• Shadow IT refers to IT systems and software applications that employees in the company use without the knowledge of the IT department.
  • It arises when the official IT does not meet the requirements of the employees and they look for solutions themselves.
  • As shadow IT is not integrated into IT governance and IT service management, it harbors high risks for IT security.
  • Shadow IT can be avoided by having a well-equipped IT department, open communication, clear guidelines, and modern no-code solutions, among other things.

Shadow IT refers to IT systems and software applications that employees in a company’s departments use without the knowledge of the IT department to supplement or circumvent the official IT infrastructure.

By definition, shadow IT is therefore neither technically nor strategically integrated into IT service management , which entails security risks and other problems. Derived from the word shadow, the term is intended to express the fact that employees leave higher instances in the company in the dark about the use of tools, and digital processes run in secret.

shadow IT

Examples of shadow IT are a dime a dozen. Here are some shadow IT examples that everyone knows and that can occur in any company:

Quickly write an e-mail with ChatGPT, translate the annual report with Google Translator or create a new presentation with Canva? Many employees carelessly use supposedly harmless AI tools without questioning this or informing the company’s IT department. What most people don’t realize is that the tools can use entered texts to improve their services or train their AI model, which harbors great potential danger when sensitive data is involved. The use of chatbots, online translators and image generators is currently on the rise and is increasingly leading to critical shadow IT with risks for the company.

The web applications mentioned also involve data transfer, usually to the USA, where the servers of the well-known cloud providers are located. There, the data flows can be monitored by US authorities without cause. The same problem occurs when employees use cloud storage such as Dropbox, WeTransfer or Google Drive to quickly share files without hesitation. This rarely happens in a data protection-compliant manner (in accordance with the EU GDPR), as all persons (e.g. employees or customers) must have consented to the processing and transfer of their data.

Employees should not use messengers (e.g. WhatsApp), chat rooms (e.g. Slack) or video conferencing tools (e.g. Zoom) for professional communication without checking and approval by IT. Shadow IT is particularly critical here, as unauthorized communication tools can give attackers access to confidential conversation content. Expert IT professionals, on the other hand, pay attention to end-to-end encryption and regular updates to close security gaps.

shadow IT in communication

There are also shadow IT examples where the use of the software itself is desirable. Imagine a company that relies entirely on Microsoft: the accounting department uses Access databases, the HR department maintains employee data in Excel spreadsheets and the sales department records customer data in a Microsoft Dynamics CRM . This reveals another problem: if IT does not coordinate development, each department does its own thing. This results in a chaos of different processes, self-developed applications and data silos that are not integrated with each other and are unknown to the rest of the company.

If employees use private smartphones or PCs for work or departments procure devices such as printers or headsets themselves, this is also shadow IT. Just like the shadow IT examples mentioned above, hardware that is not part of the company’s official inventory also escapes any control, even though this would be necessary. This is because external devices that are connected to company networks offer potential gateways for malware.

Shadow IT examples: private hardware

In the following you will find out why shadow IT repeatedly occurs in companies and what you can do about it.

Necessity is the mother of invention: If there is a certain dissatisfaction with the IT solutions provided, this can lead to clever employees looking for solutions to their problem themselves and supplementing the official IT with shadow IT. This way, they don’t have to spend time formulating their requirements and waiting for the IT department to implement them.

This impatience is understandable from the user’s point of view – because most departments are under pressure to perform. Without efficient, digital processes, however, they cannot provide the required service. Waiting too long for help from the IT department is a nuisance that reduces employee productivity and slows down the company’s growth.

Shadow IT can arise as a result of:

  • Infrequent communication and coordination between IT and other departments
  • Extensive formalization (e.g. complex and lengthy application processes)
  • No budget for new software that meets user requirements
  • Lack of or overworked IT staff who can barely keep up with requests
  • Decentralized company structure with high autonomy of individual departments
  • Employees who are not aware of the risks of shadow IT

Luckily, you might think, IT-savvy employees in your departments take the solution to problems into their own hands. As long as this initiative is officially desired and you steer the commitment in an orderly manner, this may be true. However, if your employees use additional tools and programs without consulting the IT department, this can backfire.

risks of shadow IT

Shadow IT, which is generally less well designed and tested than professionally developed systems, harbors high risks in terms of IT security, data protection and data integrity. If individual departments develop a life of their own and introduce their own software without the knowledge of the IT department, they quickly violate internal and external compliance rules.

Loss of control

Shadow IT escapes IT governance. If IT service management does not have an overview of the tools used, it cannot include them in support and future strategies, migrations or updates.

Poor quality

Shadow IT is rarely properly documented, tested and maintained. System errors or unstable applications can be the result if IT solutions are put together quickly and without IT knowledge.

Isolated solutions and data silos

The individual departments may build cumbersome, isolated workarounds that are not integrated with other systems. Unsynchronized data silos make processes inefficient and redundant.

Security risks

Shadow IT systems often do not meet company-wide security standards (e.g. encryption, authentication), which makes them vulnerable to cyber attacks and data leaks. Unchecked installations can also open the door to malware.

