What Is Shadow IT and How Is It Impacting Your Bottom Line?

In the ever-evolving landscape of enterprise technology, CIOs and CFOs are facing a new challenge – the rise of shadow IT expenses. 

As employees increasingly adopt and integrate external technologies without the explicit approval of the IT department, managing these unaccounted expenses has become a critical concern for organizations.  

In this article, we explore the complexities of shadow IT and provide a strategic approach for CIOs and CFOs to effectively manage and mitigate the associated costs.

What Is Shadow IT?

Shadow IT refers to the use of technology, software, and services outside the sanctioned and managed IT infrastructure of an organization. While employees may turn to shadow IT for its perceived agility and efficiency, the associated expenses often go unnoticed until they impact the company’s bottom line. Common examples include unauthorized software subscriptions, cloud services, and collaboration tools.

The unregulated nature of shadow IT can introduce significant risks and costs to an organization. Security vulnerabilities, compliance issues, and duplication of services are just a few of the challenges that can arise. Moreover, the financial impact of shadow IT expenses can be substantial, affecting budgets and hindering strategic planning.

Cisco tells us that 80% of end users access software unapproved by IT.

VP of Experian, Michael Bruemmer, says 80% of breaches start with employee negligence. This includes Shadow IT.

Shadow IT is clearly not as sinister as it sounds. It’s usually just the result of people looking for better ways to do their jobs. Unfortunately, this type of technology can be a huge source of problems if left unchecked. 

Strategic Approaches to Managing Shadow IT Expenses:

1. Visibility and Discovery

  • Invest in tools and technologies that provide comprehensive visibility into the entire IT landscape, including shadow IT.
  • Regularly conduct discovery audits to identify unauthorized applications and services in use within the organization.

2. Educate and Empower Employees

  • Foster a culture of transparency by educating employees about the risks associated with shadow IT.
  • Empower staff to communicate their technology needs, encouraging them to involve IT in the decision-making process.

3. Establish Clear Policies

  • Develop and communicate clear policies regarding the use of external technologies.
  • Implement approval processes that ensure all IT-related expenditures align with organizational goals and security standards.

4. Collaborate with Business Units

  • Work closely with different business units to understand their specific technology requirements.
  • Collaborate on finding solutions that meet both business and IT objectives, reducing the inclination to resort to shadow IT.

5. Implement Cost Management Tools

  • Utilize cost management tools to track and analyze IT expenses, providing insights into where resources are being allocated.
  • Establish benchmarks and key performance indicators to measure the efficiency and effectiveness of IT spending.

6. Continuous Monitoring and Adaptation

  • Implement a continuous monitoring system to stay abreast of changes in the IT landscape.
  • Adapt policies and strategies based on evolving technology trends and employee needs.

By comprehending shadow IT and adeptly controlling it, you can reduce security vulnerabilities, enhance operational efficiency, maintain secure operations within budget constraints, and empower your team with the necessary tools to amplify productivity.

Reach out to our team of expert technology advisors for professional guidance on managing shadow IT and keeping it under control.

What to Outsource and What to Keep In-House

In today’s fast-paced business environment, organizations are constantly seeking ways to optimize their operations, reduce costs, and stay competitive.

One critical decision is determining which parts of the IT infrastructure should be outsourced and which should be kept in-house. This decision has far-reaching consequences, impacting the organization’s efficiency, security, and bottom line. In this post, we’ll explore key factors to consider when making these crucial decisions.

Outsourcing versus In-House

Understanding the Outsourcing Landscape

Before diving into the decision-making process, it’s essential to understand the outsourcing landscape. Outsourcing typically falls into three categories:

1. Infrastructure Outsourcing: This involves contracting with a third-party provider to manage physical infrastructure, such as data centers, servers, and networks.

2. Application Outsourcing: Organizations can outsource the development, maintenance, and support of specific software applications or platforms.

3. Business Process Outsourcing (BPO): BPO entails delegating non-core business processes, like customer support, finance, or human resources, to external service providers.

Factors to Consider When Deciding Whether to Outsource or Keep In-House

Core vs. Non-Core Functions: Core functions, those directly contributing to your organization’s unique value proposition, are usually best kept in-house. Non-core functions can often be outsourced to reduce costs and improve efficiency.

Expertise and Skills: Evaluate your in-house IT team’s expertise. If a specialized skill set is lacking, outsourcing may be the solution to access a broader talent pool.

Cost Analysis: Calculate the total cost of ownership for IT functions. Sometimes outsourcing can be more cost-effective, considering factors like labor, infrastructure, and maintenance.

Scalability and Flexibility: Outsourcing can offer scalability options, allowing you to adapt to changing business needs without significant upfront investments.

Security and Compliance: Assess the sensitivity of your data and the regulatory requirements governing your industry. Some functions, like data security, may be safer when kept in-house.

Risk Management: Evaluate the risks associated with outsourcing, such as data breaches or service interruptions. Develop a risk mitigation strategy.

Service Level Agreements (SLAs): When outsourcing, establish clear SLAs to ensure your service provider meets your expectations in terms of performance, response times, and reliability.

Vendor Selection: Thoroughly vet potential outsourcing partners. Consider factors like reputation, experience, and client testimonials.

Hybrid Solutions: In some cases, a hybrid approach, where you combine in-house and outsourced IT services, may be the most advantageous solution.

Deciding what parts of your organization’s IT to outsource and what to keep in-house is a strategic decision that requires careful analysis.

By considering factors like core functions, expertise, cost, security, and scalability, you can make informed choices that align with your organizational goals. Remember that there’s no one-size-fits-all answer, and the right balance between outsourcing and in-house IT will vary from one organization to another. 

The key is to stay flexible, adapt to changing circumstances, and continually reassess your IT strategy to ensure it remains aligned with your business objectives.

These are the kind of strategy decisions that Blue Tree helps companies make. If you need help creating a holistic IT Strategy, please contact us today.