What is Shadow IT? Risks, Examples, & Solutions 

The SaaS-first era has made it possible for businesses to revolutionize their operations. From email and CRMs to file sharing and AI tools, SaaS solutions foster innovation, streamline workflows, and can increase profitability. However, the rise of SaaS has come with a significant risk: shadow IT. 

Shadow IT is one of the biggest drivers of security risk facing modern IT teams because it leads to blind spots in organizational defenses. For example, IBM reported that over a third of breaches involved “shadow data” that was stored in unmanaged sources. 

Addressing shadow IT requires a strategic approach, effective technology, and well-defined processes to strike the right balance between productivity, risk, and cost. In this article, we’ll explore shadow IT in depth, including common risks, shadow IT examples, and solutions to help you effectively manage shadow IT.

What is shadow IT? 

Shadow IT is any IT activity in an organization that occurs without the IT department’s approval or oversight. This includes hardware, desktop software, mobile apps, SaaS services, and the rapidly growing shadow AI category. The ease of signing up for SaaS services is one of the biggest drivers of shadow IT growth. Any end user with an internet connection and a credit card can sign up for a SaaS service without engaging IT. 

Importantly, shadow IT isn’t always intentional, and it’s rarely malicious. Often, users who engage in shadow IT activity are simply trying to solve a business problem and may not realize what they’re doing creates business risk or falls outside of IT policies. In other cases, employees might resort to shadow IT to bypass slow corporate approval processes. 

Why shadow IT is a major concern  

The biggest shadow IT risk isn’t usually the specific shadow IT software, hardware, or service per se. The primary reason shadow IT is a major concern is the sensitive data shadow IT can access without being subject to an organization’s security controls or hardened to meet specific security policies. For example, Disney’s 2024 data breach that led to the exfiltration of over 1TB of data was the direct result of shadow IT that didn’t go through a security review. 

Unfortunately for IT and security teams, there are plenty of instances of shadow IT use that can increase business risk. A McAfee report indicated that the average company has over 900 unknown cloud services in use. Just one of those services being improperly secured or implemented could lead to shadow IT risk manifesting and damaging an organization’s reputation or bottom line. 

Top shadow IT risks

Each instance of shadow IT use in an organization comes with potential data security, privacy, compliance, and financial risk. Let’s take a look at the five biggest shadow IT risks IT teams should be familiar with. 

1. Limited visibility and control

Limited visibility and control are the fundamental challenge that leads to other shadow IT risks. Simply put, IT can’t protect, optimize, or manage what it can’t see. 

IT and security teams are typically unaware of which shadow IT services are in use and what data those services can access. Without that visibility, you can’t be sure of security posture, cost, or operational efficiency. 

2. Security risks

Security reviews and the implementation of security controls that meet organizational standards are one of the biggest benefits of ensuring IT is in the loop on technology decisions. Shadow IT removes IT from the process and leaves hardening up to end users. As the Disney breach demonstrates, this can be a recipe for disaster that leads to a data breach. 

3. Compliance issues

Shadow IT operates outside of standard IT security controls and policies. That means that you can’t be sure where data resides, how it’s being handled, or if it meets the regulatory standards your business must comply with. 

4. Wasted spend 

When tech purchases bypass IT, they also bypass the potential savings IT can achieve. For example, IT purchases enterprise licenses that can be significantly cheaper per seat than standard software licenses. Similarly, IT departments can often negotiate better pricing with vendors than individual end users can. Additionally, when multiple different business units are making tech purchases without IT involvement, an organization can find itself paying for the same software multiple times. 

5. Operational inefficiency and data silos 

Shadow IT solutions may solve an individual end user or business unit’s immediate problem, but they are unlikely to integrate well with other tools or allow other users to access relevant information. This can quickly lead to data silos and operational inefficiencies that slow down productivity at scale. 

What causes shadow IT? 

As many shadow IT stats demonstrate, shadow IT is clearly a problem. But why does shadow IT happen? How come people don’t go to IT to set up these tools? Frankly, there isn’t a one-size-fits-all answer. In some cases, shadow IT can be a technical problem to solve. In others, processes and business context cause shadow IT to emerge. 

