Shadow IT: 6 biggest risks and how to mitigate them

Sara Ana Cemazar
January 25, 2024
min read

With the consumerization of cloud tools, the presence of shadow IT has become almost inevitable. 

As per a Cisco study, 80% of company employees use shadow applications. Employees tend to use shadow tools due to their personal preferences or to accelerate the completion of a task. 

Though, in most cases, the intention behind shadow devices or applications is not malicious, they carry inherent risks like compromise of security, data leakage, information breach, reputational damage, etc. Often, employees are not aware of the risks involved. 

Therefore, the IT departments must undertake proactive measures to mitigate such risks. Read on to learn the 5 biggest risks of shadow IT and the best practices to minimize them. 

What is shadow IT?

Shadow IT is a “parallel” software or hardware used by employees to speed up processes or improve productivity. However, they are not approved by the organization's IT department. So, they are not covered under the organization’s cybersecurity protocols. These tools are often more vulnerable to: 

Shadow IT can be in many forms, including unauthorized usage of cloud-based applications, collaboration tools, or personal devices to perform work-related activities. For instance, using Skype to communicate with vendors or counterparts while the organization is using Webex.

This practice has become common with the rapid spread of hybrid work and the adoption of cloud-based tech solutions. As IT services focus on improving accessibility and consumerization, users find it easy to access tools from the cloud to speed up the work. 

Why do employees sometimes rely on shadow IT?

There are several reasons as to why employees use shadow IT, such as:

1. Perception of the substandard tech stack

Some employees may feel that they have been offered poor devices or that the organization’s existing tech stack lacks robustness and impacts their productivity. Such dissatisfaction motivates them to use shadow software or hardware tools.  

2. Mis-communication and lack of training

Employees may not be fully aware of the organization’s tech usage policies. Ineffective training and the use of technical jargon may confuse them further. This could lead to unintentional usage of unauthorized devices or tools. 

3. Personal preferences

Employees often have strong preferences for specific IT tools based on their usability and familiarity. For example, some might favor Trello for its intuitive design over the organization's choice of Asana. It can lead individuals to stick with their favored tools even outside the approved corporate IT suite. This highlights the conflict between personal comfort and organizational policy.

4. Productivity enhancements

Employees often have to work under tight deadlines and face urgent requirements. In that case, they need tools that help them unleash their fullest potential and enable them to work more productively. When they feel that the organization’s tech stack lacks the required ease of access, speed, and agility, they use shadow IT tools.  

5. Delays in formal approval processes

When business units request integration of the tools they require into the back-end system, the IT department might take time to seek procurement approvals and finally deploy them. When there is a sudden lucrative business opportunity, and it should not be missed, business leaders tend to bypass the IT teams to use the technology they want. 

Examples of shadow IT

Here are some common examples of shadow IT:

1. WhatsApp vs. Secure enterprise chat solution

WhatsApp remains the most preferred communication platform for personal communication. Employees are more familiar with WhatsApp from their personal use. Also, they have WhatsApp installed on their phone. 

On the other hand, employees might not be familiar with the interface of the enterprise chat solution. So, to quickly exchange information, images, and videos, they go around the IT policies and use WhatsApp. 

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2. Using unauthorized productivity apps 

As explained earlier, employees are not the only ones using shadow IT; sometimes, team leaders are also part of this. Using unauthorized productivity apps could occur when the sanctioned application has a complex interface and involves a substantial learning curve. 

Also, employees may be invited to use these applications when collaborating with third-party vendors or external partners. 

3. Cloud storage or file-sharing apps

Another common instance when employees bypass an organization’s IT team is for cloud storage. Suppose an employee is habituated to using Google Drive. In this case, adapting to other cloud storage interfaces and features might take longer. As a result, they may continue using Google Drive, which is not safeguarded by the organization's security protocols. 

Sometimes, the sanctioned tools may lack mobile compatibility or be complex to navigate. Therefore, employees shift to using other tools when they need to exchange files on the go and are not at their desks. 

How does shadow IT pose a risk for organizations?

