It's become a big deal in IT security, too. Many corporate customers are demanding ROI models to demonstrate that a particular security investment pays off. And in response, vendors are providing ROI models that demonstrate how their particular security solution provides the best return on investment.

It's a good idea in theory, but it's mostly bunk in practice.

Before I get into the details, there's one point I have to make. "ROI" as used in a security context is inaccurate. Security is not an investment that provides a return, like a new factory or a financial instrument. It's an expense that, hopefully, pays for itself in cost savings. Security is about loss prevention, not about earnings. The term just doesn't make sense in this context.

But as anyone who has lived through a company's vicious end-of-year budget-slashing exercises knows, when you're trying to make your numbers, cutting costs is the same as increasing revenues. So while security can't produce ROI, loss prevention most certainly affects a company's bottom line.

And a company should implement only security countermeasures that affect its bottom line positively. It shouldn't spend more on a security problem than the problem is worth. Conversely, it shouldn't ignore problems that are costing it money when there are cheaper mitigation alternatives. A smart company needs to approach security as it would any other business decision: costs versus benefits.

The classic methodology is called annualized loss expectancy (ALE), and it's straightforward. Calculate the cost of a security incident in both tangibles like time and money, and intangibles like reputation and competitive advantage. Multiply that by the chance the incident will occur in a year. That tells you how much you should spend to mitigate the risk. So, for example, if your store has a 10 percent chance of getting robbed and the cost of being robbed is $10,000, then you should spend $1,000 a year on security. Spend more than that, and you're wasting money. Spend less than that, and you're also wasting money.

Of course, that $1,000 has to reduce the chance of being robbed to zero in order to be cost-effective. If a security measure cuts the chance of robbery by 40 percent -- to 6 percent a year -- then you should spend no more than $400 on it. If another security measure reduces it by 80 percent, it's worth $800. And if two security measures both reduce the chance of being robbed by 50 percent and one costs $300 and the other $700, the first one is worth it and the second isn't.

The Data Imperative

The key to making this work is good data; the term of art is "actuarial tail." If you're doing an ALE analysis of a security camera at a convenience store, you need to know the crime rate in the store's neighborhood and maybe have some idea of how much cameras improve the odds of convincing criminals to rob another store instead. You need to know how much a robbery costs: in merchandise, in time and annoyance, in lost sales due to spooked patrons, in employee morale. You need to know how much not having the cameras costs in terms of employee morale; maybe you're having trouble hiring salespeople to work the night shift. With all that data, you can figure out if the cost of the camera is cheaper than the loss of revenue if you close the store at night -- assuming that the closed store won't get robbed as well. And then you can decide whether to install one.

Cybersecurity is considerably harder, because there just isn't enough good data. There aren't good crime rates for cyberspace, and we have a lot less data about how individual security countermeasures -- or specific configurations of countermeasures -- mitigate those risks. We don't even have data on incident costs.

One problem is that the threat moves too quickly. The characteristics of the things we're trying to prevent change so quickly that we can't accumulate data fast enough. By the time we get some data, there's a new threat model for which we don't have enough data. So we can't create ALE models.

But there's another problem, and it's that the math quickly falls apart when it comes to rare and expensive events. Imagine you calculate the cost -- reputational costs, loss of customers, etc. -- of having your company's name in the newspaper after an embarrassing cybersecurity event to be $20 million. Also assume that the odds are 1 in 10,000 of that happening in any one year. ALE says you should spend no more than $2,000 mitigating that risk.

So far, so good. But maybe your CFO thinks an incident would cost only $10 million. You can't argue, since we're just estimating. But he just cut your security budget in half. A vendor trying to sell you a product finds a Web analysis claiming that the odds of this happening are actually 1 in 1,000. Accept this new number, and suddenly a product costing 10 times as much is still a good investment.

It gets worse when you deal with even more rare and expensive events. Imagine you're in charge of terrorism mitigation at a chlorine plant. What's the cost to your company, in money and reputation, of a large and very deadly explosion? $100 million? $1 billion? $10 billion? And the odds: 1 in a hundred thousand, 1 in a million, 1 in 10 million? Depending on how you answer those two questions -- and any answer is really just a guess -- you can justify spending anywhere from $10 to $100,000 annually to mitigate that risk.

