Shadow IT is transforming businesses, offering flexibility and innovation while posing significant risks.
Dive into what shadow IT means, its implications, and real-world examples. In this article, you’ll also find strategies to identify and manage shadow IT effectively, ensuring security and compliance while continuing to foster innovation.
What is Shadow IT?
Definition of Shadow IT
Shadow IT refers to using information technology systems, devices, software, applications, and services without explicit IT department approval.
This practice arises when employees seek more efficient or tailored tools outside the sanctioned IT infrastructure, often utilising easily accessible cloud services and SaaS applications.
For business leaders, shadow IT can be both a boon and a bane. On one hand, it allows for rapid innovation and increased productivity as employees customise tools to better fit their immediate working needs. On the other hand, it introduces significant risks related to security, compliance, and operational efficiency.
As digital transformation accelerates, the prevalence of shadow IT grows. Employees, driven by the need for flexibility and faster solutions, often turn to unsanctioned tools and applications. This trend is particularly prominent in remote work environments, where accessing corporate resources through personal devices and external cloud services becomes a norm.
Shadow IT often occurs to fill gaps left by traditional IT processes. However, without proper oversight, it can lead to fragmented IT systems, creating challenges in managing and securing enterprise data.
Why Is Shadow IT A Concern?
Shadow IT poses significant challenges to operations due to the following reasons:
Security Vulnerabilities
Using unapproved tools and applications can expose an organisation to security risks. These tools often lack the robust security measures sanctioned IT systems have, making them susceptible to data breaches and unauthorised access. For instance, employees using personal devices or cloud services without IT oversight can inadvertently create security gaps, increasing the attack surface.
Compliance Issues
Shadow IT can lead to non-compliance with industry regulations and standards. When employees use unauthorised software, it becomes difficult to ensure that data handling practices comply with legal requirements such as GDPR. This non-compliance can result in significant fines and legal penalties, as well as reputational damage.
Financial Implications
The hidden costs associated with shadow IT can strain a company’s budget. These costs include the direct financial impact of purchasing redundant or incompatible tools and the expenses related to addressing security breaches and compliance failures. Additionally, managing and integrating unsanctioned IT systems can consume valuable IT resources and divert attention from strategic initiatives.
Operational Challenges
Shadow IT can lead to fragmented IT environments, making it harder for organisations to manage and support their technology infrastructure. This fragmentation can result in inefficiencies and reduced visibility over IT assets, complicating efforts to ensure data integrity and system reliability. For example, employees using different tools for similar tasks can create data silos, hindering collaboration and data sharing.
Learn more about the risks of shadow IT here.
How Does Shadow IT Occur?
Shadow IT often arises from various needs and gaps in official IT support.
Here are five common scenarios that lead to people using it:
1. Employee Needs for Better Tools
Employees often turn to shadow IT when they require tools not provided by the corporate IT department, such as software for data analysis, project management, or collaboration.
For instance, a team might start using a cloud-based project management tool like Trello or Asana because it offers features that the company's official tools lack.
2. Lack of IT Support & Responsiveness
When IT departments are slow to respond to requests or fail to provide adequate support, employees may seek out their own solutions. This issue can be particularly prevalent in large organisations where IT resources are stretched thin. The immediacy and ease of accessing SaaS applications can make them an attractive alternative to waiting for IT approvals.
3. Remote Work and Decentralised Control
The rise of remote work has significantly increased the prevalence of shadow IT. Employees working from home need easy access to tools and data, often leading them to use personal devices and cloud services that are not sanctioned by corporate IT. This decentralisation makes it harder for IT departments to monitor and control software usage effectively.
4. Innovation and Flexibility
Innovation-driven employees may use shadow IT to experiment with new technologies and processes. They might use advanced data visualisation tools like Tableau or Power BI to create dynamic reports, bypassing the slower, more bureaucratic processes of traditional IT provisioning. This flexibility can drive innovation but also introduces risks if not properly managed.
5. Cost and Budget Constraints
In some cases, departments may resort to shadow IT to bypass budget constraints. For example, using free or low-cost versions of software tools available online can seem like a cost-effective solution but often results in security and compliance challenges. The lack of visibility and control over these expenditures can also lead to unplanned costs down the line.
What Are Some Examples of Shadow IT?
Shadow IT can manifest in various forms across different organisations and industries.
Here are some specific examples that highlight the prevalence and impact of shadow IT:
Ad-Hoc Applications and Data Solutions
Employees often install or create applications and databases that are not provided or supported by corporate IT.
For example, a marketing team might use Google Analytics and Google Looker Studio to track and visualise campaign performance data independently, bypassing official analytics tools. The risk is that it may lead to data silos and inconsistencies in reporting.
Use of Personal Devices
With the rise of the BYOD (Bring Your Own Device) culture, employees frequently access corporate data on personal laptops or mobile devices. This practice can enhance productivity and flexibility but also increases the risk of data breaches if personal devices are not secured to the same standards as corporate devices.
SaaS Software
Using readily available, non-approved software to augment or replace strategic systems is a common example of shadow IT.
For instance, sales teams might use tools like Salesforce or HubSpot for customer relationship management without the IT department’s knowledge, potentially leading to issues with data integration and security.
Cloud Services
Employees might use cloud storage or computing services outside of those provided by corporate IT.
A typical scenario is using services like Dropbox or Google Drive for file sharing and collaboration, which can result in unauthorised access to sensitive data and non-compliance with data protection regulations.
Advanced Data Analysis Tools
In industries like financial services, energy, and insurance, employees might use tools like Power BI, Tableau, or Microsoft Excel for advanced data analysis and reporting. These tools often operate outside the control of IT departments, leading to significant security and compliance risks.