Here are three common causes of shadow IT in modern organizations: 

• End user preferences: A motivated end user will go to great lengths to get the software they want. In some cases, end users are motivated by tool preference and go out of their way to use their preferred software (e.g., free trials or paying out of pocket) even if there is an authorized alternative. Even IT managers are prone to letting their preferences influence their tool usage, and there is a shadow IT statistic indicating that 58% of IT managers use unapproved collaboration and communication tools.  
• Lack of policy training and awareness: If end users are unaware of what is and isn’t allowed, it’s easy for them to unknowingly engage in shadow IT. In many cases, especially with remote work and bringing your own device (BYOD), end users may install software or use SaaS services without ever realizing they’re breaking policy. 
• Tech purchasing happening outside of IT: If IT isn’t handling procurement, it gets much easier for IT policies to go unenforced and shadow IT to emerge. Unfortunately, it’s fairly common for IT to be out of the loop on tech purchases, with Gartner reporting that 74% of tech purchases are funded or partially funded outside of IT.  

3 shadow IT examples 

Any system, software, or device an end user accesses for business purposes without IT authorization is technically shadow IT. To get an idea of what this looks like in practice, let’s break down three common shadow IT examples.

1. Unapproved SaaS services 

While any unapproved software is technically shadow IT, SaaS services are a particularly prevalent driver of shadow IT for modern businesses. SaaS services are simple to access and can even be free. As a result, users often sign up for SaaS tools or use personal SaaS subscriptions for business use cases like project management (e.g., Trello, Jira, and Monday), file sharing (e.g., OneDrive, Dropbox, and Google Drive), and collaboration (e.g., Slack, Google Hangouts, and Zoom) without proper authorization. This leads to IT blind spots, and that comes with the risk of unapproved services accessing and storing sensitive data.

2. Unauthorized hardware 

Often, in the interest of increasing productivity, employees may use their own personal hardware to get work done. For example, transferring files to a personal USB flash drive is a form of shadow IT. Similarly, using a personal smartphone or laptop to access company resources without meeting the requirements in a BYOD policy is another common form of hardware-based shadow IT. 

3. Personal accounts used for business purposes

The use of personal accounts for business use cases is one of the most common shadow IT use cases. For example, a team might use WhatsApp group chats with personal numbers as a way to coordinate from their mobile phones instead of using an official collaboration tool. Similarly, users may sign up for services using a personal email account for file sharing, which makes it harder for IT to control access and effectively offboard employees to revoke access to sensitive data upon termination. 

Benefits of shadow IT

Shadow IT isn’t all bad. It’s useful to think of shadow IT as an opportunity for IT to learn more about what the business needs and how to address those use cases securely. Three of the most common shadow IT business benefits are: 

• Increased agility: One of the main reasons employees turn to shadow IT is to move faster while solving business problems. Finding the right tool for the job without administrative overhead allows teams to be more agile in their tool selection. 
• Higher productivity: Often, the team best suited to find the right tool for the job is the team closest to the work. For example, your development team might opt to use GitHub over your organization’s approved coding tool because GitHub Copilot enables them to create code much faster with the help of AI. This not only improves their productivity but also drives innovation in your organization
• Better employee morale and engagement: Employees who get to use their preferred tools, even if those tools are shadow IT, tend to be happier and more engaged, which can lead to direct benefits for the broader organization. According to Gallup, organizations with highly engaged employees are 23% more profitable and have higher retention rates. 

Common shadow IT challenges 

Most IT teams recognize the risks of shadow IT. The tricky part is overcoming the challenges that make shadow IT hard to manage at scale. Let’s break down four common challenges teams may encounter as they work to reduce shadow IT risks. 

Discovering and inventorying shadow IT

The catch-22 with addressing shadow IT is that, typically, the teams responsible for securing and managing it are not aware of it. Traditional network discovery tools may discover shadow IT hardware and solutions like RMMs can help inventory desktop software, but a lot of shadow IT takes place in web browser sessions as users sign up for unauthorized SaaS tools. 

Balancing security and productivity 

Frankly, there are cases where shadow IT does a better job than any “approved” system can. This puts IT in a challenging spot if they immediately block all shadow IT upon discovery. If a business unit is producing good results with an unapproved tool, IT needs to find an official way to achieve similar outcomes or bring the shadow IT solution under management to ensure it meets security and compliance standards. 

Preventing unauthorized SaaS usage

Technical controls to block the installation of desktop applications are straightforward enough. However, it’s much harder for IT to implement controls that can block access to SaaS services for end users to access from a browser. That’s a big part of why the surge in SaaS services is correlated with increased shadow IT usage. 

Making it “safe” to talk about shadow IT

End users are often hesitant to engage IT to discuss shadow IT either because they worry about getting in trouble or because they feel formal processes will slow them down. Without a culture that encourages collaboration between IT and other business units, managing shadow IT can quickly devolve into a game of cat and mouse where users come up with creative ways to avoid shadow IT detection. 

