handling CUI

For companies that handle Controlled Unclassified Information (CUI), CMMC Level 2 compliance is mandatory. CUI is more sensitive than Federal Contract Information (FCI) and may include technical schematics, proprietary manufacturing techniques, or testing data that support national security. Achieving Level 2 requires 110 specific cybersecurity controls, as outlined in the NIST SP 800-171 framework.

Overview of Level 2 Compliance Requirements

Level 2 builds upon the basic protections of Level 1, adding more stringent measures for access control, data encryption, incident response, and system monitoring. To comply, companies must address each of these areas thoroughly, creating multiple layers of protection around CUI.

Examples of Required Controls for CUI

Access Restrictions: Limit CUI access strictly to authorized personnel. Implement role-based access controls to ensure employees only view data relevant to their job.
Data Encryption: Encrypt all CUI, both in storage and during transmission, to protect it from unauthorized access.
Incident Response and Monitoring: Establish an incident response team and document incident response plans. Implement continuous monitoring tools to detect suspicious activities in real-time.

Example Scenario

A manufacturer of specialized components for defense aircraft handles technical data on their proprietary designs, which qualifies as CUI. To comply with Level 2, they encrypt all design files, limit access to a restricted group of engineers, and install monitoring software to track unauthorized access attempts. By adhering to Level 2 standards, the company protects its contract eligibility and ensures that sensitive information stays secure.

12. Plan of Action and Milestones (POA&M) for Conditional Certification

Not every company achieves full compliance immediately, especially when transitioning to the more demanding Level 2 and Level 3 requirements. For subcontractors close to compliance but needing time to implement all controls, CMMC allows for a “conditional” certification status through a Plan of Action and Milestones (POA&M).

What POA&M Entails

A POA&M is a formal plan documenting any outstanding compliance requirements and detailing steps to achieve full compliance within a specified timeframe. Companies must demonstrate at least 80% compliance to qualify for conditional status. The remaining 20% must be completed within 180 days to maintain eligibility.

Steps in a POA&M

Identify Gaps: Conduct an internal assessment to identify which specific controls are not yet fully implemented.
Set Milestones: Outline a clear timeline for achieving each remaining control, with specific milestones and completion dates.
Commit to Monitoring: Regularly review progress toward each milestone and update the plan as necessary to stay on track.

Example Scenario

A machine parts manufacturer aiming for Level 2 compliance has implemented 85% of the required controls but needs more time to secure all access points. They submit a POA&M detailing their remaining steps, including encryption upgrades and additional employee training. This conditional status allows them to retain their contract temporarily, but full compliance must be achieved within 180 days to avoid penalties or potential contract termination.

13. Risks of Non-Compliance for Subcontractors

The consequences of failing to achieve CMMC compliance can be serious, especially for subcontractors in competitive fields. Non-compliance can jeopardize existing contracts, restrict future business opportunities, and damage relationships with prime contractors, who are increasingly focused on cybersecurity due to their own contractual obligations to the DoD.

Immediate Consequences

Contract Termination: If a subcontractor cannot meet the required compliance level, a prime contractor may need to find an alternative supplier who can meet DoD standards.
Loss of Competitive Advantage: As CMMC compliance becomes standard across the defense industry, non-compliant subcontractors are at risk of losing out on bids to compliant competitors.
Liability for Security Incidents: In cases where non-compliance leads to a security breach, the subcontractor may be held liable, facing potential fines, legal costs, or reputational damage.

Example Scenario

A supplier providing coatings for military vehicles fails to complete their CMMC Level 1 self-assessment. When the prime contractor discovers the lapse, they are forced to look for an alternate vendor to protect their DoD eligibility. The original supplier loses their contract and risks future business with the prime contractor due to their non-compliance.

14. Why CMMC Compliance Benefits Extend Beyond DoD Contracts

While CMMC is a DoD-specific requirement, achieving compliance offers advantages that extend well beyond defense contracts. Strong cybersecurity practices can improve a business’s resilience to cyber threats, enhance customer trust, and create new opportunities within other regulated industries that value robust security measures.

Enhanced Cybersecurity Resilience

Implementing CMMC controls protects a business from common cyber threats like malware, phishing, and ransomware attacks. By establishing a foundation of security best practices, companies can minimize downtime, avoid costly data breaches, and prevent loss of proprietary information.

