Shadow IT is a growing concern for organizations as it can expose them to various security risks. A study found that 30-40% of IT spend in large enterprises goes into shadow IT, which includes IT systems, devices, software, applications and services used without explicit approval from the IT department

Despite the risks, professionals resort to shadow IT to enhance their performance and improve their agility at work to meet deadlines. 

In this blog post, you’ll learn how to reduce the risks associated with shadow IT and ensure the security of your SaaS systems.

Shadow IT examples

Shadow IT refers to the use of services, systems or devices within an organization without the approval of its IT department.

It happens when employees download and install tools to improve their productivity without seeking approval from the IT team. In some cases, employees may download unauthorized software because the IT-approved tools don’t work well for their day-to-day operations. 

Here are the four ways in which shadow IT occurs in any organization:

1. Shadow Internet of Things (IoT) devices

Shadow IoT devices are smart connected devices. These include fitness trackers, cameras, wireless printers, wireless thermostats, smart medical equipment or smart TVs. 

2. Hardware

Employees may use hardware devices such as personal computers, tablets, laptops and smartphones without IT approval

3. SaaS applications

Employees may purchase or use SaaS licenses, including cloud-based project management applications (Asana, Google Drive and Trello), billing apps, sales and marketing apps (Marketo, WordPress, HubSpot etc) without following the standard procurement process.

4. Virtual machines

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Virtual desktops or servers like Amazon Web Services (AWS), VMWare or Microsoft Azure are purchased or accessed without IT approval or oversight.

Why does shadow IT occur in organizations?

According to a study, 61% of employees are dissatisfied with their company’s licenses and workplace techstack. Thus, they download and install software they deem worthy and convenient to solve their work problems.

Here are a few reasons why shadow IT occurs in organizations:

1. Unsatisfied users

When IT departments fail to meet the needs of employees, they feel that they should directly purchase a better software application.

2. Slow sanctioning or approval

Seeking approvals can take over 60 days depending on the bandwidth and priority of the IT team. Employees tend to bypass the IT department to get work done as they have deadlines to meet.

3. Easy accessibility

Purchasing a SaaS tool is as easy as ordering pizza from a food app, since all you need is a credit card. The monthly pricing model of many SaaS tools makes it easy for users to adopt it and commit to a lower amount of money. 

4. Lack of awareness

Some employees could be unaware of the associated risks with unapproved technology, such as data breaches, compliance violations and loss of sensitive information, or they might not understand the importance of IT policies and procedures.

5. Malicious Intent

Some employees might use shadow IT to steal data, access confidential information or introduce other risks such as data theft, unauthorized access and potential security vulnerabilities to the organization.

What are the benefits of shadow IT?

There are a few ways in which shadow IT can benefit your organization:

1. Shadow IT makes your business agile

Employees can use their own tech resources to quickly address a business need without waiting for approval from the IT team. 

2. You can customize your workplace environment

Shadow IT allows employees to customize their work environment and improve their workflow, thereby increasing productivity.

3. Shadow IT can improve cross-team communication:

By adopting easy-to-use communication applications, such as WhatsApp or Zoom, employees can enhance their communication and collaboration within the company. This can result in improved productivity, quicker decision-making and enhanced overall performance. 

4. High employee satisfaction

Shadow IT solutions enable employees to drive innovation in the organization when they use tools and systems that work best for them. 

Knowing how to manage shadow IT is key to leverage its benefits while minimizing the associated risks.

What are the risks of shadow IT?

Employees who use shadow IT may inadvertently allow access to sensitive data without approval. Company data gets compromised because of lack of visibility and control, creating further risks that severely impact the bottom line.

Here, we have listed the primary risks associated with shadow IT:

1. Data breach

Unapproved tools may not comply with privacy laws or the company’s data protection standards and regulations. This results in exposure of sensitive information and creates risks for the organization.

2. Security voids 

When employees use unapproved software for sharing documents or collaborating on a project, they could transfer intellectual property without security measures in place. 