Despite good intentions, using personally preferred tools for work poses risks. These tools often lack the industry-grade security, collaboration, and control features of enterprise solutions, raising data governance and compliance issues. This also exposes organizations to legal and security vulnerabilities. 

Here are some critical risks of shadow IT: 

1. Losing control over data

As per IBM reports, organizations have 30% of assets outside their formal asset management programs. Due to unauthorized usage of tools and applications, business data gets scattered across several platforms. In that case, organizations may lose data consistency as they lack a consolidated oversight of their data.

Also, it becomes impossible for organizations to trace data when employees exchange information or converse over their devices. The data is not usually backed up or archived as per corporate policies. So, if an employee resigns or gets terminated, the organization may not be able to trace or exercise control over the data

2. Data risk and unintentional leaks

Tools, technologies, and applications under the purview of an organization’s IT department are bound by stringent security protocols, encryption mechanisms, and user rights and controls. 

On the other hand, shadow applications are not covered by organizations' security systems and lack controls. So, they are vulnerable to leakages during storage and transmission. 

Also, employees or the business leaders may not be aware of the updates, configurations, and important security controls. There are chances that sensitive data may be stored and transmitted via shadow devices and applications. 

3. Malware and ransomware attacks

Shadow IT tools increase an organization’s exposure to malware and ransomware attacks. The shadow tools are not protected by their cybersecurity solutions, so they carry poor security hygiene. 

A Gartner study shows that one-third of successful cyber attacks are on data stored in shadow devices. 

Further, shadow tools are integrated using weak credentials. All these factors increase an organization’s vulnerability to malware attacks, data leaks, and breaches. For instance, a study by Cequence Security shows that 5 billion of the 16.7 billion or 31% of malicious requests were targeted at shadow APIs. 

4. Data breach mitigation costs

With shadow IT tools, there are chances that sensitive data may land in unauthorized applications. Also, most shadow applications allow file sharing, storage, and collaboration, which can lead to data leakages and breaches. 

Instances of data breaches are costly as they may lead to hefty fines and penalties. For instance, the IBM report shows that the global average cost of a data breach in 2023 was USD 4.45 million.

shadow IT

Also, when the roots of data breaches are traced back to shadow IT, the company may face regulatory consequences such as nonpayment under the cyber insurance policy, policy revocation, etc. 

Most importantly, as shadow IT applications operate outside an organization’s purview, data breaches may go unnoticed for a long time, increasing the associated costs. 

The irony is that although employees generally use shadow IT to reduce organizational costs and improve efficiencies, non-compliance and data breach mitigation costs are substantial. 

5. Regulatory compliance issues

Shadow applications may lack robust security controls, leading to unauthorized usage of the organization’s sensitive data. Also, using unapproved cloud storage devices may result in data being stored in different locations, which may be against the data residency policies. 

Further, regulations like the General Data Protection Regulation (GDPR) require stringent controls when it comes to handling personal data. Shadow applications may lack such data security control. 

Also, shadow IT may violate industry-specific regulations like the Health Insurance Portability and Accountability Act (HIPAA). All these may lead to compliance violations and result in legal action and penalties.

6. Blow to the reputation

As shadow IT involves the usage of unauthorized tools, it may question the organization’s ability to safeguard sensitive information.

For example, when employees of an organization use unauthorized applications to communicate with vendors or customers, it implies a lack of controls and powerful governance mechanisms. This affects the trust and credibility of the organization.

Moreover, using tools without stringent security controls may lead to data breaches and fines, which harm an organization’s position in the industry.

Also, using shadow IT may lead to disruptions due to incompatibility or integration issues. This impacts the quality of service delivery, harming an organization’s reputation. 

How to minimize the threats that shadow IT poses?

Now that you are aware of the risks and challenges involved in shadow IT, here are the best practices to minimize them. 

Reinforce security policies

The most effective way to mitigate risks from shadow IT is to double down on security policies.

Organizations must develop comprehensive policies regarding approved tools and acceptable technologies. 