Increased Business Credibility and Trust

Compliance with CMMC standards demonstrates to all clients, not just DoD primes, that a company is committed to cybersecurity. This credibility can help attract customers in industries such as aerospace, energy, and healthcare, where data protection is a priority.

Example Scenario

A small manufacturing firm specializing in sensor technology adopts CMMC Level 2 standards to comply with a DoD contract. This cybersecurity focus helps them stand out in the commercial aerospace sector, where secure data handling is critical, opening new business opportunities and strengthening relationships with non-defense clients.

15. Proactively Securing Your Business with CMMC Compliance

The DoD’s CMMC framework has set a new standard for cybersecurity within the defense industry supply chain, impacting businesses across sectors, including those that may not have initially realized they qualify as subcontractors. For companies handling FCI or CUI, compliance is more than a regulatory requirement—it’s a competitive advantage and a long-term investment in business continuity.

Next Steps for Subcontractors

Start with a Self-Assessment: Identify your current cybersecurity controls, assess where they align with CMMC requirements, and address any gaps.
Seek Expert Assistance: For companies new to compliance, working with experts like Centurion Data Systems (CDS) can simplify the compliance process. CDS provides tailored assessments, POA&M development, and ongoing support to help subcontractors meet and maintain CMMC standards.
Commit to Long-Term Compliance: Cybersecurity is an ongoing effort. Regularly review and update your practices to stay aligned with evolving CMMC requirements and protect your position in the DoD supply chain.

By taking proactive steps toward compliance as soon as possible, subcontractors ensure that not only their contracts are secure but also position themselves as trusted partners well outside strictly the defense sector. Working with a trusted partner like Centurion Data Systems can ensure that your compliance efforts are thorough, efficient, and sustainable, allowing you to confidently continue or expand your role within the defense industry.

CMMC 2.0 Compliance for DoD Contractors

by Nadya Shkurdyuk | Sep 16, 2024 | Compliance

CMMC 2.0: A Guide for DoD Contractors to Get Compliant Before the Deadline

If your business works with the Department of Defense (DoD)—whether as a contractor or a subcontractor—then you’ve likely heard about the updated cybersecurity standards known as CMMC 2.0. For companies in manufacturing or those providing vital services, it’s more important than ever to meet these new requirements before the looming deadline. If you don’t act soon, your business risks losing lucrative contracts and facing major disruptions. Let’s dive into CMMC 2.0 Compliance for DoD Contractors in this guide.

What is CMMC 2.0?

CMMC 2.0 stands for Cybersecurity Maturity Model Certification, and it’s designed to protect sensitive DoD data from cyberattacks. With the rise in cyber threats, especially targeting defense contractors, the DoD needed to put stricter rules in place. CMMC 2.0 has three levels, each requiring different security practices depending on how sensitive the information you handle is:

Level 1 (Foundational): For contractors who handle less sensitive info (like basic DoD data), this level involves simple practices like using antivirus software and managing system access. It focuses on basic “cyber hygiene,” ensuring your company follows everyday security practices to keep data safe.
Level 2 (Advanced): If you work with Controlled Unclassified Information (CUI), this level is for you. It’s based on NIST SP 800-171 guidelines and includes more detailed controls, like encryption and incident response plans, to safeguard sensitive DoD information.
Level 3 (Expert): Reserved for the most critical DoD projects, this level involves extensive cybersecurity practices to protect against the most sophisticated cyber threats, aligned with NIST SP 800-172.

This new model simplifies things by trimming down from five levels (in CMMC 1.0) to three, making it easier for contractors to identify where they fit in and what they need to do.

Key Deadlines and Compliance Timeline

The official deadline to comply with CMMC 2.0 is set for October 2025, but don’t wait until the last minute. The DoD will start requiring CMMC compliance in contracts as early as 2024, meaning if you’re not compliant soon, you could lose out on critical business opportunities.

The transition timeline includes significant milestones such as:

2024: Early adoption in new DoD contracts will begin.
Mid-2025: All contractors must show some progress toward compliance.
October 2025: Full implementation across all contracts.

If you wait until the final deadline, you risk losing DoD contract opportunities, so starting early is crucial.

