What is shadow IT?

Shadow IT refers to the use of software, hardware, or technology services by employees without the explicit approval or oversight of their organization’s IT department. While these tools are often used to improve productivity, they can introduce significant security, compliance, and cost-management risks.

Shadow IT examples include:

• File sharing and cloud storage: File sharing and cloud storage: Using Google Drive or Dropbox to share work files instead of the company’s secure platform.
• Collaboration tools: Discussing work-related issues on Slack (if unsanctioned), Discord, or Microsoft Teams (personal accounts).
• Project management platforms: Using Trello or Airtable to track projects outside of IT’s oversight.
• Communication apps: Discussing work on WhatsApp or Telegram instead of approved communication tools.
• Personal devices: Working on non-corporate laptops, using personal USB drives, or mobile hotspots​​​.

These tools often gain traction because they are intuitive, fast to implement, and sometimes free. However, their lack of enterprise-grade security and integration capabilities can expose the company to cybersecurity risks.

What are the key aspects of shadow IT?

Shadow IT encompasses various technology-related activities and purchases that occur without the oversight or approval of the IT department. Key aspects of shadow IT include:

• Hardware: This includes physical devices such as servers, desktop computers, laptops, tablets, and smartphones. Employees may procure or use personal devices for work, bypassing official procurement processes.
• Off-the-shelf software: This refers to commercially available applications that employees might download and install on their work devices without IT consent. These can range from productivity software to specialized tools for specific tasks.
• Cloud services: This is the most significant category of shadow IT and can be divided into several types:
  • Software as a Service (SaaS): Web-based applications used directly through a browser, such as Google Workspace or Dropbox, which allow users to access and collaborate on documents without needing IT involvement.
  • Infrastructure as a Service (IaaS): Cloud services that provide virtualized computing resources, such as Amazon Web Services or Microsoft Azure.
  • Platform as a Service (PaaS): Cloud platforms that allow developers to build and manage applications without dealing with underlying infrastructure details.

The use of shadow IT is the most prevalent within the cloud services category, with particular emphasis on SaaS. With the rise of cloud-based solutions, organizations face the dual challenge of leveraging employee-driven innovation while managing the associated risks related to security, IT compliance, and data governance.

Why do employees use shadow IT?

Given the significant security risks associated with shadow IT, it might seem puzzling that employees opt to use unauthorized tools and applications. However, there are several compelling reasons behind this widespread phenomenon:

• Frustration with existing systems: When official IT systems are perceived as outdated, slow, or inadequate, employees may seek out alternatives that better meet their needs. This is particularly common in organizations where IT infrastructure hasn't kept pace with changing work patterns, such as the shift to remote and distributed teams.
• Lack of awareness: Many employees are simply unaware of the security implications of using unauthorized tools. They may not realize that their actions can compromise sensitive corporate data, increase the risk of data breaches, or violate compliance regulations. This lack of understanding often stems from insufficient training or communication about IT policies and security best practices.
• Bypassing bureaucracy: Sometimes, the process of getting new tools approved through official channels can be lengthy and complex. Employees facing tight deadlines or urgent needs may opt for shadow IT solutions as a quick workaround to avoid bureaucratic delays.
• Convenience and familiarity: As personal technology becomes increasingly sophisticated, employees develop preferences for certain tools and applications. When these familiar solutions aren't available in the workplace, staff may resort to using their preferred apps, especially if they believe it will help them perform their jobs more effectively.
• Rapid technological change: The pace of technological innovation often outstrips the ability of IT departments to evaluate and implement new solutions. Employees, eager to leverage cutting-edge tools that could give them a competitive advantage, may adopt these technologies without waiting for official approval.
• Collaboration necessities: In an increasingly interconnected business world, employees often need to collaborate with external partners or clients who use different tools. This can lead to the adoption of unauthorized applications to facilitate smoother communication and file sharing.
• Intentional misuse: While rare, it's important to acknowledge that a small percentage of shadow IT usage may be motivated by malicious intent. Some employees might use unauthorized tools to deliberately circumvent security measures, access restricted information, or engage in data theft.