Here is a hypothetical example of how the use of shadow IT could manifest itself in an insurance company:
Overview
Underwriters at an insurance provider use various data visualisation tools to create reports for senior management. These tools help interpret complex data and present insights necessary for strategic decision-making.
Issue
The primary issue is the lack of a standardised toolset across the department. Each underwriter uses their preferred data visualisation tool, resulting in significant inconsistencies in data interpretation and presentation. Report formats and insights provided vary, causing confusion and mistrust in the data provided to senior management.
Outcome
Senior management finds it challenging to make reliable decisions due to the inconsistency in the reports generated. They cannot access reliable insights, leading to suboptimal decisions that affect strategic direction and operational efficiency.
How Can Businesses Identify Shadow IT?
Here are some effective detection methods, including tools you can use:
Network Monitoring
IT departments can use network monitoring tools to track all devices and applications that connect to the corporate network. Tools like SolarWinds, Nagios, and Wireshark can provide detailed insights into network activity and help identify suspicious or unauthorised usage.
Employee Surveys and Feedback
Conducting regular surveys and feedback sessions with employees can help identify the tools and applications they are using to perform their tasks. By understanding the needs and preferences of employees, IT departments can identify shadow IT practices and address the gaps in the officially supported tools and services. This proactive approach also fosters better communication and cooperation between IT and other departments.
Software Asset Management (SAM) Tools
Implementing Software Asset Management (SAM) tools can help organisations keep track of all software installations and licences. These tools provide visibility into the software being used and can flag unauthorised or non-compliant applications. SAM tools such as Flexera, Snow Software, and Microsoft’s System Center Configuration Manager (SCCM) are effective in managing software assets and identifying shadow IT.
Cloud Access Security Brokers (CASBs)
CASBs are security solutions that provide visibility and control over cloud services and applications used by employees. These brokers help in monitoring and securing cloud applications, ensuring that data is protected and that the usage complies with corporate policies. CASBs like Netskope, McAfee MVISION Cloud, and Cisco Cloudlock are instrumental in detecting and managing shadow IT in cloud environments.
Regular Audits and Assessments
Conducting regular IT audits and assessments helps in identifying any discrepancies between the sanctioned IT infrastructure and the actual tools and applications being used. These audits can uncover unauthorised software, data silos, and security vulnerabilities. Regular assessments also ensure that the IT policies and controls are up-to-date and effective in managing shadow IT.
How Can Organizations Manage Shadow IT?
Develop Clear Policies: Establish and enforce IT policies that define shadow IT and outline acceptable use of technology resources. Ensure these policies are communicated to all employees and updated regularly to address new technological developments.
Educate Employees: Conduct regular training sessions to inform employees about the risks associated with shadow IT and the importance of adhering to corporate IT policies. A well-informed workforce is less likely to engage in risky IT practices.
Provide Approved Tools: Offer a variety of user-friendly, approved tools that meet employees' needs, reducing the temptation to use unauthorised applications. Engage with employees to understand their requirements and integrate their feedback into IT provisioning.
Implement Access Controls: Use multi-factor authentication, role-based access controls, and regular reviews of user permissions to prevent unauthorised access to IT resources. Strong access controls are vital for protecting sensitive data and systems.
Use Monitoring Tools: Deploy tools like Cloud Access Security Brokers (CASBs), Software Asset Management (SAM) tools, and network monitoring systems to gain visibility and control over IT resources. These tools help detect and mitigate shadow IT practices by monitoring unauthorised software and devices.
Read more about how to manage the threats shadow IT poses here.
Benefits of Effective Shadow IT Management
Effectively managing shadow IT offers several crucial benefits that can enhance IT governance and operational efficiency:
Improved Security: By monitoring and controlling all IT resources, the risk of security breaches and vulnerabilities is reduced. Integrating unauthorised tools into the sanctioned IT framework ensures consistent security measures across all platforms.
Enhanced Compliance: Proper management helps maintain compliance with industry regulations and standards, reducing the risk of non-compliance penalties and protecting the business’ reputation.
Better Decision-Making: Standardising tools and processes improves the consistency and accuracy of data across the company, leading to more reliable reports and insights and enabling senior management to make well-informed strategic decisions.
Increased Operational Efficiency: Reducing the fragmentation caused by unsanctioned IT solutions streamlines operations, leading to better resource allocation and reducing the time and effort required to manage disparate systems.
Facilitating Digital Transformation: Effective shadow IT management supports digital transformation by integrating innovative tools and applications within the sanctioned IT infrastructure. This allows businesses to leverage new technologies while maintaining control and oversight, driving innovation and agility.
Use Schematiq to Mitigate Shadow IT Risks
Schematiq offers a comprehensive solution designed to help leaders manage and mitigate the risks associated with shadow IT.
Why Schematiq?
Schematiq offers a comprehensive solution designed to help businesses manage and mitigate these risks.
Schematiq integrates Excel with centralised data systems, enhancing data visibility and control and reducing reliance on unsanctioned tools.
It provides robust control over data access and usage within Excel spreadsheets, ensuring compliance and reducing data breach risks.
Schematiq makes spreadsheets more auditable, ensuring regulatory compliance with full audit trails for data access and changes.
By integrating Excel with other systems, Schematiq streamlines data workflows, reducing operational inefficiencies and improving accuracy.
With an intuitive Excel interface, Schematiq ensures rapid adoption and realisation of benefits with minimal training.
Learn more about how Schematiq can help your organisation manage shadow IT and enhance your IT governance. Discover more here.
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