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.

5 Books to Help Prepare For Digital Transformation

5 Books to Help Prepare For Digital Transformation - Blue Tree Technology Group

The buzz words “digital transformation” may be overused, but that doesn’t make them less meaningful. If anything, digital transformation is more relevant then ever, but organizations continue to struggle, first, with how they define digital transformation, and second, how to initiate a successful digital transformation.

We witness this struggle every day and work with our clients to successfully define, assess, plan and execute successful technology initiatives that enable them to run their organizations more efficiently and effectively.

One thing that makes the process smoother is when all the stakeholders of a digital transformation initiative are communicating from a shared vision and understanding. We’ve listed five books below that can help lay the groundwork for both.

1. Designed for Digital: How to Architect Your Business for Sustained Success by Jeanne w. Ross

DESCRIPTION:

Practical advice for redesigning “big, old” companies for digital success, with examples from Amazon, BNY Mellon, LEGO, Philips, USAA, and many other global organizations.

Designed for Digital How to Architect Your Business for Sustained Success Digital Transformation BooksMost established companies have deployed such digital technologies as the cloud, mobile apps, the internet of things, and artificial intelligence. But few established companies are designed for digital. This book offers an essential guide for retooling organizations for digital success. In the digital economy, rapid pace of change in technology capabilities and customer desires means that business strategy must be fluid. As a result, the authors explain, business design has become a critical management responsibility. Effective business design enables a company to quickly pivot in response to new competitive threats and opportunities. Most leaders today, however, rely on organizational structure to implement strategy, unaware that structure inhibits, rather than enables, agility. In companies that are designed for digital, people, processes, data, and technology are synchronized to identify and deliver innovative customer solutions―and redefine strategy. Digital design, not strategy, is what separates winners from losers in the digital economy.

Designed for Digital offers practical advice on digital transformation, with examples that include Amazon, BNY Mellon, DBS Bank, LEGO, Philips, Schneider Electric, USAA, and many other global organizations. Drawing on five years of research and in-depth case studies, the book is an essential guide for companies that want to disrupt rather than be disrupted in the new digital landscape.

Five Building Blocks of Digital Business Success

1. Shared Customer Insights

2. Operational Backbone

3. Digital Platform

4. Accountability Framework

5. External Developer Platform

2. Implementing World-class IT Strategy: How it Can Drive Organizational Innovation by Peter High

DESCRIPTION:

The actionable guide for driving organizational innovation through better IT strategy.

Implementing World Class IT Strategy How IT Can Drive Organizational Innovation Digital Transformation BooksExpert technology strategist Peter High emphasizes the acute need for IT strategy to be developed not in a vacuum, but in concert with the broader organizational strategy. This approach focuses the development of technology tools and strategies in a way that is comprehensive in nature and designed with the concept of value in mind. The role of CIO is no longer “just” to manage IT strategy―instead, the successful executive will be firmly in tune with corporate strategy and a driver of a technology strategy that is woven into overall business objectives at the enterprise and business unit levels.

High makes use of case examples from leading companies to illustrate the various ways that IT infrastructure strategy can be developed, not just to fall in line with business strategy, but to actually drive that strategy in a meaningful way. His ideas are designed to provide real, actionable steps for CIOs that both increase the executive’s value to the organization and unite business and IT in a manner that produces highly-successful outcomes.

· Formulate clearer and better IT strategic plans

· Weave IT strategy into business strategy at the corporate and business unit levels

· Craft an infrastructure that aligns with C-suite strategy

· Close the gap that exists between IT leaders and business leaders

While function, innovation, and design remain key elements to the development and management of IT infrastructure and operations, CIOs must now think beyond their primary purview and recognize the value their strategies and initiatives will create for the organization. With Implementing World Class IT Strategy, the roadmap to strategic IT excellence awaits.