Being prepared now will not only protect your place in the DoD supply chain, but it also means you won’t be scrambling to meet the final deadline. For up-to-date information, the DoD has a dedicated CMMC resources page, so you can track important dates and new developments.

Why CMMC Compliance is Crucial for Your Business

Think of CMMC 2.0 as a security checkpoint for companies wanting to work with the DoD. If you don’t pass, you don’t get the job. Non-compliance can have some serious consequences:

No more contracts: If your business fails to meet CMMC requirements, you won’t be able to bid for new DoD contracts, effectively locking you out of a key revenue stream.
Fines and penalties: Misrepresenting your compliance status could lead to legal action or fines under the False Claims Act. It’s essential to ensure that you’re fully compliant at the right level before taking on new contracts.

The DoD is cracking down on cybersecurity because cyberattacks are more frequent and more dangerous than ever. For example, 60% of small businesses close their doors within six months of a cyberattack. You don’t want your business to become part of that statistic, especially when protecting sensitive government data is part of the job.

How Do CMMC Levels Affect Contractors and Subcontractors?

Each level of CMMC 2.0 targets specific types of contractors, depending on what kind of data you handle:

Level 1 (Foundational): This level covers basic practices like using antivirus software and managing access to your systems. It’s essential to maintain “basic cyber hygiene,” which means making sure everyone in your company is following common-sense security rules. Skipping these basics can be a huge risk, as shown in a lawsuit where poor security left a contractor exposed to cyberattacks.
Level 2 (Advanced): If your company handles CUI—more sensitive information—this level applies to you. You’ll need to meet the stricter requirements of NIST SP 800-171, which includes encryption, access controls, and incident response systems. These safeguards are designed to protect important data and ensure you can quickly address security breaches.
Level 3 (Expert): This is for contractors working with the most sensitive DoD data, and it involves extremely high-level security measures to defend against advanced threats, such as nation-state actors.

Each level of compliance corresponds to how sensitive the data is that you handle, so make sure you’re prepared based on your specific needs.

How to Get Started: The Self-Assessment and Gap Analysis

Before you can get certified, you need to figure out where your company stands now. This means conducting a self-assessment for Level 1 or planning a more detailed third-party assessment for higher levels.

Start with a gap analysis, which compares your current cybersecurity practices with what CMMC requires. This will help you identify where you’re falling short and what you need to fix. For example, NIST SP 800-171 has 110 security practices that Level 2 contractors need to follow, ranging from access controls to encryption, and these gaps can be costly if not addressed.

For detailed steps on conducting internal assessments, refer to the DFARS 252.204-7019 requirements, which outline the DoD’s expectations for contractors.

Challenges Contractors Face in Meeting CMMC Requirements

Many small and mid-sized businesses find the compliance process overwhelming. Some of the common challenges include:

Limited resources: Smaller businesses may not have a full IT team dedicated to cybersecurity, making it harder to implement necessary changes.
Complex regulations: Navigating all of the requirements, especially at higher levels, can feel like trying to decode a foreign language. Without proper guidance, it’s easy to miss important steps.
Time constraints: With deadlines approaching, many companies feel the pressure to comply quickly but may not know where to start.

This is why many contractors partner with managed service providers (MSPs) to help navigate the compliance maze.

How MSPs Can Help With Achieving CMMC Compliance

Managed Service Providers (MSPs) can play a crucial role in helping your business meet CMMC standards. MSPs offer a range of services, from performing initial gap analyses to implementing cybersecurity solutions that meet DoD requirements. However, it’s important that you work with an MSP who is also a CMMC DoD contractor and understands all the intricacies of the certification process and requirements.

Partnering with an MSP can significantly reduce the burden on your in-house team, allowing you to focus on your business while experts handle your compliance needs. MSPs also provide ongoing monitoring and updates to ensure you remain compliant over time, even as new threats and regulations emerge.

Cybersecurity Best Practices to Help You Get Compliant

To prepare for your CMMC 2.0 assessment, start by implementing these key cybersecurity practices:

Access Control: Ensure that only authorized personnel have access to sensitive systems and information.
Antivirus and Malware Protection: Regularly update and monitor antivirus software to protect against threats.
Encryption: Encrypt sensitive data both when it’s stored and when it’s sent to other systems.
Incident Response Plan: Develop a detailed plan for how your business will respond in the event of a data breach or cyberattack.

