Shadow IT, or the use of unauthorized software and cloud services within an organization, has become widespread as technology proliferates. Recent surveys indicate that on average, 30-40% of enterprise software expenditures happen outside the CIO‘s purview. Employees often resort to readily available tools due to gaps in approved solutions, lack of awareness or the need for efficiency. However, shadow IT can open dangerous security holes and compliance nightmares if left unchecked.
Just last year, a breach at a financial services firm exposed over 10 million customer records. The root cause? An employee had copied client data to a popular consumer-grade cloud storage app for easier access while working from home during the pandemic. Examples like this illustrate shadow IT‘s severe consequences – data loss, legal liability, reputation damage and recovery costs.
So how can security and technology leaders regain control? This comprehensive guide covers shadow IT‘s risks, methods to detect it, and a strategic approach to govern unsanctioned IT sprawl in the enterprise.
What is Shadow IT?
Shadow IT refers to any hardware, software, cloud services or data processing performed without the organization‘s knowledge or approval. It lives "in the shadow" of formal IT systems.
Some examples of popular shadow IT tools adopted by employees:
- Messaging apps like WhatsApp or Slack for team communication
- File sharing sites like Google Drive or Dropbox to store company data
- Video conferencing tools like Zoom or Webex for meetings
- Social media platforms like Facebook Workplace for collaboration
Employees often use unsanctioned apps because they are easy to access, free or offer better user experience than company-approved versions. However, these tools operate outside IT‘s visibility, introducing serious risks.
Key Drivers and Statistics on Shadow IT Adoption
What compels employees to use unauthorized apps and cloud services for work? Here are some top reasons:
1. Perceived productivity benefits
Employees often turn to external tools they are familiar with to gain efficiency. For example, marketing teams may use Canva for graphic design instead of more complex, IT-provided solutions.
2. Innovation enablement
Lines of business want to innovate quickly. Lengthy IT approval cycles often stand in the way, prompting business units to procure their own solutions.
3. Cost savings
Procuring software with business budgets rather than going through IT seems cheaper upfront even if the long-term costs are higher.
4. Remote work needs
The growth of remote work since 2020 has led to unsanctioned adoption of collaboration and file sharing tools by distributed teams.
5. Lack of security awareness
Well-intentioned employees focused on being productive may not realize the data protection, privacy and regulatory implications of using consumer-grade apps for enterprise data.
Some key statistics that demonstrate shadow IT‘s expanding footprint:
- 61% of organizations have over 1,000 shadow IT apps as per 2022 Gartner analysis
- Cisco‘s 2022 Shadow IT Survey found that on average, 40% of enterprise software spend happens outside IT‘s control
- A 2022 IDC study found that typical organizations use over 130 shadow services – both sanctioned and unsanctioned
So how does an organization address risks arising from this loss of visibility and control? Let‘s examine the implications first.
Key Risks and Impacts of Shadow IT
Here are some major pitfalls and dangers organizations face due to uncontrolled shadow IT adoption:
1. Data breaches
Consumer messaging, file sharing and storage services often have weak security controls compared to enterprise-grade tools vetted by IT. Unsecured company data on such apps is vulnerable to compromise via breaches, accidental insider leaks or rogue employee activity.
2. Non-compliance
Many regulated industries like healthcare and financial services have strict laws governing data handling. Using unauthorized apps that don‘t meet compliance controls can directly violate these regulations and result in heavy penalties.
3. Reputational harm
If a client‘s sensitive data gets exposed due to shadow IT tools, organizations face backlash and deteriorated trust in the marketplace regardless of breach size.
4. Operational disruption
Unsanctioned apps that go offline unexpectedly can halt business workflows. Without IT support, problems take longer to diagnose and fix, affecting productivity. Conflicts between officially approved and shadow systems can also hinder operations.
5. Legal liability
If compromised consumer-grade tools were sanctioned by someone in authority like a C-level executive or department leader, organizations can face lawsuits over negligence.
6. Increased costs
The hard costs of fixing shadow IT issues or breach recovery and the soft costs of reputation damage and lost opportunity pile up over time. Shadow IT ultimately thins margins and affects the bottom line.
In one example, a clothing retailer faced $200 million in breach losses when an employee‘s personal Dropbox folder holding unencrypted customer data got hacked. Such extreme impacts underscore the importance of mitigating shadow IT risks through a structured strategy.
Methods to Detect Shadow IT Activity
The first step is gaining visibility by detecting shadow IT tools that may already be in use across the organization. Here are some of the top techniques to accurately identify unsanctioned apps and services:
1. Asset discovery and monitoring
IT asset monitoring software can automatically track all hardware and software across an enterprise network. Frequently comparing the detected applications to an approved asset inventory unveils shadow systems, especially cloud SaaS apps which leave very small network footprints.
