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Economics and Software Bills of Materials (SBOM)

In an article for The Hill, Shannon Lantzy and Kelly Rozumalski have discussed how Software Bill Of Materials (SBOMs) are good for business as well as security. SBOMs more forcefully emerged on the American policy space after the Biden Whitehouse promulgated an Executive Order on cybersecurity on May 12, 2021. The Order included a requirement that developers and private companies providing services to the United States government be required to produce Software Bill of Materials (SBOM).1 SBOMs are meant to help incident responders to cybersecurity events assess what APIs, libraries, or other digital elements might be vulnerable to an identified operation, and also help government procurement agencies better ensure the digital assets in a product or service meet a specified security standard.

Specifically, Lantzy and Rozumalsko write:

Product offerings that are already secure-by-design will be able to command a premium price because consumers will be able to compare SBOMs.

Products with inherently less patchable components will also benefit. A universal SBOM mandate will make it easy to spot vulnerabilities, creating market risk for lagging products; firms will be forced to reengineer the products before getting hacked. While this seems like a new cost to the laggards, it’s really just a transfer of future risk to a current cost of reengineering. The key to a universal mandate is that all laggards will incur this cost at roughly the same time, thereby not losing a competitive edge.

The promise of increased security and reduced risk will not be realized by SBOM mandates alone. Tooling and putting this mandate in practice will be required to realize the full power of the SBOM.

The idea of internalizing security costs to developers, and potentially increasing the cost of goods, has been something that has been discussed publicly and with Western governments for at least two decades or more. We’ve seen the overall risk profiles presented to organizations continue to increase year over year as a result of companies racing to market with little regard for security, which was a business development strategy that made sense when they experienced few economic liabilities for selling products with severe cybersecurity limitations or vulnerabilities. In theory, enabling comparison shopping vis-a-vis SBOMs will disincentivize companies from selling low-grade equipment and services if they want to get into high-profit enterprise or high-reliability government contracts, with the effect being that security improvements will also trickle down to the products purchased by consumers as well (‘trickle down cybersecurity’).

While I think that SBOMs are definitely a part of developing cybersecurity resilience it remains to be seen just how much consumers will pay for ‘more secure’ products given that, first, they are economically incentivized to pay the lowest possible amounts for goods and services and, second, they are unlikely to know for certain what is a good or bad security practice. Advocates of SBOMs often refer to them as akin to nutrition labels but we know that at most about a third of consumers read those labels (and those who read them often experience societal pressures to regulate caloric intake and thus read the labels) and, also, that the labels are often inaccurate.

It will be very interesting to see whether enterprise and consumers alike will be able or willing to pay higher up-front costs, to say nothing of being able to actually trust what is on the SBOM labels. Will companies that adopt SBOM products suffer a lower rate of cybersecurity incidents, or ones that are of reduced seriousness, or be able to respond more quickly when a cybersecurity incident has been realized? We’re going to actually be able to test the promises of SBOMs, soon, and it’s going to be fascinating to see things play out.


  1. I have a published a summary and brief analysis of this Executive Order elsewhere in case you want to read it. ↩︎