By following these steps, you’ll not only be on the right path toward compliance, but you’ll also enhance your company’s overall security posture.

What Does CMMC Compliance Cost?

Compliance costs vary depending on your CMMC level. For Level 1, the costs are relatively low since you can self-assess, but as you move up to Levels 2 and 3, you may need to invest in:

Cybersecurity tools and infrastructure upgrades.
Training and certifications for your employees.
Third-party assessments for the higher levels.

While these costs can add up, failing to comply can be much more expensive, especially if you lose out on lucrative DoD contracts or face penalties.

Next Steps: Start Preparing for CMMC Now

The clock is ticking toward the October 2025 deadline, but CMMC requirements will start appearing in contracts as early as 2024. If your business wants to stay competitive in the DoD supply chain, you need to start preparing now.

Our team specializes in helping businesses like yours meet CMMC 2.0 standards. Contact us today for a free initial consultation, and we’ll help you develop a tailored plan to ensure you’re ready well before the deadline.

Taking action now will safeguard your business’s future and ensure you can continue to work with the DoD on critical projects.

Why Cheap Backup Solutions Could Cost Your Business Big Time

by Nadya Shkurdyuk | Sep 15, 2024 | Business IT Best Practices, Compliance, Cybersecurity

Is your business truly protected, or are you just saving money on the surface? Many small and mid-sized businesses (SMBs) turn to cheap backup solutions, thinking they’ve covered their bases. After all, a backup is a backup, right? But when disaster strikes—whether it’s a server crash, ransomware, or even a natural disaster—the real costs of those budget-friendly backups become clear.

So, what’s the catch? As many businesses discover too late, cheap backup solutions can leave you vulnerable to slow recovery times, incomplete data recovery, and even devastating data loss. In this article, we’ll break down the hidden dangers of low-cost backup services and show why investing in a managed solution is worth every penny.

Why Cheap Backup Solutions Look Like a Good Deal

For many SMB owners, cost is the driving factor when choosing IT services. Cheap backup providers, such as Carbonite or Wasabi, often market their solutions as easy-to-use, affordable alternatives that promise all the benefits of data protection without the hefty price tag. Pricing for these services can range from as little as $50 to $100 per month, which seems like a bargain compared to more comprehensive managed backup services.

The appeal is obvious:

Low upfront costs: Budget-conscious businesses are attracted to the idea of spending just a few hundred dollars a year on a backup solution.
Easy setup: Many cloud-based services offer simple, user-friendly installation processes that don’t require IT expertise.
Automation: Most cheap backup solutions boast automated processes, meaning the system runs in the background, seemingly without any extra effort from the business.

But are these low-cost solutions as comprehensive as they seem? Unfortunately, in most cases, what you’re actually buying is a false sense of security.

The Real Price You Pay: Downtime, Slow Recovery, and Data Loss

The initial savings from using cheap backup services can quickly evaporate when disaster strikes. Here’s where the hidden costs start piling up:

Limited Storage and Scalability: As your business grows, so does your data. Cheap solutions often offer limited storage, and exceeding these limits can result in unexpectedly high costs or force you to upgrade to more expensive plans. Moreover, these services might not be able to scale efficiently as your data needs increase.

Slow Recovery Times: One of the biggest drawbacks of budget backup solutions is the time it takes to restore your data. For instance, recovering large amounts of data from some low-cost cloud-based backups can take days or even weeks. In fact, a study by Datto revealed that 90% of small businesses can’t afford more than a few hours of downtime, yet slow restore times from cheap solutions can cost them far more than they bargained for.

Lack of Monitoring: Inexpensive backup services typically do not offer ongoing monitoring. If a backup fails or data is corrupted, the business may not even be aware until it’s too late. Without a dedicated team overseeing the backup process, undetected failures can result in catastrophic data loss when you need to restore files.

Data Corruption Risks: Cheap backup services often only back up files, not entire systems, and may not offer the flexibility to choose exactly what to back up. This can lead to missing critical components during a restore, or worse, discovering too late that corrupted data was backed up, rendering the restore useless.

Real-World Example: A Costly Data Recovery

Consider the case of a small accounting firm that used a low-cost backup service. When a ransomware attack hit, they discovered their backups were incomplete, missing vital client records. What’s worse, the process of recovering what little data they had took over two weeks, during which time they were unable to service their clients. The estimated revenue loss? Nearly $50,000 in client contracts alone—not to mention the long-term damage to their reputation.