2. Cloud access security brokers
Cloud access security brokers (CASBs) govern data access permissions for cloud services. Unknown cloud apps accessed by employees automatically register as high-risk events for sanctions.
3. Dark web monitoring
Cyber threat intelligence tools search underground hacker forums and dark web markets for stolen company data. If compromised files bear metadata or fingerprints of specific apps, tools responsible for the breach become visible.
4. Digital forensics
Analyzing endpoint device misconfigurations, access logs, network traffic flows and system firewall reviews through computer forensics can uncover irregular usage patterns indicating shadow IT.
5. Surveys
Conducting periodic surveys of department heads on software needs, user experience with authorized tools and requests for additional solutions provides self-reported shadow IT usage incidents. Surfacing this feedback is the first step to remediation.
6. Data loss prevention
Enterprise data loss prevention (DLP) software detects attempts to extract or copy restricted data outside the corporate perimeter, including via unsanctioned cloud storage or file sharing services. All non-compliant apps appear for inspection.
The wide range of detection strategies available equip CIOs, CISOs and IT teams to gain much-needed visibility into shadow IT activity within their technology environment. But technology alone cannot eliminate the problem at its roots or prevent recurrence.
IT leaders need a proactive shadow IT governance plan spanning policy, process, technology and culture. Let‘s explore such a strategic blueprint.
7 Steps to Implement Shadow IT Controls
Here is a comprehensive approach covering critical areas of people, processes and technology to regulate shadow IT:
1. Define policies and controls
Document permitted vs prohibited app usage covering:
- Compliance-regulated data types (e.g. customer PII, healthcare records)
- Examples of sanctioned apps and unsafe consumer tools
- Mandatory security requirements (encryption, access controls etc.) for any new software
- Compliance attestation and audits
- Acceptable channels for tool procurement requests
Educate all employees on these policies through security awareness programs.
2. Streamline IT request procedures
Lengthy delays while procuring new software often trigger shadow IT. IT needs an agile intake and review process that facilitates innovation via sanctioned channels.
3. Evaluate and approve tools centrally
Before granting access to any new tool, IT, Security and Compliance teams should collabotively evaluate its data security, privacy and infrastructure stability protections as per the organization‘s standards.
4. Monitor for shadow access drift
Employ the shadow IT detection techniques outlined earlier continuously via endpoint, network, cloud and dark web surveillance. Automate controls to restrict access or quarantine risky apps.
5. Maintain data protection controls
Classify and label sensitive data repositories. Implement data loss prevention controls and cloud access security brokers to block extraction via unapproved apps.
6. Increase security awareness
Educate employees on shadow IT risks using real case studies. Offer security training during onboarding. Test staff periodically with simulated phishing attacks that mimic shadow IT malware.
7. Track tool usage analytics
IT service management software tracking usage metrics and user sentiment can indicate when sanctioned tools fall short of needs to avoid recurrence of workarounds. Maintain continual improvement via such feedback loops.
Through this comprehensive strategy focused on governance and employee enablement complementing decisive technological controls, organizations can significantly reduce risky shadow IT activity. The business gains are ample too – enhanced security posture, data privacy compliance, operational stability and optimized costs. It also nurtures a culture of collective responsibility towards enterprise data safety.
Expert Views on Addressing Shadow IT Challenges
Industry experts suggest these leading practices to contain unauthorized IT sprawl:
"Shadow IT often sprouts when formal IT cannot deliver solutions fast enough for the business. CIOs need to prioritize speed and agility through DevOps while balancing governance." – Mark Thomas, CIO at National Grid
"Continuous monitoring via Cloud Access Security Brokers coupled with automation can prevent shadow IT risks in real-time. This frees IT staff to focus on more strategic endeavors." – Kamal Jayasankar, Director of Information Security at MongoDB
"Winning hearts and minds is vital – employees meaning well often unintentionally open security gaps via shadow IT. Awareness programs targeting educating them as a trusted insiders are invaluable investments." – Bhavna Soman, CISO at Dell Financial Services
Technology leaders must align policies and upgraded IT delivery models with comprehensive visibility supported by automation to get shadow IT under control. But ultimately, employees wanting to be productive are partners, not obstacles in this mission.
Conclusion
By recognizing shadow IT as a consequence of IT delivery gaps or employees seeking efficiency, technology and security leaders can reshape solutions to encourage innovation safely. Mature identity and data access controls coupled with enabling infrastructure and positive awareness is the path forward.
A solid shadow IT governance plan as outlined here is invaluable for CIOs and CISOs to gain much-needed visibility across today‘s complex IT environment. It also helps exercise oversight for risk mitigation while still nurturing productivity – a critical balance for digital resilience.