How to manage Shadow IT: 4 Shadow IT solutions

Clearly, shadow IT risks are far from trivial. This phenomenon represents an overall security risk that is steadily growing and needs immediate attention.

However, managing Shadow IT is like trying to catch smoke with a net: the decentralized, covert nature of it makes it a formidable challenge. On the other hand, letting it fester unaddressed is not an option either. It’s a problem that must be solved — and fast.

But where do we start?

Here are four tips to help you solve the common shadow IT challenges.

1. Conduct a comprehensive audit

Step 1 in addressing shadow IT risk is assessing the current state and discovering what tools are in use. Conducting a thorough shadow IT audit will help you discover how widespread it is at your organization and/or at your clients’, which is the first step toward finding an effective solution.  

There are two high-level options for your audit methodology:

• Manual audits: Use manual methods like surveys, spreadsheets, and human reviews to document shadow IT. 
• Automated audits: Use SaaS discovery tools like Auvik to help discover shadow IT based on real-world data. 

Manual audits might be suitable for smaller organizations, but even then, they are quite time-consuming and prone to inaccuracies due to human error and limited visibility. For example, people might not mention tools they’re using because they don’t think it’s a problem. “Oh, it’s only a tiny little thing, and I really use it only for myself. I don’t have to mention it because surely it doesn’t matter.” You’d be surprised how many people think that way, particularly for tools they don’t perceive as important. Additionally, once you complete the first audit, maintaining your inventory requires a meaningful amount of manual work. 

2. Invest in SaaS management tools

Just as smoke detectors protect your home, SaaS discovery and SaaS management tools protect our businesses. They provide complete visibility into all SaaS applications in use, identify unauthorized usage and rogue user accounts, and help you respond to shadow IT before it spirals out of control.

Imagine if a smoke detector could alert you to a new fire hazard entering your home, monitor it for potential issues, give you tools to avoid escalation, and then send loud alerts when it’s on the verge of doing so – now you’re getting closer to what these tools can do. It’s like having an intelligent smoke detector and firefighter rolled into one. The only thing it can’t do is look good on a calendar. For now.

A SaaS management platform saves time by automating the process of documenting accounts and tracking SaaS apps. They can identify all the business applications in your business. They can monitor your entire organization in real-time, completely on autopilot, and only alert your IT staff when there are potential issues. And they can determine those potential issues before they become a serious problem through employee access analysis.

Through comprehensive software inventory management, generation of regular business shadow IT reviews, and simplified offboarding of employees, SaaS management tools can help tackle the shadow IT problem effectively. They can also save significant resources in the long run by identifying hazards that you can fix before they escalate. This frees up your team to focus on tasks that drive the business forward. 

3. Foster a culture of open communication 

Encourage your employees to share their needs and the tools they would prefer to use. Also, implement a clear approval process to request new software or hardware. If people have a process to follow (and know what it is), it reduces the temptation to resort to shadow IT.

However, to ensure you don’t have a slew of shadow IT examples in your organization, don’t refuse every request for a non-approved tool. If the request makes objective sense and would enhance the employee’s productivity, at least explain your reasoning and provide an alternative. 

As part of this culture of collaboration, be sure to invest in user education. In many cases, users engaging in shadow IT simply don’t know that they’re doing something wrong. Making the policies related to shadow IT clear reduces ambiguity and empowers well-intentioned end users to make the right decision when they’re trying to solve business problems. 

4. Be open to compromising on shadow IT tools

If a shadow IT tool proves to be valuable, consider integrating it into your application stack. Of course, make sure to first review it thoroughly for security and compliance. 

This willingness to compromise will further reduce the temptation of shadow IT. Employees see that IT is open to fulfilling their needs and may be more likely to use official channels for requests, instead of resorting to shadow IT.

Also consider your IT department’s response times to these requests. According to Statista, 38% of employees resort to shadow IT because of slow response times from the IT team. Instituting clear processes and ensuring your IT department has the bandwidth to respond in a timely manner helps reduce the threat of shadow IT in your organization. 

Seamlessly detect and manage shadow IT with Auvik 

Don’t let shadow IT lurk in the dark corners of your organization. Illuminate it. Understand it. Control it. Auvik SaaS Management helps IT teams do just that with robust SaaS discovery and inventory features that can uncover shadow IT and shadow AI based on user activity. 

Auvik empowers IT to quantify all the SaaS apps used within an organization, identify shadow IT, and alert on risky end-user behaviors like password sharing. 

If you’d like to learn more and determine your company’s shadow IT risk, download the free Modern IT Professional’s Guide to Shadow IT and Shadow AI ebook to take a quick quiz to assess your shadow IT risk level.