3. EDGE: Value-Driven Digital Transformation by Jim Highsmith, Linda Luu and David Robinson

DESCRIPTION:

The Agile Operating Model That Will Help You Successfully Execute Your Digital Transformation

EDGE Value-Driven Digital Transformation Digital Transformation BooksMaximum innovation happens at the edge of chaos: the messy, risky, and uncertain threshold between randomness and structure. Operating there is uncomfortable but it’s where organizations “invent the future.” EDGE is a set of fast, iterative, adaptive, lightweight, and value-driven tools to achieve digital transformation.

Jim Highsmith is one of the world’s leading agile pioneers and a coauthor of the Agile Manifesto. He, Linda Luu, and David Robinson know from their vast in-the-trenches experience that sustainable digital transformation requires far more than adopting isolated agile practices or conventional portfolio management. This hard, indispensable work involves changing culture and mindset, and going beyond transforming the IT department. EDGE embraces an adaptive mindset in the face of market uncertainty, a visible, value-centered portfolio approach that encourages continual value linkages from vision to detailed initiatives, incremental funding that shifts as strategies evolve, collaborative decision-making, and better risk mitigation. This guide shows leaders how to use the breakthrough EDGE approach to go beyond incremental improvement in a world of exponential opportunities.

· Build an organization that adapts fast enough to thrive

· Clear away unnecessary governance processes, obsolete “command and control”

leadership approaches, and slow budgeting/planning cycles

· Improve collaboration when major, fast-paced responses are necessary

· Continually optimize investment allocation and monitoring based on your vision and goals

4. See Sooner, Act Faster: How Vigilant Leaders Thrive in an Era of Digital Turbulence (Management on the Cutting Edge) by George S. Day and Paul J.H. Schoemaker

DESCRIPTION:

How organizations can anticipate threats, spot opportunities, and act faster when the time is right; with rich examples including Adobe, MasterCard, and Amazon.

See Sooner, Act Faster How Vigilant Leaders Thrive in an Era of Digital Turbulence Digital Transformation BooksWhen turbulence is the new normal, an organization’s survival depends on vigilant leadership that can anticipate threats, spot opportunities, and act quickly when the time is right.

Vigilant firms have greater foresight than their rivals, while vulnerable firms often miss early signals of external threats and organizational challenges. Charles Schwab, for example, was early to see and act on the promise of “robo-advisors”; Honeywell, on the other hand, stumbled when Nest Labs came out first with a “smart” thermostat. Day and Schoemaker show leaders how to assess their vigilance capabilities and cultivate insight and foresight throughout their organizations. They draw on a range of cases, including Adobe and Intuit’s move to the cloud, Shell’s investment in clean energy, and MasterCard’s early recognition of digital challenges. 

Day and Schoemaker describe how to allocate the scarce resource of attention, how to detect weak signals and separate them from background noise, and how to respond strategically before competitors do. The challenge is not just to act faster but to act wisely, and the authors suggest ways to create dynamic portfolios of options. Finally, they offer an action agenda, with tips for fostering vigilance and agility throughout an organization. The rewards are stronger market positions, higher profits and growth, more motivated employees, and organization longevity.

5. Digital Transformation: Survive and Thrive in an Era of Mass Extinction by Thomas M. Siebel

DESCRIPTION:

Digital Transformation Survive and Thrive in an Era of Mass Extinction Digital Transformation BooksA penetrating examination of the new technologies that are disrupting business and government—and how organizations can harness them to transform into digital enterprises.  The confluence of four technologies—elastic cloud computing, big data, artificial intelligence, and the internet of things —is fundamentally changing how business and government will operate in the 21st century.   Siebel guides readers through a fascinating discussion of the game-changing technologies driving digital transformation and provides a roadmap to seize them as a strategic opportunity. He shows how leading enterprises such as Enel, 3M, Royal Dutch Shell, the U.S. Department of Defense, and others are applying AI and IoT with stunning results.

Regular Technology Budget Hygiene Helps Prevent Spend Drift

Regular Technology Budget Hygiene Helps Prevent Spend Drift - Blue Tree Technology Group

Many organizations are feeling a budget crunch for COVID-related reasons and are looking to reduce their technology spend. While these efforts are critical at the moment, there is a larger argument for long-term strategic budget hygiene. Just like we floss our teeth and wash our hands regularly to help prevent cavities and disease, regular budget hygiene helps prevent wasted technology resources every quarter, every year. In turn, this makes for a financially healthy organization that is not only better prepared to survive economic downturns but is also better prepared to take advantage of economic booms.