How Much Could Data Loss Really Cost Your Business?

It’s not just about losing files—it’s about losing time, money, and trust. When your business experiences downtime due to data loss or corruption, the financial impact can be staggering. Consider these statistics:

The average cost of downtime for SMBs is $8,000 per hour according to a report from Datto. For businesses that rely heavily on IT systems—like eCommerce, legal services, or healthcare—this number can be even higher.
60% of small businesses go out of business within six months of a major data loss, according to the National Cyber Security Alliance. The inability to recover quickly can lead to long-term revenue loss, damaged customer relationships, and, in some cases, the closure of the business altogether.

Other impacts include:

Lost Revenue: Every minute your system is down, you’re losing money. Even a few hours of downtime could result in thousands of dollars in lost sales or service interruptions.

Reputation Damage: If your clients’ data is compromised, it’s not just a technical problem—it’s a trust issue. Losing client data can lead to damaged relationships and lost contracts.

Compliance Penalties: Many industries have strict regulations about data protection and reporting breaches. For example, failing to maintain HIPAA compliance in healthcare could result in fines up to $50,000 per incident.

Operational Disruption: Your employees may be sitting idle, unable to access the tools they need to do their work. The productivity lost during downtime adds another layer to the costs.

To truly understand how much data loss could cost your business, you need to consider both the immediate financial impact and the long-term effects on your reputation, operations, and compliance.

Managed Backup Services vs. DIY Solutions: Why You Get What You Pay For

At first glance, it might seem like all backup solutions are the same—they save your data, and you’re set, right? But once you dive into the details, it becomes clear that not all backups are created equal. Managed backup services offer more than just data storage; they provide a comprehensive solution for business continuity, reliability, and security. Let’s break down the key differences:

Comprehensive Data Protection: Cheap solutions often limit what they back up, focusing on certain files or folders, leaving critical system data unprotected. Managed backup services, on the other hand, provide full system backups, ensuring every file, folder, and configuration is saved. This holistic approach means that when you need to restore, you can recover your entire system, not just select files.

Fast Recovery Times: The speed at which your business can get back up and running is critical. Managed services are designed for rapid data recovery, often allowing businesses to restore their systems within hours, not days. With cheap backup solutions, it’s common to experience delays in accessing your data. Slow restoration processes can lead to significant downtime, which, as discussed, can be devastating for small businesses.

Daily Monitoring and Maintenance: Managed services don’t just set up your backups and walk away. They include daily monitoring to ensure backups are completed successfully and to catch any issues before they become problems. This proactive approach prevents data loss due to unnoticed failures or corruption—something cheap solutions lack.

Expert Support: Managed services provide access to IT professionals who can handle complex recovery situations, troubleshoot issues, and ensure that your backup solution is aligned with your business needs. Cheap solutions leave you on your own, which can be overwhelming when facing a disaster.

Security Benefits: With cheap solutions, your backups might still be vulnerable to cyberattacks, especially if they are connected to the same network as your production environment. Managed services often include air-gapped backups, meaning your data is stored separately from your network, making it impossible for ransomware or other threats to compromise the backup itself.

Why Speed of Recovery Matters

When disaster strikes, every minute of downtime impacts your bottom line. Imagine losing access to your data for several days while you wait for a budget backup solution to restore your files. That’s not just an inconvenience—it’s potentially thousands of dollars in lost revenue, halted operations, and frustrated customers.

Cheap backup solutions can take days—or even weeks—depending on the volume of data being restored. Managed backup services, by contrast, are built with speed in mind. They prioritize business continuity, often restoring full systems in hours rather than days.

Here’s why fast recovery matters:

Revenue Impact: Downtime doesn’t just stop your business from running—it stops your cash flow. Whether you’re a law firm, an eCommerce store, or a service-based business, your ability to serve clients or process transactions is directly tied to having operational systems. According to Gartner, the average cost of downtime is $5,600 per minute for businesses of all sizes.
Client Relationships: Prolonged downtime can erode customer trust. In today’s fast-paced world, clients expect quick responses and seamless service. If your business goes dark for days due to data loss, your competitors are just a click away.
Operational Efficiency: Your employees can’t work if they can’t access your systems. The longer your systems are down, the more operational momentum you lose. Managed services allow you to recover systems quickly, minimizing workflow disruptions.

