The hidden price of free: How businesses' cost-cutting tech choices compromise your security
Free tools may save businesses money, but they often compromise customer data. Learn how “free” software puts your privacy at risk—and what to look out for.
By Amber ChenMay 29 2025, Published 3:13 p.m. ET
Free software is everywhere, used for email, marketing, accounting, scheduling, and even storing customer data. For small businesses under pressure, it's a tempting way to cut costs and stay afloat.
But “free” often comes with strings. Many of these tools don't offer strong security, putting your customers or clients at risk. What looks like a smart financial move can end up compromising sensitive information. Plenty of businesses, from healthcare to retail, have learned this the hard way. Data breaches tied to free platforms aren't rare, and the consequences can be serious.
Just because a tool saves money doesn't mean it's the right choice. If it's not built to protect sensitive data, it might cost you and your customers much more down the road. Heimdal explored this issue to highlight how popular free software tools can weaken cybersecurity and what businesses (and consumers) can do to stay protected.
Understanding the vulnerabilities and who pays the price
Free software isn't really free. To stay in business, these tools often make money by tracking users, selling data, or running ads. They can collect user data by scanning emails, monitoring activity, or analyzing documents, and it's rarely clear how the data is used or stored. Without strong protections in place, customers can end up paying the price with lost privacy.
Businesses might save a few dollars using free platforms, but the trade-off can mean weak security, intrusive advertising, and data leaks. Free platforms often lack essential security features like encryption, multi-factor authentication, and monitoring tools. These gaps can make sensitive information easier to access and exploit.
Even trusted brands make compromises in their free versions. For example, Microsoft's no-cost Office stores files on OneDrive by default and displays ads. This setup raises concerns about privacy and control over users' stored content.
The most troubling part is that customers don't choose these tools—businesses do. But when something goes wrong, it's the customers who suffer. Their data may be exposed, sold, or stolen. Free software might help balance a budget, but the real cost is often passed on to someone else.
Legal and compliance risks
Using free software can do more than risk data. It can also break the law. Industries like healthcare, finance, and legal services must follow strict compliance standards and data protection rules. Free tools may not be equipped with the features needed to meet those requirements.
Take healthcare, for example. HIPAA requires encryption for patient emails containing health information, yet most free platforms don't offer that protection by default, which can lead to provider violations, fines, and lawsuits.
Any business collecting customer information, such as emails, names, or payment details, has a legal obligation to safeguard it. The Federal Trade Commission (FTC) has outlined specific steps businesses should take after a breach, from notifying users to fixing the issue, and they don't take violations lightly.
Case studies: When cutting corners cuts deep
From retail to healthcare, real-world breaches show how cutting corners on tech can expose sensitive data, violate regulations, and damage trust. The following examples highlight what happens when cost-saving decisions put customers at risk.
Retail and e-commerce data exposures
Online shopping is convenient, but only if businesses keep customer data safe. Many small retailers use free or cheap tools to handle payments and store personal details. Without strong security, that choice can cause damage.
Drizly's 2022 breach is a clear example. After ignoring known vulnerabilities, the alcohol delivery company and its CEO faced FTC action when millions of customer records were compromised. It's no longer in business.
Insecure systems can lead to fraudulent charges, identity theft, and long-term credit damage for customers. Hackers can use leaked details to open accounts or apply for loans. Retailers may not intend harm, but skipping secure systems puts people at risk. Saving money shouldn't come at the cost of customer trust and safety.
Small business service providers
Law firms, consultants, and accountants often handle highly sensitive client data. But when they rely on free tools, they may be putting that information at risk. Free cloud storage isn't always secure, and file-sharing tools pose similar risks. Without alerts or monitoring, unauthorized access can go unnoticed, leaving confidential documents exposed.
In 2024, Illinois-based accounting firm Legacy Professionals suffered a data breach that exposed the personal information of nearly 217,000 individuals, including Social Security numbers and health data. Multiple lawsuits were filed, alleging the firm failed to implement reasonable security measures or notify victims promptly.
A single breach can shatter client trust in these types of businesses. Once it's broken, it's tough to rebuild. Plus, if data like Social Security numbers or banking info gets leaked, clients could face real financial harm.
Healthcare privacy breaches
Using free tools in healthcare puts providers at serious risk. Without proper security, these tools can lead to HIPAA violations. Take free email platforms, for example. If they don't encrypt messages, patient info gets exposed with every send. That kind of slip can trigger identity theft, insurance scams, and even job discrimination.
