What is Shadow IT?

Shadow IT is the unauthorized use of software or hardware in an organization and it’s everywhere.

80% of employees use software not cleared by IT (Cisco).

With the average cost of a data breach now at $4.88 million, organizations need to prioritize locating and locking down any unauthorized software or services.

While shadow IT often stems from good intentions, like employees wanting to be more productive, it can introduce significant security risks that organizations need to proactively deal with.

Some common examples include cloud storage services (like Dropbox or Google Drive), personal devices used for work purposes, and unapproved software programs.

In this post, we’ll cover everything you need to know about shadow IT and how to manage it effectively.

What are the Risks of Shadow IT

When it comes to Shadow IT, there are five primary risks that it introduces into organizations. These include:

1. Security vulnerabilities: Unapproved applications often lack proper security controls, potentially exposing sensitive company data to breaches. These tools may not undergo the same security testing as officially sanctioned software.
2. Data leakage: When employees use unauthorized cloud services or personal devices, corporate data can be stored inside a misconfigured environment, increasing the risk of data loss or theft.
3. Compliance violations: Many industries need to adhere to various regulatory requirements (GDPR, HIPAA, SOX, etc.). Shadow IT solutions may not meet these standards, potentially resulting in serious legal issues and steep fines.
4. Limited visibility: IT departments can’t protect or manage what they don’t know exists. Shadow IT creates blind spots in the organization’s security posture and makes comprehensive risk assessment impossible.
5. Business continuity risks: If a shadow IT service suddenly shuts down or an employee who manages an unofficial system leaves the company, critical business operations could be disrupted without proper backup or knowledge transfer procedures.

Now that we’ve discussed the risks, let’s talk about what causes Shadow IT.

Causes of Shadow IT

While there are many reasons employees install unapproved software, here are the most common causes:

• Slow IT Response Times: When the IT department takes too long to address requests, whether for new tools, software, or support, employees often turn to readily available, unapproved alternatives to keep work moving.
• Lack of Flexibility in Approved Tools: Official IT solutions may not fully meet the specific needs of certain teams or workflows. Employees may find third-party tools more user-friendly or better suited to their tasks.
• Ease of Access to Cloud Services: The proliferation of cloud-based software (SaaS) allows anyone with a credit card to sign up for the relevant tool, bypassing traditional procurement processes.
• Insufficient Awareness or Training: Employees may not be aware of approved tools or how to use them effectively. This often results in employees adopting familiar and unauthorized alternatives instead.
• Innovation Demands: Teams, especially in fast-paced environments like marketing or development, adopt shadow IT to experiment with new technologies or stay ahead of competitors.
• Poor Communication: A disconnect between IT departments and other teams can result in misaligned priorities. This often leaves employees feeling their needs aren’t understood or addressed.
• Remote Work and BYOD Policies: The rise of remote work and bring-your-own-device (BYOD) practices has increased the reliance on personal or unapproved tools.
• Budget Constraints: When budget limitations prevent IT from providing commercial tools, employees might use free or low-cost alternatives instead.

Despite the risks that Shadow IT introduces, there are actually some benefits it provides as well.

What are the Benefits of Shadow IT

Despite these risks, Shadow IT is not an entirely negative phenomenon.

When employees create their own solutions, it often highlights gaps in your official IT ecosystem.

Employees are better situated to find tools that suit their specific workflows than the one-size-fits-all solutions provided by IT departments.

In addition, traditional procurement processes are often slow and can be quite bureaucratic. Shadow IT enabled teams to solve issues immediately and work more effectively.

With these benefits in mind, let’s look at how shadow IT manifests across different business units.

Recognizing these examples can help you identify similar patterns in your own organization.

Examples of Shadow IT

Shadow IT appears in various forms across organizations. Here are some of the most common examples:

• Cloud storage and file sharing: Employees using personal Dropbox, Google Drive, or OneDrive accounts to store and share company documents instead of approved enterprise solutions.
• Communication tools: Teams adopting messaging platforms like Slack, Discord, or WhatsApp for internal communication when not officially sanctioned by the organization.
• Project management applications: Departments implementing Trello, Asana, or similar tools to manage workflows without IT approval.
• Personal devices: Using personal smartphones, tablets, or laptops for work purposes outside the company’s mobile device management system.
• Productivity software: Installing unapproved applications like note-taking apps (Notion, Evernote), PDF editors, or specialized software without going through proper channels.
• Browser extensions and add-ons: Installing productivity extensions, grammar checkers, or screen capture tools that may have access to sensitive data.
• AI and analytics tools: Teams experimenting with AI assistants, data visualization platforms, or analytics software not vetted by the organization.
• Development environments: Developers using unauthorized code repositories, IDE plugins, or testing tools that bypass security protocols.
• Social media management: Marketing teams using unapproved social media scheduling and analytics platforms to manage company accounts.
• Video conferencing solutions: Using alternative meeting platforms when the company’s official solution has limitations or performance issues.

Now that you can recognize various forms of shadow IT, the next challenge is discovering what’s already operating within your environment.

How to Locate Shadow IT

Before we talk about how to find instances of Shadow IT, I want to reiterate the importance as an organization to first understand why employees needed to implement an alternative solution to begin with. Having said that, here are number of useful techniques for finding shadow IT:

• Network traffic analysis: Implement tools that monitor network traffic to identify unauthorized cloud services, applications, and data transfers occurring across the corporate network.
• Cloud Access Security Brokers (CASBs): Deploy CASB solutions that can discover cloud services being used throughout the organization, even when accessed from outside the corporate network.
• Endpoint scanning and monitoring: Use endpoint management solutions to identify unauthorized software installations and applications on company devices.
• DNS monitoring: Analyze DNS requests to identify connections to unauthorized cloud services and applications.
• Financial audits: Review expense reports and credit card statements for subscriptions to unauthorized software services and cloud platforms.
• Application inventory tools: Implement automated discovery tools that can scan your environment for all running applications and compare them against approved software lists.
• Web proxy and firewall logs: Analyze logs from web proxies and firewalls to identify access to unapproved cloud services and applications.
• Data Loss Prevention (DLP) solutions: DLP tools can help identify where sensitive data is being uploaded to unauthorized cloud services.
• API connections: Monitor for unauthorized API connections between approved applications and external services.
• External Attack Surface Mapping: Leverage OSINT tools like certificate transparency logs and DNS brute-forcing to identify non-contiguous IP space and hostnames.

Once you’ve found shadow IT in your organization, the real work begins.

Rather than simply prohibiting these unauthorized tools, successful organizations take a more nuanced approach to managing shadow IT that balances security with innovation.

How to Manage of Shadow IT

Effectively managing shadow IT requires a balanced approach that acknowledges its inevitability while still mitigating associated risks. Here are our suggestions:

Create clear guidelines that define what technologies employees can adopt independently and which require IT approval. Ensure these policies are practical and acknowledge business needs rather than simply prohibiting all unauthorized tools.

In addition, create an efficient evaluation system for new tools that employees want to use. The easier it is to get official approval, the less incentive there is to circumvent the process.

Develop and maintain a list of pre-approved applications for common needs. This will give employees flexibility when doing their jobs while still maintaining security standards.

Train employees about the risks of shadow IT and why certain protocols exist. When people understand the “why” behind policies, they’re more likely to comply.

Remember that not all shadow IT presents the same level of risk. Prioritize addressing high-risk applications that handle sensitive data rather than trying to eliminate all unsanctioned tools.

Finally, when you discover useful tools, consider officially adopting and integrating them into the corporate infrastructure rather than shutting them down.