3. Financial risk

Employees may not be familiar with the hardware and software compatibility of the unapproved software with organizational infrastructure, which incurs costs on damage control. 

4. Loss of control

When data is stored only on personal cloud storage, the organization loses control over that information. For example, if an employee leaves the company or their account is compromised, the company can’t recover the data stored on personal cloud storage. 

Unapproved access to company data and systems can pose a significant security risk. Thus, organizations must discover and manage shadow IT effectively to mitigate these risks.

How to discover and manage shadow IT

Maintaining a balance between optimizing security without compromising employee productivity and innovation is challenging.

Here are some ways you can probe and optimize shadow IT:

1. Incorporating cybersecurity technologies

Use cybersecurity technologies such as attack surface management (ASM) tools to monitor your internet-facing IT assets and discover shadow IT as it is adopted. 

Once these assets are discovered, evaluate them for vulnerabilities and remediate them by working with the IT department. The department will bring them into compliance with the company’s security standards, such as implementing security measures like firewalls, access controls and encryption, and regularly monitoring and updating these assets to ensure they remain secure.

2. Establishing policies and protocols

Regularly monitoring your network and employee activity and looking out for freemium sign-ups by employees are some preventive measures that ensure compliance with company policies. 

For instance, if an employee is using shadow IT with malicious intent, the company will take appropriate disciplinary action, including penalties such as suspension, termination of employment or legal action, depending on the severity of the offense and the company’s policies.

3. Using discovery tools

Use a discovery tool that discovers, controls and analyzes users' applications. 

It can detect shadow IT solutions and provide risk assessment and analytics based on various factors. Additionally, it can block unauthorized apps using the firewall or proxy appliance.

4. Educating your employees

Promote awareness of shadow IT among employees and its potential impact on the business. Conduct regular training sessions to reinforce security best practices and ensure compliance with company policies.

You cannot eliminate shadow IT completely but can minimize the risks associated with it while encouraging innovation and productivity.

Protect your organizations from the risks of shadow IT

"Shadow IT has traditionally been a disaster for IT units and over time for everyone in a company."

                                         ~ Jeanne Ross, Director, MIT Center for Information Systems Research (CISR) at the MIT Sloan School of Management.

Here are the best practices to minimize risks associated with shadow IT:

• Use SaaS management software

SaaS accessibility is now effortless. Affordable pricing and freemium plans make it a top choice for employees to improve their efficiency. However, data security varies among SaaS apps, making it crucial to keep a close eye on it. To manage shadow IT, tools like Spendflo enable monitoring of all employee-used apps and devices, ensuring the safety of company data.

• Create a list of legal BYOD use

You can provide a list of “bring your own devices” (BYOD) that are legal to use within the company. This ensures that employees use secure devices to access company data.

• Don’t use prohibited jailbroken devices

Jailbreaking an iOS device or rooting an Android device removes restrictions, exposing company data to potential security threats. Companies should have policies prohibiting the use of such devices and educate employees on the dangers.

• Restrict dangerous applications

Create a list of dangerous applications that employees should not be able to use and block them.

• Create a company policy for IT approval

The IT department must approve all technology purchases and downloads before being used within the organization.

Manage shadow IT with efficient SaaS management

Managing and optimizing shadow IT in an organization is daunting, whether it involves detecting shadow IT or finding the best tools to minimize associated risks. Shadow IT has few perks, and the risks associated with it often outweigh the benefits. 

With Spendflo, 

• Get advanced insights that help you gauge the actual usage of IT apps you’ve purchased
• Measure your employee’s sentiment for each SaaS tool. Do they think it is useful? Does the tool help them be more productive? This data helps you eliminate shadow IT proactively
• Optimize SaaS spending and get maximum ROI on your IT spending 
• Automate your SaaS management to save time and effort.  

Try Spendflo to enhance the security of your tech stack and reduce SaaS costs by 30%.

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