Understanding these motivations is crucial for organizations seeking to address shadow IT effectively. By recognizing the legitimate needs and frustrations that drive employees to adopt unauthorized tools, companies can work towards implementing more flexible, user-friendly IT policies and solutions that balance security requirements with productivity needs.

See also: Compliance Issues When Providing Equipment for Remote Workers

Why is shadow IT an important consideration for organizations?

Shadow IT has implications that span security, compliance, operational efficiency, and employee productivity. Addressing it is crucial for organizations aiming to maintain a secure, collaborative, and legally compliant environment. Key reasons include:

• Security vulnerabilities: Without IT department oversight, shadow IT tools can bypass established security protocols, increasing the risk of data breaches and cyberattacks. Notably, Gartner estimates that one-third of successful cyberattacks experienced by enterprises will be on their shadow IT resources.
• Compliance risks: Many regulations, such as GDPR, HIPAA, or PCI DSS, impose strict requirements on how data is handled. Unauthorized tools can unintentionally breach these regulations, leading to hefty fines and reputational damage​​. For example, 60% of organizations fail to include shadow IT in their threat assessments, leaving them vulnerable to potential security breaches.
• Operational challenges: The use of disparate, unsanctioned tools can disrupt workflows, create data silos, and complicate system integration, leading to inefficiencies. Research indicates that shadow IT accounts for more than half of SaaS usage in over 50% of surveyed companies, highlighting its prevalence and potential to fragment operations.
• Missed insights: Data stored in unauthorized platforms often escapes the organization's analytics systems, resulting in incomplete or inaccurate reporting. This lack of visibility can hinder strategic decision-making and obscure potential opportunities or threats.

By addressing shadow IT, organizations can reduce risks while empowering teams with the tools they need to work effectively.

See also: How To Create a Secure IT Environment For Hybrid Teams: A Complete Guide

How shadow IT impacts collaboration and workflows

The impact of shadow IT on collaboration and workflows can be complex and often ambiguous. While it has the potential to empower teams and enhance flexibility, it can also introduce challenges that hinder productivity and communication.

The risks often outweigh the benefits, especially if it’s not properly managed. While shadow IT can bring flexibility and innovation, the potential downsides—such as data breaches, compliance violations, and fragmented workflows—can cause significant harm to an organization.

To truly balance the scales, organizations need a proactive approach:

• Educate employees about the risks of shadow IT.
• Provide IT-approved tools that are user-friendly and meet team needs.
• Use monitoring tools to detect and address unauthorized tools.

By addressing the root causes of shadow IT (such as slow approval processes or inadequate tools), organizations can mitigate risks while still reaping some of its benefits. That said, let's take a closer look at both benefits and risks of shadow IT.

Benefits of shadow IT

While shadow IT presents risks, it can bring some advantages to organizations by addressing gaps in existing systems and allowing employees to work more effectively. Some of the key benefits include:

• Flexibility and innovation: Teams can adopt tools that align closely with their specific needs, fostering creativity and improving efficiency. For example, a marketing team might use Asana for campaign management if it better fits their workflow than the organization's default platform.
• Faster problem-solving: Employees can quickly address gaps in provided tools without waiting for IT approval, allowing them to meet immediate business demands.
• Improved team autonomy: Shadow IT enables teams to experiment with new tools, potentially uncovering better solutions for unique challenges.
• Familiarity with tools: Employees may already be proficient with certain platforms, reducing onboarding time and increasing productivity.

Risks associated with shadow IT

Shadow IT may offer teams flexibility and efficiency, but it introduces significant risks. Tools outside IT oversight create vulnerabilities that threaten security, compliance, and operations, potentially leading to costly financial and reputational damage.

Key risks include:

• Security vulnerabilities: Shadow IT tools bypass enterprise security protocols, making them vulnerable to breaches and exposing sensitive data.
• Lack of encryption: Personal cloud storage accounts and other unapproved platforms often lack encryption and proper access controls.
• Compliance violations: Unauthorized tools can breach regulations like GDPR or HIPAA, resulting in penalties or legal action.
• Audit challenges: Compliance audits become more difficult when shadow IT tools are not tracked or included in official records.
• Fragmented workflows: Disjointed systems introduced by shadow IT hinder productivity and collaboration across teams.
• Delayed IT responses: IT teams struggle to maintain visibility over unauthorized tools, delaying responses to security incidents.
• Escalating costs: Scaling consumer-grade tools for enterprise needs often results in unexpectedly high costs over time.
• Reputational and financial risks: Breaches or compliance failures tied to shadow IT can lead to fines, reputational damage, and financial losses.