Similar to personal hygiene, budget hygiene is most effective when it becomes a habit. There is a lot of science behind successfully creating new personal habits, and we have found that some of it translates very well to organizations.

1. Start Small

2. Plan for Obstacles

3. Take Inventory

4. Identify Areas to Improve

5. Execute

6. Rinse and Repeat

 

1. Start Small

Regular Technology Budget Hygiene Helps Prevent Spend Drift - Blue Tree Technology Group - 1Depending on the size of your organization and the size of your budget hygiene team, you may find more lasting and scalable success by starting with one business unit. This is also important as different units – say Marketing or HR – require their own unique set of technology tools and resources.

Starting small also allows for more elasticity in your strategy. It’s helpful to hone your processes and make adjustments with that first and solitary business before tackling the entire organization.

 

2. Plan for Obstacles

Regular Technology Budget Hygiene Helps Prevent Spend Drift - Blue Tree Technology GroupWhat challenges do you foresee? How will you record and organize the data? Do you have the support of most if not all of the key stakeholders? Are employees going to be resistant to any changes?

No matter how much you plan, obstacles are bound to surface after you start. Expect it and have a process for identifying and addressing obstacles in real-time. Most importantly, have a targeted communication plan ready to launch immediately.

 

3. Take Inventory

Regular Technology Budget Hygiene Helps Prevent Spend Drift - Blue Tree Technology GroupSimilar to taking stock of your personal habits, you need a clear picture of your organization’s current state before you can possibly make informed budget choices. After you’ve identified the business vertical you want to start with, collect and organize a complete inventory of the following:

· Existing technology vendors, all contracts with them, service level agreements, and all invoices

· Categorize all applications used by the business unit by the business function(s) supported by each

· Compute hardware supporting the apps, whether hosted internally or in the cloud

· Network connectivity providing employees access to those applications

· Internal and external support services

· End-user data via form surveys to see what technology they actually use

 

4. Identify Areas for Improvement

Regular Technology Budget Hygiene Helps Prevent Spend Drift - Blue Tree Technology GroupAfter you’ve collected all the necessary data, analyze it by asking the following questions:

Are existing technology vendors fulfilling their contracts?

Are they over-billing?

When are contracts up for renewal?

Does it make sense to send out an RFP before renewing existing contracts?

Are we monitoring contract dates for renewals, expirations and out-clauses?

How do our current vendors compare in service and price to other market leaders?

Are we paying more than average?

What are the triggers for auto-renewals?

Are there unnecessary redundancies?

Are there technology tools going unused?

Would different applications be better suited for the needs of the business unit?

 

5. Execute Changes

Regular Technology Budget Hygiene Helps Prevent Spend Drift - Blue Tree Technology GroupExecuting on budget decisions is bound to encounter obstacles. Most likely, not all stakeholders are going to be supportive. Many employees are going to resist any changes to the way they are used to doing things. Hopefully, all of these obstacles were foreseen and prepared for. Continue to listen and acknowledge the validity of any concerns and communicate all the benefits of the new technology initiatives.

Assign project managers for any decommissions, service cancelations or implementations of new services. Canceling a service or picking a new service provider is only the beginning. It is very rare that technology initiatives go smoothly. Just assume things will go wrong at some point. Having a plan, enforcing accountability, establishing escalation paths, and fostering clear and constant communication to both internal and external stakeholders are all critical for success.

Record all of the changes in real time and keep these records up to date.

 

6. Rinse and Repeat

This is where establishing a habit comes into play. Having efficient and effective technology tools that support business outcomes requires regular review. A quarterly technology review of each business unit is probably overkill, but an annual review is manageable and can be done simultaneously with already established financial reviews and cost benefit analysis. Afterall, budget is not just about the cost of tech tools, it’s also about whether or not those tools are actually effective and efficient.