These policies must comply with industry-specific regulations like HIPAA and regional data protection rules like the EU’s GDPR, India’s Digital Personal Data Protection (DPDP) Act, etc. Upgrade the policies to meet evolving policy dynamics, compliance requirements, and business needs. 

Organizations must also enforce the use of authentication controls like two-factor authentication and well-demarcated user rights. They must conduct periodic checks to ensure that such rights and privileges are updated based on job roles and responsibilities.

The quality of communication determines the effectiveness of such policies. Organizations must conduct training sessions to sensitize employees about the importance of adhering to the company’s policies and the potential risks involved in shadow IT. 

Introduce company-wide apps 

Organizations can mitigate the risks from shadow IT by introducing company-wide applications for secure collaboration, messaging, productivity, video conferencing, document editing and storing, etc. For this, they must find secure, scalable tools and technological alternatives for shadow IT applications. 

Businesses can create internal applications and technological stores with all the essential applications. They must update the catalog based on the evolving dynamics and remove redundant ones. 

Investment in tools with cross-functional abilities can reduce the need for switching from one tool to another while collaborating with another department. In that case, providing company-wide applications for common tasks like messaging or video conferencing helps.    

Another common reason for shadow IT is the absence of department-specific tools. Organizations must identify the unique needs of different departments. The best way to achieve this is to include employees in the decision-making process. The IT department must work in close collaboration with other departments.  

Streamline the app procurement process

Another factor behind the widespread usage of shadow applications is the delays due to multi-level, slow-paced approvals in the app procurement process. 

Simplify the process and develop clear policy guidelines. Introduce a standardized process request form and procedure for employees and business leaders to rely on when they need new tools and technologies.

The request form must have limited fields requiring information on the intended purpose and features needed.

Organizations must remove barriers and delays in the app procurement process by introducing automation in approvals and procurement workflows.

Besides, they must notify the requestor about the procurement request's status to enhance the process's transparency. 

The IT department must be open to new ideas and tools instead of resisting them. They must review the policy, take employee feedback, and update the process to address the concerns appropriately. 

Offer employees better tools

A major reason why employees tend to use shadow IT applications is the lack of efficient, user-friendly tools. For instance, a study shows that around 53% of business teams did not prefer to use tools recommended by IT teams.

shadow IT

The IT department should conduct frequent review sessions with business leaders of different departments to understand their requirements and update the tech stack accordingly. Businesses must invest in work tools that have a user-friendly interface and easily adaptable features

Employees prefer shadow applications as an alternative to applications and tools with a high learning curve. Whether messaging, productivity, or document editing applications, IT teams must prioritize tools with minimal learning curves. 

Security is a crucial determinant when it comes to procuring business tools, whether it is for communication or project management. Often, the IT teams overlook features and functionalities while merely prioritizing security aspects. The best policy would be to balance between features and security while choosing tools and technologies. 

Prioritize mobile compatibility

While choosing technological applications, businesses must ensure their compatibility with various devices, including desktops, mobile devices, tablets, etc. Doing so helps ensure that employees can use the tools to communicate and work from anywhere. For instance, having an enterprise chat tool with a mobile application helps employees manage messages and connect with their counterparts on the go. 

Detect anomalies with Machine Learning

Implement machine learning algorithms that analyze network traffic patterns and detect anomalies indicative of potential unauthorized application usage. This proactive approach can alert IT teams to shadow IT activities faster, allowing quicker responses to security risks.

Foster a security-focused culture

Beyond training, nurture an engaging organizational culture where security is a shared priority. Regularly communicate shadow IT risks in a relatable way and encourage open conversations about IT needs and concerns. This helps identify gaps in approved tools and frames employees as partners in solutions.

Another idea is to start applying the zero-trust security approach.

Collect IT tool suggestions

Create a channel for employees to suggest productivity tools or applications for review. IT teams can evaluate these for security, compliance, and system integration. This both uncovers new solutions and engages staff in collaborative IT decision-making.

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Sara is an SEO Strategist at Rocket.Chat. She is passionate about topics around digital transformation, workplace experience, open source, and data privacy and security.
Sara Ana Cemazar
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