Or take another example: airport security. Assume that all the new airport security measures increase the waiting time at airports by -- and I'm making this up -- 30 minutes per passenger. There were 760 million passenger boardings in the United States in 2007. This means that the extra waiting time at airports has cost us a collective 43,000 years of extra waiting time. Assume a 70-year life expectancy, and the increased waiting time has "killed" 620 people per year -- 930 if you calculate the numbers based on 16 hours of awake time per day. So the question is: If we did away with increased airport security, would the result be more people dead from terrorism or fewer?

Caveat Emptor

This kind of thing is why most ROI models you get from security vendors are nonsense. Of course their model demonstrates that their product or service makes financial sense: They've jiggered the numbers so that they do.

This doesn't mean that ALE is useless, but it does mean you should 1) mistrust any analyses that come from people with an agenda and 2) use any results as a general guideline only. So when you get an ROI model from your vendor, take its framework and plug in your own numbers. Don't even show the vendor your improvements; it won't consider any changes that make its product or service less cost-effective to be an "improvement." And use those results as a general guide, along with risk management and compliance analyses, when you're deciding what security products and services to buy.

This essay previously appeared in CSO Magazine.

New life for dead Tempe network? Another firm has expressed interest in buying the pennies on the dollar assets that remain of the former Kite Networks installation in Tempe from the firm that financed the venture as long as they can negotiate a new, more favorable deal with the city for mounting and removal rights. CTC, Inc., which the East Valley Tribune reports runs networks in the Kansas City, Mo., area, thinks there's an opportunity. The article notes that reception problems were due in part to the prevalence of stucco in Tempe, common in the southwest. Stucco walls layer plaster or other materials on a wire mesh for strength that turns a house into a bit of an accidental Faraday cage, partially shielding the home from electromagnetic radiation. (Could I go so far to say that Tempe's network could be a phoenix? Ouch.)

Wake up, you darn computer: Intel's new Remote Wake motherboards won't work with Wi-Fi, it's important to note. The feature, announced today, will let an incoming VoIP call (the articles all say "phone call over the Internet") to wake a computer, as long as the call comes from a particular source. Of course, the standard SIP protocol for VoIP doesn't have the kind of security and integrity that would allow this; Intel has to overcome the problem with network address translation that renders most computer unreachable from outside the local network without a separate service like GoToMyPC or LogMeIn; and it will only work for computers connected via Ethernet to a local network, because Wi-Fi is off when a computer sleeps, while Ethernet can remain lightly active. I don't have the protocol details yet, but there's long been a Wake on LAN protocol that required support in a router, operating system, and Ethernet card; Intel may be leveraging this.

In particular, SSL certificates (as used to identify https websites) might contain one of these weak keys — and so it would be possible for an attacker to successfully impersonate a secure website. Of course the attacker would need to persuade you to mistakenly visit their site — but it just so happens that one of the more devastating attacks on DNS has recently been discovered; so that’s not as unlikely as it must have seemed back in May.

Anyway, my old friend Ben Laurie (who is with Google these days) and I have been trawling the Internet to determine how many certificates there are containing these weak keys — and there’s a lot: around 1.5% of the certs we’ve examined.

But more of that another day! because earlier this week, Ben spotted that one of the weak certs was for Sun’s “OpenID” website, and that two more OpenID sites were weak as well (by weak we mean that a database lookup could reveal the private key!)

OpenID, for those who are unfamiliar with it, is a scheme for allowing you to prove your identity to site A (viz: provide your user name and password) and then use that identity on site B. There’s a queue of people offering the first bit, but rather less offering the second : because it means you rely on someone else’s due diligence in knowing who their users are — where “who” is a hard sort of thing to get your head around in an online environment.

The problem that Ben and I have identified (advisory here), is that an attacker can poison a DNS cache so it serves up the wrong IP address for openid.sun.com. Then, even if the victim is really cautious and uses https and checks the cert, their credentials can be phished. Thereafter, anyone who trusts Sun as an identity provider could be very disappointed. There’s other attacks as well, but you’ve probably got the general idea by now.

