2014: The year of encryption

Padlock in the middle of digital circuit board Companies are under pressure in the current environment to make sure their encryption is up to scratch

"The solution to government surveillance is to encrypt everything."

So said Eric Schmidt, Google's chairman, in response to revelations about the activities of the US National Security Agency (NSA) made by whistle-blower Edward Snowden.

 Technology of Business

Schmidt's advice appears to have been heeded by companies that provide internet-based services.

Microsoft, for instance, says it will have "best-in-class industry cryptography" in place for services including Outlook.com, Office 365 and SkyDrive by the end of the year, while Yahoo has announced plans to encrypt all of its customers' data, including emails, by the end of the first quarter of 2014.

For many smaller businesses too, 2014 is likely to be the year of encryption. That's certainly the view of Dave Frymier, chief information security officer at Unisys, a Pennsylvania-based IT company.

But he believes the driving force for this will be different: not government surveillance programmes, but the threat of attacks from hackers.

Diamonds and paperclips

Rather than encrypting everything, Mr Frymier advocates that companies identify what he believes is the 5%-15% of their data that is really confidential, and use encryption to protect just that.

He says employees should then be barred from accessing this data using standard desktop and laptop machines or their own smartphones or tablets, which can easily be infected with malware. Access would be restricted to employees using secure "hardened" computers.

Dave Frymier Dave Frymier from Unisys says the threat posed by hackers will drive firms to invest in encryption

"When you look at the increasing sophistication of malware, it becomes apparent that you need to establish highly protected enclaves of data. The only way to achieve that is through modern encryption, properly implemented," says Mr Frymier.

"You can split your data into diamonds and paperclips, and the important thing is to encrypt the diamonds, and not to sweat the paperclips."

Prakash Panjwani, a general manager at Maryland-based data protection company Safenet, also believes that the large number of high-profile data breaches in 2013 - including hacker attacks on US retailer Target, software maker Adobe, and photo messaging service Snapchat - means that 2014 will inevitably be a bumper one for encryption vendors.

"Snowden has focused attention on surveillance issues, but the real threat is organised crime and the number of data breaches that are occurring," he says.

"Companies are going to come under extreme pressure from boards, customers and regulators in 2014 to take action so that if there is a data breach they can say, 'We didn't lose any data because it was encrypted.'"

Keeping the regulator happy

A large number of companies already use encryption to protect the data they store on their own systems "at rest", as well as data "in flight" as it is sent over networks to customers, other data centres, or for processing or storage in the cloud.

Hacking for password Using a longer encryption key will make it harder for hackers to access your data

But Ramon Krikken, an analyst at Gartner, believes that the way encryption is used by many of these companies is likely to change in 2014.

"Companies are certainly going to have to take encryption more seriously thanks to the Snowden revelations," he says.

"At the moment many companies are using encryption for compliance reasons, not for security. They are not using it to protect their data, but because it is the easiest way to comply with regulations: encryption is the auditor's and the regulator's favourite check box item."

'Back doors'

Start Quote

You have to decide who you trust, and find out where the vendor gets all the parts of its product from”

End Quote Ramon Krikken Gartner analyst

One question that companies will need to consider is which encryption algorithm or cipher to use to best encrypt their data. It's an important question as some older ciphers can now be "cracked" relatively quickly using the computing power in a standard desktop PC.

And there is a question mark over whether the NSA may have deliberately used its influence to weaken some encryption systems - or even to introduce "back doors" that provide easy access to encrypted data to anyone who knows of their existence.

"The problem is that even if you can inspect the source code, it is certainly not a given that you would be able to spot a back door," Mr Krikken says.

Edward Snowden US whistle-blower Edward Snowden's revelations have made companies take encryption more seriously

He believes it is more important to establish where all the parts of an encryption solution come from.

Start Quote

No-one ever got fired for having encryption that was too strong”

End Quote Robert Former Neohapsis

"If you procure software or hardware from overseas, from a country with a government which does not have your best interests at heart, you need to remember that it may not be as secure as you think," Mr Krikken says.

"So you have to decide who you trust, and find out where the vendor gets all the parts of its product from."

Don't be cheap

Another thing companies need to consider when they implement encryption is how strong the encryption should be. Using a longer encryption key makes it harder for hackers or governments to crack the encryption, but it also requires more computing power.

But Robert Former, senior security consultant for Neohapsis, an Illinois-based security services company, says many companies are overestimating the computational complexity of encryption.

"If you have an Apple Mac, your processor spends far more time making OS X looks pretty than it does doing crypto work."

He therefore recommends using encryption keys that are two or even four times longer than the ones many companies are currently using.

"I say use the strongest cryptography that your hardware and software can support. I guarantee you that the cost of using your available processing power is less than the cost of losing your data because you were too cheap to make the crypto strong enough," he says.

"No-one ever got fired for having encryption that was too strong."