Compliance breaches

Shadow IT is often incompatible with data protection in accordance with GDPR, ISO certifications and other requirements. With cloud services, server locations outside the EU can be problematic.

Incalculable costs

Without transparency, companies quickly lose control of costs, e.g. due to duplicate subscriptions/licenses for similar tools. If there are legal consequences due to compliance violations, there is a risk of high fines.

Many of these points are also important in IT risk management. This involves assessing the risks for the company and weighing them up against possible alternatives: Depending on how long a shadow IT has been established unnoticed, it can be more expensive to bring ongoing processes to a standstill, for example, than to accept the risks until an appropriate replacement is available.

In principle, IT-savvy, motivated employees play an important role in driving the digital transformation in your company and maintaining your competitiveness. Why? Because they know the processes in their departments and the requirements for the software to be developed best. Provisional shadow IT solutions are therefore better than nothing and provide a quick remedy while IT works on a permanent solution.

However, unlike professional developers, your employees have little or no IT and programming knowledge. The shadow IT examples mentioned above have made it clear that many are not at all aware that they are using shadow IT. To ensure uniform standards of applications, you must therefore train your employees on IT compliance and IT security requirements. Then they can even help to relieve the burden on the IT department.

While the nature of Shadow IT is that it happens behind the scenes, IT departments often have a sense of the likelihood of the above-mentioned Shadow IT examples occurring in the organization. There are basically two approaches to making Shadow IT visible: technical or organizational.

Monitoring to detect shadow IT

With technical control, you use security mechanisms and monitoring to detect and prevent shadow IT. Among other things, you have the following technical options for detecting it:

  • Using proxies and firewalls, you can analyze your employees’ Internet traffic, such as unauthorized traffic between cloud services and your network.
  • Cloud Access Security Broker (CASB) automatically detects the use of cloud services and can ensure compliance.
  • Inventory all company devices and keep track of the software installed on the devices by means of Endpoint Management / Mobile Device Management.

Organizationally, shadow IT can be identified as soon as it leaves financial traces: For example, the accounting department could become suspicious if recurring invoices are received from unusual software providers or subscription charges are made to company credit cards. In any case, the most effective approach is to talk to the individual departments and ask which tools they really use.

Shadow IT is not usually the result of malice, but of time pressure, dissatisfaction or carelessness on the part of your employees. If you discover unwanted IT systems in your company, a calm but firm tone helps when dealing with shadow IT. Explain to the colleagues involved in the departments that you need to know about the introduction and use of IT systems so that you can check them for possible IT risks and compliance violations.

Then find joint solutions on how to integrate the unapproved systems into the existing IT landscape, meet the needs of the department and possibly even further optimize the processes. In this way, you can create a positive climate in which IT is seen as a friend and helper and employees are happy to approach you instead of hiding their shadow IT solutions from you.

In summary, the following recommendations for action can help you get a grip on shadow IT and eliminate its causes:

  • Strengthen the IT department: In order to be able to act and be present, the IT department first and foremost needs sufficient resources, i.e. time, money and personnel.
  • Open communication: Talk regularly with the individual departments about their IT needs and which IT processes could run even better.
  • Clear IT governance: Make it clear what is allowed and what is not. Make employees aware of IT risks and explain why compliance rules make sense.
  • Pragmatic solutions: Modern no-code platforms empower your employees – in close cooperation with IT – to develop workflows and applications themselves.

transparency against shadow IT

As a AI no-code platform, SeaTable can make a significant contribution to channeling the drive of IT-savvy employees and allowing them to develop their own applications within a predefined framework. Simply provide your departments with a toolbox that contains appropriate software modules with which they can flexibly map, optimize and automate their processes.

Instead of waiting weeks for the IT department to implement them, employees can simply realize their ideas themselves. This allows them to both relieve the IT department and accelerate the development of customized solutions. SeaTable fulfills strict compliance guidelines, increases employee satisfaction and consequently eliminates the breeding ground for shadow IT.

Your IT department can deploy SeaTable either via the cloud or on-premises – depending on whether you prefer the convenience and scalability of the SeaTable Cloud or prefer to use SeaTable Server on your own IT infrastructure to ensure full data sovereignty and the highest security standards.

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What is shadow IT?

The common shadow IT definition includes all IT systems, software programs, apps, AI tools and devices that employees of a company use without the knowledge of the IT department to supplement or circumvent the official IT infrastructure. According to this definition, shadow IT is neither technically nor strategically integrated into IT service management, which entails a number of IT risks. The term is derived from the English “Shadow IT”.

What risks does shadow IT pose for companies?

Undetected shadow IT entails numerous risks, e.g. a loss of control by the IT department, poorly integrated isolated solutions and data silos, hidden costs due to duplicate structures and untested systems that jeopardize IT security and compliance.

How can shadow IT be avoided?

Shadow IT can be avoided primarily through a well-equipped IT department, open communication, clear guidelines and modern no-code solutions.

TAGS: IT Security & Data Privacy Digital Transformation No Code & Low Code