In principle Sun should make a replacement certificate and that should be it (and so they have — read Robin Wilton’s comments here). Except that they need to put the old certificate onto a Certificate Revocation List (CRL) because otherwise it will still be trusted from now until it expires (a fair while off). Sadly, many web browsers, and most of the OpenID codebases haven’t bothered with CRLs (or they don’t enable their checking by default so it’s as if it wasn’t there for most users).

One has to conclude that Sun (and the other two providers) should not be trusted by anyone for quite a while to come. But does that matter ? Since OpenID didn’t promise all that much anyway, does a serious flaw (which does require a certain amount of work to construct an attack) make any difference? At present this looks like the modern equivalent of a small earthquake in Chile.

1. DNS + Karma = Boom! Enuf said. Also, hear Pete Linstrom squeal.
2. Fun essay on "blocking" and risk. Is it our job to stop'em from using Facebook?
3. MS Exploitability Index. Smart ... or misguidedly focused on "vulnerability release" (and not creation)
4. Chip-n-PIN, a PCI killer? I don't think so!
5. Mike R revisits "good enough security" - read it, then review your IR plans (...for you will be 0wned)
6. Very fun RSA survey here; data leakage beats malware again, people still not report incidents (to whom???)
7. More and more and more people point at idiocies of academic security research... Read the whole w00t 08 thread here. Weep. Laugh.
8. Neosploit has a bad quarter... breaks support "contracts" ... shuts down? Ah, the economy :-)
9. Awesome stuff from  Richard Bejtlich: CAER.
10. "The Network Firewall is a Consensual Hallucination" :-)
11. More GRC-ball-kicking: here, here ("IT-GRC "vendors" are not IT-GRC vendors") - both are pretty insightful for GRC-lovers and GRC-haters)
12. More SIEM-ball-kicking: here ("underwhelming","ridiculous", "missing the point"), here ("dead ...unless","cripple")
13. Fun DLP portal launches.
14. Final word (?) on TerryChilds-gate here. "When management starts controlling the actions of admins, things start to fall apart." Huh? When management loses control of the business, it dies. Folks, IT vs IT security gap IS real. I never quite believed it, but this taught me a lesson. Some common security sense for a change (also here).

Enjoy.

If you still subscribe to fixed site recovery services using shared IT infrastructure from the likes of HP, IBM BCRS, or SunGard, among others, you will quickly become a dinosaur in the next 1 to 2 years.

These types of shared infrastructure services involve lengthy restores from tape and a recovery time objective of 72 hours, at best. Plus, you'll be lucky if you recover at all because chances are, you've had trouble scheduling a test with your service provider and it's been a LONG time since the last one, if indeed you’ve ever tested.

72 hours recovery just doesn't cut it anymore. And frankly, understanding your provider's oversubscription ratio to shared infrastructure to determine the risk of multiple invocations, or attempting to negotiate exclusions zones and availability guarantees is a time suck. Most companies are either taking DR back in-house or, if they still rely on a DR service provider, they are using dedicated infrastructure.

A dedicated infrastructure is attractive as it enables replication to improve recovery objectives. But it’s expensive, and puts advanced IT recovery out of the reach of many companies who can't measure downtime in millions of dollars.

But, there are new services on the horizon that will make advanced IT recovery affordable for the masses. This month SunGard announced the availability of its new Virtual Server Replication Service. As I discussed in my most recent Forrester Wave™ of DR Service Providers and other reports, server virtualization is transforming IT recovery. With replication to a virtualized server infrastructure and shared storage infrastructure, customers can enjoy improved recovery-time and recovery-point objectives without the cost of dedicated and custom IT recovery solutions from the DR services provider.SunGard is the first DR service provider to productize these virtual services. I expect other DR service providers to follow suit.