More on This Story

The BBC is not responsible for the content of external Internet sites

More Business stories

RSS

Business Live

  1.  
    11:29: Noisy Japanese children
    Japanese kids

    It's a bit of a slow news day, so a story on FT.com has caught our eye. For years Tokyo has had a strict 45-decibel noise limit - library levels in short - in its suburbs, but is considering changing it because of... noisy children. Some residents are complaining loudly because noisy kids affect property values, apparently. But it is this quote that really says a great deal about Japan: "Children should be taught to speak and sing at an appropriate volume, and age four is old enough to understand that," said one Tokyo resident.

     
  2.  
    11:12: Irish mortgage arrears

    Ireland's slow recovery in the property market continues to trundle along. The number of Irish households in mortgage arrears for more than 90 days fell to 10.4% the three months to December, down from 11.2% in the previous quarter, Ireland's central bank has said. That's the lowest level since March 2012.

     
  3.  
    10:48: Co-op hires Wilko's Ellis

    The Co-operative Group is hiring Ian Ellis as chief financial officer. He joins from retailer Wilko, where he has the same role.

     
  4.  
    10:32: Currencies

    Sterling slipped against the dollar ahead of the monthly US unemployment figures out at 1330 GMT, down 0.2% to $1.5208. Richard Falkenhall, currency strategist at SEB, said: "This election is very uncertain ... we think the uncertainty created will see sterling lose ground and forecast sterling/dollar to drop below $1.50 in coming months."

     
  5.  
    10:17: Eurozone economy
    euros

    The eurozone economy gathered pace in the last three months of 2014, with Eurostat confirming its earlier estimate of 0.3% growth compared with the three months to September 30 and a 0.9% expansion compared with the same period in 2013. Germany's economy grew by 0.7% quarter-on-quarter, while France managed just 0.1%.

     
  6.  
    10:04: Mike Ashley
    Mike Ashley

    Mike Ashley is a very busy man. Too busy for the entire month of March, it seems, to appear before MPs on the Scottish Affairs committee, who want to ask Mr Ashley about the treatment of workers at the USC fashion chain owned by his Sports Direct. Fortunately chairman Keith Hellawell is able to make the time, though. The MPs would still like to know why Mr Ashley is unavailable during March.

     
  7.  
    09:43: Japan shares

    Japan's Nikkei 225 shares index closed at a 15-year high earlier on the ECB's upward revision for eurozone economic growth and the announcement that it would begin bond buying on Monday. The index rose 1.2% to close at 18,971.

     
  8.  
    09:26: Greece
    Athens

    Greece has paid the first €310m (£223m) instalment of an International Monetary Fund (IMF) loan that falls due this month. The government must pay a total of €1.5bn to the IMF this month over two weeks starting today. Prime minister Alexis Tsipras is reported to have asked for a meeting with European Commission chief Jean-Claude Juncker about the payments.

     
  9.  
    09:09: Eurozone bonds

    Government bond yields in Portugal, Italy and Spain fell to new record lows on Friday, a day after the ECB gave details of its bond-buying plans. Portuguese 10-year yields fell 12 basis points to 1.7%, while Italian and Spanish equivalents fell 5 points to 1.28% and 1.19% respectively. The ECB starts buying government bonds on Monday in a bid to boost growth in the eurozone.

     
  10.  
    Thomas Cook Via Twitter

    Dominic Walsh of The Times tweets: Question is whether, as with Club Med, Fosun has longer-term aim to use minority stake in Thomas Cook as basis for eventual full bid @walshdominic

     
  11.  
    08:47: Market update

    The FTSE 100 Index is 8 points lower at 6,953. Shares in Weir Group are the biggest riser this morning on speculation that the engineering firm may be a bid target following a recent slump in its share price.

     
  12.  
    08:31: Thomas Cook
    Thomas Cook

    Fosun, a Chinese investment firm, has bought a 5% stake in Thomas Cook for £91.9m and plans to increase its holding further. The move follows its purchase of French resort operator Club Med last month. Shares in Thomas Cook have soared 16% higher to 140p.

     
  13.  
    08:17: RBS shares

    Just worth point out that RBS shares are trading at 376.9p and the government needs to sell its stake at an average of 455p per share just to break even on the money it pumped into the bank in 2008 and 2009. Also worth mentioning: Mr Osborne may not be Chancellor after May.

     
  14.  
    08:03: RBS shares
    RBS

    George Osborne has told the Financial Times he made a mistake in not radically restructuring taxpayer-owned Royal Bank of Scotland soon after he came to office in 2010. But the chancellor says he would like to proceed "as quickly as we can to get rid of it" after the general election.

     
  15.  
    07:50: AGA profits

    AGA says operating profit stood at £9.6m, but it booked £4.1m in pensions charges, £3.3m in fair value costs relating to its stake in Fired Earth - its tiles business - leaving it with £2.2m. But that's before £1.5m in net interest charges on its pensions deficit, which doubled in the year from £35m to £72m. That brought pre-tax profits down to just £700,000, and left AGA in no position to pay a dividend. But the company does expect market conditions to improve this year.