Onsite Women's Health experienced this firsthand. In October 2024, the Massachusetts-based provider suffered an email data breach that exposed the personal details of over 350,000 people. Lawsuits followed, claiming the company didn't do enough to protect patient data.
Red flags: Identifying businesses with risky tech practices
Customers can spot weak digital security if they know what to watch for. Many small businesses using free tools leave behind clues. One red flag? Free email addresses. A business sending messages from @gmail.com or @yahoo.com might not be using secure, business-grade email services. Custom domains usually offer stronger protections.
Sketchy websites are easy to spot if you know what to look for. No “https,” a broken padlock, or browser warnings usually mean the site isn't secure. Pay close attention to payment pages. If you're redirected to a site you don't recognize or don't see trusted logos, that's a red flag. Maybe the system is outdated or missing encryption.
Even random software ads can be a clue. They might mean the business is running on older, less secure tools. These signs aren't foolproof, but they help people protect their data.
Business practices that signal risk
Some businesses make it pretty easy to spot security problems if you know what to look for. Pay attention to how they handle your data. If they dodge security questions or give vague answers, that usually means their protections are weak or nonexistent.
Privacy policies packed with generic language are another warning sign. If they don't say how data is stored, whether it's encrypted, or who can access it, they're probably not taking security seriously.
Be wary if a company asks for info they don't need, like your birthdate, just to sign up for a newsletter. That usually means they're collecting data for marketing or even selling it. And if a tool forces everything into cloud storage without options, that's a hit to your control. No transparency? No real privacy.
Consumer protection strategies
Before sharing your data
Sharing personal information shouldn't be automatic. Before filling out a form or buying something online, consider how that business handles your data. Ask direct questions. How is your data stored? Is it encrypted? Who can access it? If the business can't answer clearly, that's a red flag. The FTC expects transparency, and so should you.
Read the privacy policy. Look for details on data sharing, storage time, and security measures. If it's vague or hard to follow, that's not accidental. Do a little research. Check for HTTPS in the URL, valid security certificates, and online reviews. See if the company has had breaches or complaints.
Trust your gut—if something feels off, walk away. A cautious pause now can save you headaches later.
After your data has been shared
Even if you're careful, breaches can still happen. Once a company has your information, it's smart to stay alert. Watch for unusual activity in your bank accounts, emails, and credit reports. Tools like credit monitoring or breach alerts can help you spot trouble early. You can also check online databases to see if a company you've used has been breached.
If you feel something is wrong, act quickly. Change your passwords and freeze your credit if needed, then report the issue and keep records. The FTC offers a helpful guide for the next steps. Know your rights and don't stay silent. Depending on your location, you might qualify for credit monitoring or compensation, and you can report mishandling to the FTC, your state attorney general, or consumer protection agencies.
Best practices for businesses: Balancing cost and security
Affordable alternatives to free software
Businesses don't have to choose between overspending and risking security. Plenty of budget-friendly tools offer real protection without the downsides of free platforms.
Many paid options are built for small businesses and include encryption, access controls, and support. When you consider the hidden risks of free software, affordable paid versions start to look like smart investments.
Open-source tools can also be secure. Many are well-maintained and ad-free, but they may require IT support to set up properly. Using a risk assessment checklist (e.g., What data is stored? Who owns it? Is it updated regularly?) can help guide smart choices.
Breaches can cost far more than subscriptions. Spending a little now can protect trust, data, and your bottom line later.
Minimum security standards worth paying for
Some security features are nonnegotiable when handling sensitive data. These protections are worth paying for:
- Automatic updates to fix vulnerabilities fast
- Strong logins with multi-factor authentication
- Encryption for data while it’s moving and when it’s stored
- Role-based access and audit logs to track who’s doing what
- Backup and recovery systems in case something goes wrong
These features cut the risk of breaches, protect your reputation, and keep you out of legal trouble. It's smart IT and smart business.
Conclusion: Advocating for your digital security
Consumers aren't helpless when it comes to data protection. Speaking up and making informed choices can help push businesses to do better.
- Start by asking questions. Don't hesitate to ask how your data is stored, whether it's encrypted, or who has access. These conversations can nudge companies toward stronger security.
- Choose where you spend. Supporting businesses that invest in secure systems helps raise the standard. Avoiding those that cut corners sends a clear message.
- Stay informed. Know your rights and keep up with trends in data security.
- Stay alert. Use strong passwords, keep software updated, and monitor your accounts.
Free software may offer convenience, but it often comes at a price—one that customers or clients may end up paying. Businesses and consumers alike have the power to change that.
This story was produced by Heimdal and reviewed and distributed by Stacker.
