What is Shadow IT?

Written By: Kyler Cheatham
Date: October 15, 2022

Shadow IT refers to the use of digital devices and services that have not been formally approved by a company’s IT department. This can include using personal accounts for cloud workloads, purchasing unauthorized SaaS applications, using productivity apps, leveraging public cloud services, and using communication platforms for work-related communication. These actions often pose security risks and can lead to data breaches or compliance issues. Companies need to monitor and control shadow IT usage, while also finding ways to address employee needs and improve communication with the IT department.

With the use of shadow IT services, developers can improve their productivity by leveraging off-the-shelf hardware and software tools. These improvements lead them in a direction where they can more quickly complete projects without involving an entire department or team within your organization which could potentially slow things down significantly depending on how big it already is. However, there's no protection for this data if it's exposed since most companies don't know about what lies behind these external efforts.

There are several ways that companies can address and control shadow IT usage. This includes creating clear policies on approved software and hardware, improving communication with the IT department to address employee needs, regularly monitoring unauthorized devices and services, and providing training on data security. By addressing and controlling shadow IT usage, companies can minimize potential risks and ensure compliance with regulations and company policies.

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Why Is Shadow IT a Growing Problem?

The problem of shadow IT use has become increasingly prevalent in recent years. A 2019 study from Everest Group estimates that nearly half (47%) of total IT spend lurks “in the shadows” - before COVID-19 restrictions, this number was likely much higher as remote workers struggled with limited resources during a pandemic period which caused them to use their own devices or cloud storage solutions such as outside providers like Dropbox for work purposes instead of company approved technologies.

The use of shadow IT can be dangerous to an organization if left unchecked.

It is important to limit the potential problems that Shadow IT can create. These problems can include:

Cost

Shadow IT often appears to be a cost-effective solution in the short term, but it can actually end up being costly in the long run. Using personal services or scaling them across the business may not be financially practical compared to corporate-specific options. Additionally, shadow IT can result in noncompliance fines, damage to a company's reputation in the event of a data breach, and the need for extensive IT support when it comes time to migrate or decommission the service.

System Inefficiencies

The compound nature of the shadow IT problem means that when an organization does not provide employees with adequate resources to complete their job, its people will self-provision in order to address any shortfalls. This can lead to fragmented IT systems and a lack of standardization, making it difficult for an organization to manage its infrastructure efficiently.

Using unauthorized technology often means that proper security measures have not been put in place. This leaves the company vulnerable to data breaches and compliance violations, potentially leading to financial consequences and damage to its reputation.

While shadow IT is not uncommon in today's world of high tech, many organizations struggle with the lack or a single source of truth when it comes to data analysis. This can lead to inaccurate insights and compliance issues which erode quality reports from that point on.

Data Loss

One of the biggest challenges with shadow IT is that data or other assets stored in personal accounts are not accessible to others within your company. If an employee resigns, they may still maintain access to those files while you're left without any means for viewing or retrieving them - which could be very harmful if there's critical information on those servers!

Additionally, there may not be proper security measures in place for these personal accounts, leading to a higher risk of data breaches and loss. This can have serious consequences for your company.

It's important to remember that shadow IT is not always malicious - employees may simply be trying to find a more efficient solution. However, it's crucial to address these issues and establish clear guidelines on the use of personal accounts for work-related purposes.

Visibility

User self-provisioning is a great way to increase agility but it also leaves IT security vulnerable. The solution? By decentralizing power and resources, organizations can make sure that vulnerabilities don't go unnoticed while giving them more speed in their organization with less risk than before!

In addition, without proper oversight and management, shadow IT can lead to the creation of silos within a company. This hinders collaboration and can result in a disjointed workflow, ultimately affecting overall productivity.

Companies need to address these challenges by implementing policies and procedures for the use of personal accounts in the workplace, as well as regularly reviewing and monitoring all IT systems and devices in use. This can help ensure visibility, security, and collaboration within the organization.

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Benefits of Shadow IT

We discussed the potential drawbacks of Shadow IT but it's also fair to assess some of its potential benefits.

Using Shadow IT can provide benefits such as faster access to needed resources, reduced costs through the use of affordable cloud-based services, optimizing limited IT resources, and improving communication and collaboration. It can also lead to a positive user experience by reducing bureaucracy.

However, it's important to remember that these benefits can only be fully realized if Shadow IT is properly managed and monitored. Without proper oversight, the risks may outweigh any potential advantages.

It's up to each organization to weigh the pros and cons and establish clear policies for how Shadow IT will be used in their workplace.

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How to Manage the Risk of Shadow IT

Managing the risk of shadow IT involves understanding and addressing the needs of employees, which can be achieved by streamlining approval processes and making them more efficient. It is important for companies to recognize their role in creating an environment where employees feel compelled to seek out unauthorized technology solutions. By recognizing and addressing these issues, organizations can reduce instances of shadow IT.

The use of shadow IT is inevitable, but it can be managed through effective identification and risk reduction measures. Businesses should take the following steps to limit its risks:

  1. Conducting regular audits of all business operations can help uncover instances of Shadow IT and address any potential issues.
  2. Prioritize risks, this helps to reduce potential issues and save time and money on remediation efforts. Businesses need to recognize the role they play in creating an environment where employees feel compelled to seek out unauthorized technology solutions.
  3. Communicate, collaborate with and train all employees on the safe and secure use of all tools and technologies, as well as the proper protocol for provisioning a new service.
  4. Leverage technology to monitor the network to ensure visibility and control of all devices, applications, and systems.
  5. Create and enforce security policies and procedures.

How to Eliminate Shadow IT

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The use of shadow IT can have long-lasting negative impacts on an organization. For one thing, it increases costs and diverts funding away from approved technical strategies - which can lead to more costly solutions in the future if this trend continues unchecked!

With the shift to a fully remote or hybrid workforce, businesses need to tackle the shadow IT problem. If your business needs a shadow IT overhaul, here are some steps we recommend:

Step 1: Improve Visibility

With remote monitoring and management (RMM) systems, your IT team can get real-time visibility into their office or home computers. They’ll be able to spot unauthorized software that could put you at risk for malware infections as well as vulnerabilities in an endpoint before it becomes public knowledge!

Step 2: Communication with Users

Regularly solicit feedback from employees about how satisfied they are with your IT services as well as the software and hardware your business uses and if there’s anything you can do better or offer to make their work more efficient; then use those insights as input into future hiring decisions so that all new hires come into office already familiarized themselves with the various methods/tools your business leverages.

Step 3: Supply Users With Optimized Tools

If an organization has unauthorized services, they should conduct a thorough analysis of those that are not approved for use in order to get rid of those that are unnecessary, this will improve security as well as make things more efficient!

Make sure to give your employees the support they need during this transition, including details on how their old tools will be replaced and any necessary updates about when you'll implement each new tool.

If you have further questions about how you can manage your companies Shadow IT issues, you can reach out to me here with any questions ryan.glisan@thirdstage-consulting.com

I'd also highly recommend downloading the 2023 Digital Transformation Report which is packed full of industry insights and best practices.

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Author:
Kyler Cheatham
Kyler Cheatham is a digital artist and innovator who is always thinking of new ways to improve the world around her. As the Global Marketing Director at Third Stage Consulting, she uses her creativity and tech-savvyness to help businesses reach their target audiences. Kyler is also a thought leader in the digital marketing space, and she loves sharing her knowledge with others. She is also a mother of two young children, which has given her a unique perspective on balancing work and family life.
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