Strategies for managing shadow IT

Organizations can take proactive steps to minimize the risks of shadow IT without stifling employee innovation:

• Employee education: Create training programs to raise awareness about the risks of shadow IT and the importance of using approved tools.
• Tool accessibility: Ensure IT departments offer user-friendly, flexible tools that meet employee needs, reducing the motivation to seek alternatives.
• Monitoring solutions: Deploy technologies like cloud access security brokers (CASBs) to monitor and secure shadow IT activities. These tools provide visibility into unauthorized applications and help enforce security policies​​.
• Feedback channels: Establish open communication for employees to request tools or highlight limitations in existing systems.

Policy recommendations to mitigate shadow IT

Developing clear, enforceable policies is crucial for reducing shadow IT risks. These policies might include:

• A list of approved tools and services for various functions.
• A streamlined process for requesting new tools, ensuring employees can access the resources they need without delays.
• Regular audits to identify and address shadow IT usage.
• Guidelines for handling sensitive information and adhering to regulatory requirements.
• Consequences for using unauthorized tools that jeopardize organizational security​​​.

See also: How to Improve IT Compliance with Automated Device Management

Shadow IT in remote and hybrid work models

The shift to remote and hybrid work has significantly increased shadow IT adoption, as employees seek tools that address the unique challenges of working outside traditional office environments. Key factors driving this trend include:

• Use of personal devices and networks: Employees often rely on personal laptops, tablets, and home Wi-Fi networks, which may lack the encryption, firewalls, and security protocols of corporate infrastructure. This increases exposure to cyber threats such as phishing and malware attacks.
• Task management across time zones: Remote teams frequently adopt disparate tools to handle task coordination and communication in a global workforce. For example, one team might use Trello while another prefers Asana, leading to integration issues and inconsistent workflows.
• Region-specific tool adoption: Employees in different regions may opt for locally popular tools that aren’t approved or standardized by the organization. For instance, a team in one country might use a regional cloud storage service that does not meet global compliance standards, further complicating centralized control.

To address these challenges, organizations should provide secure, IT-approved tools that meet the diverse needs of remote workers. Regular check-ins and feedback loops can help identify gaps in the toolset, ensuring employees have what they need while maintaining security and compliance.

Future trends in shadow IT management

As shadow IT continues to evolve, organizations are adopting more proactive and adaptive approaches to mitigate risks while fostering innovation. Emerging trends include:

• Enhanced monitoring: Organizations are increasingly implementing real-time visibility solutions to detect and manage shadow IT activities. Tools like cloud access security brokers (CASBs) and attack surface management platforms provide insights into unauthorized applications and their associated risks, enabling IT to respond quickly and effectively.
• Employee-first tools: To reduce reliance on unapproved software, companies are investing in user-friendly, intuitive tools that meet employee needs without compromising security. For example, platforms that combine collaboration, task management, and secure file sharing can serve as comprehensive solutions, minimizing the need for shadow IT.
• Proactive collaboration between IT and business units: IT departments are working more closely with teams across the organization to understand their unique requirements and identify pain points. By streamlining the approval process for new tools and offering flexible options, IT can prevent the need for employees to turn to unauthorized platforms.

By embracing these strategies, organizations can balance security and compliance with flexibility and innovation, creating an environment where employees feel empowered without exposing the company to unnecessary risks.

Simplify global IT compliance with Deel

Shadow IT poses unique challenges, especially for global and remote teams. Deel makes it easier to stay secure and compliant by providing a centralized platform for managing your workforce, no matter where they are. With Deel’s global payroll, contractor management, and compliance tools, you can ensure employees and contractors are using approved resources while meeting international regulations.

Empower your teams without compromising security. Learn more about how Deel IT can simplify your global workforce management.