A Tale of Two Recoveries: Managed vs. Cheap Backup

Consider two businesses hit by the same disaster: both lose access to their systems due to a ransomware attack. Business A uses a managed backup service and is able to restore their full system within eight hours. They’re back to serving clients the same day. Business B, relying on a cheap backup solution, experiences seven days of downtime due to slow recovery speeds. During that week, Business B loses tens of thousands of dollars in lost revenue, while Business A moves forward without missing a beat.

The cost of fast recovery is worth every penny when weighed against the potential loss of business and reputation.

How Vulnerable Is Your Backup to Ransomware Attacks?

Ransomware is one of the most common and devastating cyber threats facing businesses today. A key tactic of cybercriminals is to encrypt not only your production data but also your backup files. If your backups are stored on the same network as your main systems, they’re just as vulnerable to attack as the rest of your data.

This is where air-gapped backups come into play. An air-gapped backup is stored on a system that is physically or logically separated from your network, making it inaccessible to hackers even if they breach your main systems.

Here’s why that’s crucial:

Ransomware Targets Backups: During an attack, one of the first things cybercriminals look to do is destroy or encrypt your backups, leaving you with no way to recover without paying the ransom. If your backup is connected to the network, it’s vulnerable. Managed services often use air-gapped backups to ensure that no matter what happens, your data remains safe and recoverable.
Complete Recovery After an Attack: With air-gapped backups, your business can completely recover from a ransomware attack without having to pay a ransom. These backups are protected from compromise, ensuring that even if your network is breached, your data is safe.

Real-World Example: Air-Gapped Backups Save the Day

Let’s look at the case of a manufacturing company hit by ransomware. The attackers encrypted the company’s entire system, including local backups. However, because the company had air-gapped backups managed by an IT service provider, they were able to restore their entire system within 24 hours—with no ransom paid.

Had they relied on a standard, connected backup solution, they would have faced a difficult decision: either pay the ransom (which averaged over $1 million in 2023) or face weeks of downtime while attempting to rebuild systems from scratch.

Air-gapped backups provide that extra layer of security cheap solutions simply can’t offer.

Can Cheap Backup Solutions Grow with Your Business?

When you start out as a small business, a cheap backup solution may seem like it’s doing the job. You’ve got a small amount of data, and the limitations of an entry-level service don’t feel like a problem—yet. However, as your business grows, so does your data. More clients, more projects, more transactions—your data storage needs expand over time, and if your backup solution can’t grow with you, you’re setting yourself up for problems down the line.

Here’s what happens when businesses rely on a cheap backup solution that doesn’t scale:

Storage Limitations: Most budget-friendly services offer low storage limits, and exceeding these limits can trigger sudden, steep price hikes. What started as a $50/month plan could balloon into hundreds or even thousands of dollars as your data grows. In fact, many businesses find themselves juggling multiple backup accounts just to accommodate their data growth, which adds unnecessary complexity and costs.
Performance Degradation: As the amount of data you back up increases, cheap solutions can struggle to keep up. You might experience slower backup times, missed backup windows, or even failures due to capacity issues. This undermines the entire purpose of having backups in the first place.
Scalability of Managed Services: Managed backup services are built to scale with your business. As your data grows, so does your backup capacity—without exorbitant price increases. Managed services also adapt to your changing needs, offering flexible storage options and cloud-based solutions that can handle large-scale backups without sacrificing performance.

Future-Proofing Your Business

Investing in a scalable, managed backup solution today ensures you’re protected not just for where your business is now, but where it will be in the future. As your company grows, a scalable backup service guarantees that you won’t run into hidden costs, storage limitations, or downtime caused by an inadequate backup system. Essentially, managed backups future-proof your business by ensuring that no matter how much data you generate, it’s always safe, secure, and recoverable.

Backup Expertise: An Insurance Policy for Your Business

One of the biggest differences between cheap backup solutions and managed services isn’t just about the technology—it’s about the expertise behind it. Cheap services are often DIY, leaving you to handle setup, monitoring, and troubleshooting. But when it comes to protecting your most valuable business asset—your data—expert guidance is essential.

