Shadow IT: Overview, Definition and Risk

What is Shadow IT?

Shadow IT includes all IT systems used in an organization that are not controlled by the IT department. They are a response to obstacles and make it easier for you to complete work tasks effectively. Thus, the use of shadow IT is directly related to your business processes. Such systems can be used across all departments. Shadow IT, in definition, is therefore any IT system that you use but over which your IT has no control. By the way, the shadow IT definition is not limited to the area of software, but likewise the hardware.

How is Shadow IT Created?

Many companies still choose to ban specific applications. The result is a perpetual battle between users and the IT department. These disputes do not lead to a desirable outcome, which is why they use cloud services and software without consulting IT whenever possible: Whether it's to share a presentation or pass images to a colleague. The reason for this is not only the expediency, but also the necessity, of such services. In this way, individual employees, groups or departments bypass confrontation and use such shadow IT instead.

Factors within IT

• If IT lacks the financial or human resources, requests from different departments must be deferred. This is also true when the necessary expertise is lacking. If this occurs, the departments help each other on their own.
• New offers make it easier to use software that does not fall into the official IT area.
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Factors within the Departments

• The high autonomy of the business department also extends to IT.
• If there is little organizational cohesion, departments are inclined to act independently of internal IT.
• The decentralized form of organization also favors shadow IT, as there are usually restrictions with regard to IT support.
• As a result of external influences, it may be necessary to use third-party systems.
• If employees are among the [digital natives](https://www.investopedia.com/terms/d/digital-native.asp#:~:text=Digital%20natives%20are%20people%20who,as%20subjected%20to%20modern%20technology.), they support the development of shadow IT.

Problems with Alignment between IT and Business Departments

• If there are no clear responsibilities, departments are more likely to take matters into their own hands
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• An overly rigid budget or insufficient transparency further supports the formation of shadow IT.
• Inadequate formalization also promotes shadow IT. Important: Excessive formalization also leads to employees having to find other ways to help themselves.

This is why Shadow IT is on the Rise

Shadow IT has long since ceased to be a new phenomenon. Surveys of IT managers found that more than half of employees use such software. Companies that employ innovative and young employees are particularly affected. They have the necessary knowledge and feel at home in the world of computers. Even if you follow particularly restrictive IT rules, you are tempting your employees to increase the proportion of shadow IT. Why is this? If employees are used to relying on convenient IT solutions in their private lives, they demand the same service in their professional lives. Cloud solutions that can be used even by people without in-depth IT knowledge are particularly popular.

This is why it's Important to pay Attention to Shadow IT

The fact that shadow IT exists is not a problem in and of itself. Rather, it's the extent of it that is a negative. Because as soon as many different applications are used, the flexibility gained through individual solutions is lost. In addition, an excess of software solutions can cause cost planning to go off the rails. In such cases, duplicate purchases or underutilized licenses occur, leading to a significant increase in costs.

Risks of Shadow IT

• The [protection goals of IT security](https://www.preferreditgroup.com/2019/08/27/the-three-goals-of-cyber-security-cia-triad-defined/) can suffer from a lack of professionalism
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• If undesirable processes become established, compliance conflicts may arise.
• Shadow IT applications are not supported by the IT department.
• It undermines sourcing decisions.
• It can, in the worst cases, negatively impact employee performance.

Should Shadow IT Worry You?

No, as long as shadow IT does not compromise IT security, there is no reason to consider it a threat. However, it can quickly become a complex and costly problem. That's why it's worth taking a closer look at the company's internal reasons. What are employees missing that they have to make do with shadow IT? Structural and strategic gaps create misalignment, which can be a more serious problem.

Shadow IT Opportunities

• High rate of innovation in IT: As a result of IT engaging with the business departments, additional potential for optimizing processes can be identified
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• Shadow IT solutions are always task-oriented. This allows you to recognize the underlying processes and can improve them.
• With their help, you recognize the needs of users and can take a step forward in the direction of user-friendliness.
• Employees quickly identify with new products and are thus more motivated.

How to Manage the Shadow IT in your Company

Managing shadow IT in the enterprise is a somewhat larger task. The best way to do this is to work with stakeholders on a regular basis. They can provide information about what software has been purchased. The result is that you can uncover your shadow IT and thus implement effective software license management.

Step 1: Identify Shadow IT

Since employees don't buy their own software for work, a trail always exists toward company expenses. In most cases, it's expense or credit card statements, which you can use to locate software purchases. In this way, you can narrow down which cloud platforms employees are using in the company.

Step 2: Create Policies

You need to keep software policies up to date at all times. Typically, these policies concern maximum limits on costs incurred. However, this no longer works when cloud services are used. This is because the monthly fees are low and usually fall below the defined threshold. Important: Even with effective management, you should not limit your company's innovation momentum.

Step 3: Introduce Software Asset Management Tools

To counter the problem of shadow IT, a few tools have long been proven effective. A SAM tool helps manage enterprise SaaS spend. At the same time, these tools provide a great way to keep track of the IT environment: Both on-premises solutions and cloud solutions.

Conclusion

Shadow IT is a major problem for internal IT departments. Although it seems essential for many employees, its use makes it difficult to meet IT security protection goals. It is better to integrate such cloud solutions or other software into the existing IT infrastructure. Clouds do represent rapid growth with increased penetration. Nevertheless, administrators can integrate them into the internal system and monitor them.

The extent of shadow IT within your company depends on the individual case. While every now and then it is a single employee who relies on subscription software, it can affect entire business units. To ensure IT security within your organization, you should therefore try to keep an eye on so-called shadow IT at all times.