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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.

Rob Gibbs

PMP|ACP|Program Director. Rob is a PMP Certified Project Manager with a background in IT and IT Construction. He is an Air Force Academy Graduate and was trained in Transportation and Logisitics Management. He also teaches Project Management for the Project Management Institute.

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