Here’s why expertise matters:

Proactive Support: Managed services provide proactive monitoring of your backups. This means that experts are constantly watching over your system, identifying issues before they cause problems, and ensuring backups are completed successfully every day. If something goes wrong, you don’t have to scramble to figure out what happened—your provider handles it for you.
Handling Complex Recoveries: Not all data recovery scenarios are the same. Some businesses may need to recover a single file, while others might need to restore entire systems after a ransomware attack or server crash. Managed backup providers are experienced in handling even the most complex recovery processes, ensuring that everything is restored efficiently and correctly.
Regular Testing and Auditing: Many businesses assume their backups are working—until they need them, and realize something was wrong. Managed services conduct regular testing and audits to ensure that backups are functional and ready for quick recovery when needed. This takes the guesswork out of disaster recovery, giving you peace of mind that your data is always protected.

The DIY Dilemma

Businesses that opt for DIY backup solutions are often left to navigate these complexities on their own. They may not have the IT expertise in-house to troubleshoot failed backups, test recovery processes, or configure backups properly. And while these cheap solutions can offer basic file storage, they lack the personalized, hands-on service that ensures a smooth recovery in a crisis. In contrast, managed backups act as an insurance policy, providing professional oversight and security for your data.

Making the Switch: How to Upgrade to a Managed Backup Solution

By now, the risks of sticking with a cheap backup solution should be clear. But how do you actually make the transition to a managed backup service? The good news is that upgrading is simpler than you might think, and the benefits of making the switch far outweigh the short-term hassle.

Here’s how to make the move:

1. Evaluate Your Current Backup Setup

Start by assessing your current backup solution. What are its limitations? Are you experiencing slow recovery times, storage issues, or missing important data? Do you have daily monitoring in place? Identifying these weaknesses will help you better understand what you need in a managed solution.

2. Choose the Right Managed Backup Provider

Look for a provider that offers a comprehensive solution: full system backups, scalable storage options, air-gapped backups, and 24/7 monitoring. Make sure they have experience working with businesses of your size and can offer a solution tailored to your specific needs.

3. Plan for Migration

Migrating to a managed service is a straightforward process. Most managed providers offer migration assistance, ensuring a smooth transition without losing any data. Your provider will work with you to schedule the migration, ensuring it happens during non-critical business hours to minimize disruptions.

4. Implement Daily Monitoring and Testing

One of the key benefits of managed backups is daily monitoring and regular testing. Once you’ve made the switch, your provider will ensure that your backups are consistently monitored, and they’ll run regular tests to make sure the system is always ready for a quick recovery.

5. Benefit from Comprehensive Disaster Recovery

With a managed service in place, you’ll have a full disaster recovery plan that includes fast restoration, expert support, and the confidence that your data is protected no matter what happens. You’ll be able to focus on running your business, knowing that your backups are handled by experts.

What to Expect After the Transition

Once you switch to a managed backup service, you’ll notice an immediate difference in the quality of protection and the peace of mind that comes with it. You’ll no longer have to worry about whether your backups are running or if you’ll be able to recover from a disaster. You’ll have professionals watching over your data, testing your backups, and ensuring your business can recover quickly from any data loss scenario.

Backups Are Important—But What About Data Security?

Data Protection is Key

While having reliable backups is crucial for business continuity, they’re only one piece of the larger cybersecurity puzzle. Relying solely on backups without strong data security measures in place leaves your business exposed to numerous risks, including ransomware attacks, data breaches, and regulatory fines.

Cybercriminals are constantly evolving their tactics, and data theft is becoming as common as data encryption. In addition to attacking your systems, hackers are now extracting sensitive information to use for extortion, blackmail, or sale on the dark web. Even if you can restore your systems quickly with a backup, the damage done by data theft can be irreversible.

Here’s why businesses need to take a holistic approach to data protection:

Preventing Breaches: A backup solution can restore your files, but it can’t stop a hacker from breaching your network in the first place. This is why your business needs to invest in comprehensive security tools like firewalls, endpoint protection, and network monitoring.
Protecting Sensitive Data: If your business handles personally identifiable information (PII), health records, or financial data, a breach could trigger not only reputational damage but also regulatory penalties under laws like HIPAA, GDPR, or CCPA.
Encryption and Access Controls: Managed services often include encryption and strict access controls for data both in transit and at rest, ensuring your data stays safe even if it’s intercepted by malicious actors.

