Shadow IT: Understanding Risks & How to Manage It Effectively
In today’s fast-paced digital world, businesses are pushing boundaries to keep up with constant advancements in technology. Yet, this rapid evolution has also paved the way for Shadow IT—the use of software or applications within a company without proper approval. While employees often mean well, relying on these miscellaneous tools can expose your business to significant risks, especially when it comes to data security, intellectual property (IP), and hidden costs.
Shadow IT can easily become one of those runaway costs that most companies don’t have a handle on, even well-managed businesses with dedicated IT departments. Employees often bypass the approval process and use department budgets to pay for tools they believe will improve productivity. This can result in unnoticed expenses and potential risks to your company’s data and compliance.
In this article, we break down what Shadow IT is, why it’s a concern for businesses, and, most importantly, how you can effectively manage it. We’ll also take a closer look at the role that software products like Dropbox, Asana, and Loom, for example, play when it comes to costs and security risks. Ultimately, we’ll explore practical strategies for handling Shadow IT in your business.
What is Shadow IT and Why is It a Concern?
Understanding the Risks of Shadow IT
Shadow IT happens when employees use tech and software solutions without approvals from the IT department. It’s becoming more common as people search for tools they think will help them work more efficiently. While the intention might be good, the risks are very real. One of the biggest concerns is data security. Many of these tools don’t have the robust security features businesses rely on, making sensitive company information vulnerable to breaches or leaks.
Cost Implications of Shadow IT:
Real dollar costs are also a major issue. In many cases, teams or departments have 20, 30, or even more employees using unapproved tools, each costing $20 or more per month. These expenses quickly add up and can remain hidden from IT and finance until they become significant.
The risk of intellectual property (IP) exposure is a huge concern around the topic of Shadow IT. Employees might not think twice about using these tools, unaware of the serious security risks that can occur when these systems aren’t properly monitored. It is easy to imagine how IP can get leaked by an employee inappropriately sharing a login or taking data with them. For example, this can happen when a sales rep leaves and then is able to access all of the customer data.
Compliance Risks:
Shadow IT can lead to compliance headaches. In industries with strict regulations, like finance or healthcare, unapproved tools could result in non-compliance, legal trouble, and costly fines. If these tools aren’t properly maintained, they can leave security holes that hackers could exploit. It’s a recipe for disaster if left unchecked.
Shadow IT can also throw a wrench into your operations. Imagine trying to collaborate on a project where key information is locked away in apps no one else uses. Miscommunication, errors, and duplicated efforts can start creeping in. That’s why businesses need to understand the risks of Shadow IT and take steps to monitor and control it.
Common Examples of Shadow IT in Businesses
Shadow IT often pops up through popular cloud-based applications employees start using on their own. For instance, services like Dropbox or Google Drive can seem helpful for quick file-sharing, but they might bypass company security protocols. Employees might not realize that storing sensitive files this way opens the door to data breaches and unauthorized access.
Communication platforms like Slack or WhatsApp might help teams work together more efficiently, but they often lack security features that are robust enough for businesses. When employees use these apps without telling IT, it becomes nearly impossible to monitor what data is being shared or ensure compliance with security standards for the organization.
Project management tools, like Trello or Asana, are another common source of Shadow IT in many businesses. These tools may streamline workflow but can lead to siloed data and limited visibility across departments if not integrated into the broader IT system. These examples show how everyday apps can present bigger challenges when used without proper oversight over time.
The Impact of Shadow IT on Organizations
The impact of Shadow IT goes beyond operational inefficiencies in your business. One of the most immediate risks is a data breach. Employees using unapproved software or tools can inadvertently expose sensitive data to vulnerabilities outside the control of your IT department. The fallout from a data leak extends beyond financial consequences, eroding customer trust and causing long-term damage to your reputation.
Another hidden cost of Shadow IT is its impact on IT budgets. Often times, departments purchase their own SaaS subscriptions without informing finance or IT. This leads to fragmented and unmonitored spending, making overall IT costs considerably higher than anticipated. When different teams use different tools for similar tasks, there can be duplication and wasted spend. These inefficiencies can slow down your business.
Shadow IT can strain relationships between departments and the IT team. When IT is seen as a roadblock rather than a partner, employees are more likely to go around approval processes. This can foster a culture where IT and business units operate in silos, which increases the likelihood of Shadow IT continuing unchecked in the organization.
Beyond costs, there’s the impact of intellectual property (IP) leakage. When Shadow IT is in play, company policies governing the use and protection of sensitive data are often bypassed, making it easier for important company information to be inappropriately shared—or even taken by employees leaving the company. Monitoring and controlling this are critical for safeguarding your company’s assets.
Steps to Identify and Manage Shadow IT
Addressing Shadow IT starts with awareness and visibility. Conducting a thorough audit of all applications in use across the organization is the first step. Tools that monitor network activity can help identify unauthorized software and give IT departments the information they need to assess potential risks.
Cybersecurity solutions, such as those provided by some of our vendor partners, can help with this. For example, an agent installed on company devices can generate monthly reports detailing which tools, such as Dropbox, are being accessed by employees—especially when those tools aren’t part of the standard tech stack.
Once you’ve identified the scope of Shadow IT, the next step is to engage with employees. Understanding why they adopted these tools in the first place can provide valuable insight into gaps in your current technology offerings. By listening to their feedback, IT teams can offer approved alternatives that meet their needs without compromising security or compliance.
Rather than just cracking down on unauthorized tools, it’s often more effective to bring some of them into the current stack. If certain applications offer real value to the team, evaluate them for security and functionality, then integrate them officially. This approach not only ensures safer usage but also strengthens collaboration between IT and other departments.
Conclusion and Best Practices for Handling Shadow IT
In today’s fast-moving digital world, Shadow IT is a real challenge for businesses. By understanding the risks, implementing policies, educating your team, and proactively managing unauthorized technology use, you can protect your company’s data, intellectual property, and IT budget.
Best practices include regularly auditing for unauthorized applications, fostering open communication between departments, and developing a robust Shadow IT policy that reflects the company’s needs. Ongoing education and engagement of staff are key to maintaining awareness and collaboration across teams and departments.
By taking these steps, your organization can not only minimize the risks associated with Shadow IT but also turn it into an opportunity for innovation. A proactive, collaborative approach ensures that employees feel supported in their technology choices, leading to enhanced productivity and stronger security across the company.