     
  16.  
    07:39: Vodafone
    The Hoff

    Vodafone has announced a plan to introduce a mandatory minimum maternity policy in all 30 countries in which it operates. By the end of 2015, all female employees will be offered at least 16 weeks fully paid maternity leave, as well as full pay for a 30-hour week for the first six months after they return to work. David Hasselhoff, however, will not be eligible.

     
  17.  
    07:27: AGA profits
    AGA Rangemaster

    AGA Rangemaster has reported a slight fall in an annual pre-tax profit to £700,000, compared with £1.1m a year earlier. It has also announced it will not be paying a dividend to shareholders.

     
  18.  
    DFS shares Via Twitter

    Retail analyst Nick Bubb tweets: The Chairman of DFS trumpets that it stands for "Dedication, Family and Success". Or Dull Furniture Sale? ;-) @NickBubb1

     
  19.  
    07:15: DFS shares
    DFS

    Buy one, get one half price! Furniture retailer DFS has priced shares at 255p - at the lower end of expectations. The stock starts trading at 0800 today and means the company will be valued at close to £550m.

     
  20.  
    07:02: Eurozone outlook BBC Radio 4

    One thing that may help the eurozone economy is a small but significant accomplishment by the ECB that appears to have gone largely unnoticed. That was last Autumn's asset quality review of the banks, by the ECB which "gave pretty much everybody a clean bill of help", says Mr Cameron Watt. "And that's allowing banks to sell assets off their balance sheets."

     
  21.  
    Greek economy Via Twitter Adam Parsons Business Correspondent

    Former Greek shipping minister @MVarvitsiotis tells #WUTM "we'll do whatever it takes...to stay in Eurozone...leaving would be a disaster" @AdamParsons1

     
  22.  
    06:47: Eurozone outlook BBC Radio 4
    Draghi

    Mr Cameron Watt tells Today: "There is a following wind which is the lower oil price and the material decline in the currency [euro] against the dollar". He says those factors should help boost the eurozone economy, although he he sceptical that it will do as well as ECB president Mario Draghi (pictured) suggested at his press conference on Thursday.

     
  23.  
    06:35: ECB bond buying BBC Radio 4
    The EURO logo is pictured in front of the former headquarter of the European Central Bank

    We're talking quantitative easing (QE) on the Today programme and why it pushes up stock markets. And Ewan Cameron Watt, global chief investment strategist at BlackRock, explains in the most clear terms. It is all about portfolio substitution, of course. "If I buy a whole lot of bonds and give you cash, you have now have to invest that cash," he says. "You don't want to buy bonds because of [current] negative yields, so it forces you to buy riskier assets, which inflates the prices of things like equities." Simples.

     
  24.  
    06:25: Alpacas! Radio 5 live
    Alpacas

    Let's face it - alpacas are a bit weird. But farming the cuddly critters appears to appeal to some who want to escape the rat race, alpaca farmer Mary-Jo Smith tells Wake Up to Money. She says alpaca wool is strong, luxurious and "just amazing to wear". The British Alpaca Society holds its annual show in Telford this weekend.

     
  25.  
    06:15: Insurers v banks Radio 5 live

    Aviva shares ended 7% higher yesterday and Ewen Cameron Watt, chief investment strategist at BlackRock, tells Wake Up to Money it is no surprise that insurers are doing better than banks. He says operating conditions for banks are getting tougher, but some insurers are opting to join forces.

     
  26.  
    06:05: Rangers FC
    A general view of the Ibrox Stadium, in Glasgow,

    It's a big day for Rangers FC as the club holds an emergency meeting where Dave King hopes to oust the board. However, there are question marks over King - who wants to become chairman - because of his convictions in South Africa for tax offences.

     
  27.  
    06:03: Matthew West Business Reporter

    Happy Friday everyone. Don't forget you can get in touch by email at bizlivepage@bbc.co.uk or via twitter @bbcbusiness.

     
  28.  
    06:00: It's Friday Chris Johnston Business Reporter

    Good morning and welcome to the last day of the working week. US unemployment figures are set to dominate the day and are out at 13:30. We'll bring you the reaction to those numbers and all the day's other business news as well.

     

Features

  • Replica of a cargo boxSpecial delivery

    The man who posted himself to the other side of the world


  • Cartoon of women chatting on the metroChat wagon

    The interesting things you hear in a women-only carriage


  • Target practice for Lithuanian troopsBaltic shiver

    Europe editor Katya Adler on the alarm at Russian muscle-flexing


  • Ruben ReuterRuben returns Watch

    Child TV star with Down's syndrome on life away from home


Try our new site and tell us what you think. Learn more
Take me there

Copyright © 2015 BBC. The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.