CDS’s Approach to Complete Data Security

CDS integrates ThreatLocker, a zero-trust security solution, alongside its managed backup service to provide end-to-end data protection. This ensures that not only are your backups secure and air-gapped, but your systems are actively defended against intrusion, giving businesses a comprehensive security solution that goes beyond simple backups.

How Cheap Backup Solutions Can Lead to Compliance Failures

Peace of Mind for Regulatory Compliance

For businesses in regulated industries like healthcare, finance, or legal services, compliance with data protection laws is non-negotiable. Failure to adhere to these regulations can result in steep fines, legal action, and irreparable damage to your business’s reputation.

Many cheap backup solutions are not designed with compliance in mind. They may not offer encryption, they might store your data in locations that don’t comply with jurisdictional laws, and they often lack the documentation and security controls required to satisfy compliance audits. Here’s why this is a major issue:

Encryption Requirements: Regulations like HIPAA and GDPR require data to be encrypted both in transit and at rest. Many budget backup solutions don’t offer robust encryption, leaving your data vulnerable to interception.
Data Sovereignty: Some regulations, like CMMC and GDPR, have strict requirements about where data can be stored. Cheap cloud providers may store your data in locations that do not meet your industry’s compliance standards, which can result in penalties during an audit.
Audit Trails and Documentation: Compliance often requires maintaining a clear record of how and when data was accessed, transferred, or restored. Cheap solutions rarely offer this level of transparency, making it difficult to prove compliance during audits.

CDS’s Compliance-Ready Backup Solutions

With CDS’s managed backup services, businesses can meet the strict compliance requirements of regulations like HIPAA, GDPR, and CMMC 2.0. All backups are encrypted, stored in compliant data centers, and regularly tested, ensuring that businesses have the documentation they need to demonstrate compliance in case of an audit.

The Cost of Doing Nothing

The High Risk of Ignoring Backup Failures

For some businesses, the decision to stick with cheap backup solutions isn’t about saving money—it’s about doing nothing and assuming that their current setup will suffice. This is a dangerous mindset that can have catastrophic consequences.

The cost of ignoring potential failures in your backup system can be far greater than the savings you think you’re getting. Here’s what happens when businesses don’t address the limitations of their cheap backup systems:

Complete Data Loss: The most extreme outcome of neglecting your backup solution is total data loss. If your backups fail due to corruption, incomplete files, or slow recovery, you could lose all your critical business data.
Extended Downtime: Every minute your systems are down, your business is bleeding money. Cheap backups often have slow recovery times, and if a disaster hits, you could be looking at days or weeks of downtime. In fact, according to FEMA, 40% of businesses never reopen after experiencing a disaster, largely due to the inability to recover quickly enough.
Loss of Customer Trust: Your customers trust you with their data. If a backup failure leads to extended downtime or a data breach, you risk losing that trust permanently. This can lead to lost contracts, negative reviews, and long-term reputational damage.

Why You Can’t Afford to Wait

If you’ve been relying on a cheap solution and putting off an upgrade to a more reliable, managed backup service, it’s only a matter of time before disaster strikes. The longer you wait, the higher the risk that your backups won’t be enough when you need them most.

Don’t wait for a crisis to find out if your backup system is up to the task. CDS provides a free Backup Health Check that assesses your current backup solution for weaknesses and ensures your business is ready for any eventuality.

Cheap Backup Solutions: A Risk Your Business Can’t Afford

Cheap backup solutions may offer short-term savings, but they come with long-term risks. Slow recovery times, incomplete data protection, and compliance failures can lead to lost revenue, damaged reputations, and costly downtime. These solutions simply don’t provide the reliability, scalability, or security that businesses need to stay operational after a disaster.

Managed backup services, on the other hand, offer fast recovery, proactive monitoring, and full system protection, ensuring your business can bounce back from any data loss event. With managed backups, you’re not just storing data—you’re safeguarding your business.

Take Action Now: Ensure Your Data Is Protected

Don’t wait for a data loss incident to reveal the gaps in your backup solution. Centurion’s FREE Backup Health Check will assess your current setup and show you how to strengthen your disaster recovery strategy.

Protect your business from downtime, data loss, and compliance risks. Contact us today to schedule your Backup Health Check!