So, the next time your contract is up for renewal, you need to completely rethink your approach to IT recovery. Get off tape and move to these new virtual services. It will improve your recovery capabilities and you don't have to worry about the oversubscription issue with shared virtual infrastructure -- the DR provider can manage capacity much more easily in this environment. In fact, SunGard is offering an RTO SLA of 6 hours as part of the offering. To my knowledge, this is the first time a DR service provider is offering this as part of a standard contract. I'm looking forward to the day when vendors will offer most services with transparent, subscription-based pricing, and standard contract terms that don't take a team of procurement professionals to negotiate. 

Not sure if it is because of the slumping market and economy or in spite of it, but there pace of merger activity has been picking up lately and the security industry has not been immune to it.  Today saw two meaningful deals announced that could have an impact on the security landscape:

1. Sophos buys Utimaco - Saw this one when I woke up today, as it is a European deal.  UK based Sophos is buying German based Utimaco, makers of the SafeGuard line of data encryption/protection/DLP product line.  Sophos is paying cash $340 million US for in this deal.  This means they are substantially dipping into the credit market, as this is far more than they reported cash on hand. So like the Brocade/Foundry deal, the acquiring company feels strong enough about the acquisition to mortgage the house to get it.  In this case, I think Sophos is making a smart deal. They clearly say that to compete with Symantec, McAfee and Microsoft they are going to need a full endpoint security suite. AV alone is not just going to cut it. This gives Sophos a real play in DLP and data storage space. 

Yes they could have just done a partner deal for this type of technology, but I applaud them for going out and buying the technology.  I wondered if they would use this as a reverse merger entry to the public markets but it doesn't look like that.  In any event it looks like Sophos is making the play and spending the bucks to be a player in the endpoint security suite game.

2. Motorola buys AirDefense - Well one of the air brothers finally found a taker. I always thought that for all of the press AirDefense, AirTight and AirMagnet receive, the revenue just didn't match the hype. Stand alone wireless security was a tweener.  Would traditional security cover wireless or would traditional wireless cover wireless security.  In any event a stand along wireless security play is a tough road.  So with this answer Motorola says wireless handles wireless security. 

My question is what does the future hold for Motorola.  They are reportedly getting out of the cell phone business.  Is their wireless business, even a secure one enough to support this giant?  I don't know but there is a bit of "dead man walking" over there if you ask me. 

I think the play is clear though that wireless providers are going to snap up wireless security companies. The real issue is at what prices.  If anyone hears a price on this one, let me know.

Not sure if it is because of the slumping market and economy or in spite of it, but there pace of merger activity has been picking up lately and the security industry has not been immune to it.  Today saw two meaningful deals announced that could have an impact on the security landscape:

1. Sophos buys Utimaco - Saw this one when I woke up today, as it is a European deal.  UK based Sophos is buying German based Utimaco, makers of the SafeGuard line of data encryption/protection/DLP product line.  Sophos is paying cash $340 million US for in this deal.  This means they are substantially dipping into the credit market, as this is far more than they reported cash on hand. So like the Brocade/Foundry deal, the acquiring company feels strong enough about the acquisition to mortgage the house to get it.  In this case, I think Sophos is making a smart deal. They clearly say that to compete with Symantec, McAfee and Microsoft they are going to need a full endpoint security suite. AV alone is not just going to cut it. This gives Sophos a real play in DLP and data storage space. 

Yes they could have just done a partner deal for this type of technology, but I applaud them for going out and buying the technology.  I wondered if they would use this as a reverse merger entry to the public markets but it doesn't look like that.  In any event it looks like Sophos is making the play and spending the bucks to be a player in the endpoint security suite game.

2. Motorola buys AirDefense - Well one of the air brothers finally found a taker. I always thought that for all of the press AirDefense, AirTight and AirMagnet receive, the revenue just didn't match the hype. Stand alone wireless security was a tweener.  Would traditional security cover wireless or would traditional wireless cover wireless security.  In any event a stand along wireless security play is a tough road.  So with this answer Motorola says wireless handles wireless security. 

My question is what does the future hold for Motorola.  They are reportedly getting out of the cell phone business.  Is their wireless business, even a secure one enough to support this giant?  I don't know but there is a bit of "dead man walking" over there if you ask me. 

I think the play is clear though that wireless providers are going to snap up wireless security companies. The real issue is at what prices.  If anyone hears a price on this one, let me know.