What is Shadow IT? Causes, Risks & Best Practices

What is Shadow IT?

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Shadow IT is the use of IT systems, software, or cloud services within an organization without the IT department's knowledge or approval. It includes applications, productivity apps, and cloud-based applications used by employees to enhance their work without following the official approval process. While it may help improve employee productivity, it introduces security risks due to the lack of proper oversight and security measures.

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Causes of Shadow IT

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The causes of Shadow IT can be traced to several factors, mainly revolving around employee needs, convenience, and a lack of communication with the IT department. Below is a data table highlighting the common causes of shadow IT.

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Causes	Description
Quick Solutions	Employees use shadow IT for immediate solutions, avoiding delays from the IT department.
Limited IT Resources	IT departments may need more resources to meet all user needs, prompting employees to find alternatives.
Familiarity with Tools	Employees prefer cloud services or productivity apps they are comfortable with for efficiency.
Unawareness of Security Risks	Employees may not recognize the security risks of using unauthorized tools or cloud-based applications.
Lengthy IT Approval Process	Slow approval processes for new software lead employees to use unapproved tools for efficiency.
BYOD Policies	Personal device use introduces unmonitored cloud-based applications into the network.
Lack of IT Communication	Insufficient dialogue between employees and the IT department causes employees to seek their own solutions.
Remote Work Needs	Remote collaboration pressures employees to use quick-access tools that may not be sanctioned.
Budget Limitations	Departments opt for free or low-cost alternatives when official tools exceed budget constraints.
Experimentation and Innovation	Teams experiment with new tools outside of the standard IT infrastructure for business growth.
User-Driven Technology	Increased comfort with consumer technologies drives employees to adopt shadow IT for work purposes.

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Shadow IT Examples

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Shadow IT manifests in various ways, from unapproved cloud services to using personal devices for work. Some typical examples are:

Cloud-Based Applications: Tools like Dropbox, Google Drive, or OneDrive are often used for file sharing without IT approval, which can lead to data leaks if not properly secured.
Communication and Messaging Apps: Apps like Slack, WhatsApp, and Zoom enhance productivity but bypass security measures, making it hard for the IT department to monitor information flow.
Personal Devices (BYOD): Using personal laptops, smartphones, or tablets for work introduces security risks, as these devices are not managed by the IT department.
Third-Party Productivity Apps: Tools like Trello, Asana, and Notion are popular for task management but can store company data outside the secured network, risking exposure.
Unapproved Software Downloads: Downloading software without IT vetting can introduce security risks or malicious code into the company’s network.
Shadow IT in SaaS Applications: Employees may use marketing, CRM, or design tools on personal accounts, leading to a lack of control over company data and compliance challenges.

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Shadow IT Risks

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Shadow IT introduces a range of risks to an organization, often going undetected until serious problems arise. Here are the key risks associated with shadow IT:

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1. Loss of IT Visibility and Control

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When employees use unauthorized tools and cloud-based applications, the IT department loses visibility over how sensitive data is accessed, stored, and shared. This lack of control makes it difficult to monitor security, manage software updates, and enforce security measures, leaving the company vulnerable to security risks.

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2. Data Insecurity

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Shadow IT often leads to sensitive data leaks as employees may use unsecured file-sharing services or store confidential information on personal devices. Since these tools bypass official security measures, the company is at a higher risk of data breaches and unauthorized access, potentially resulting in significant damage to the organization's reputation and finances.

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3. Compliance Issues

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Using shadow IT can inadvertently cause the company to violate data protection regulations, such as GDPR or HIPAA. Unauthorized tools may not comply with industry standards for handling sensitive data, exposing the company to legal penalties, fines, and increased scrutiny from regulatory bodies.

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4. Business Inefficiencies

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Shadow IT applications often do not integrate seamlessly with sanctioned IT systems, leading to fragmented workflows. This fragmentation can cause data inconsistencies, communication breakdowns, and operational inefficiencies, ultimately impacting employee productivity and setting back business growth.

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Benefits of Shadow IT

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While Shadow IT introduces risks, it also has benefits that some organizations have come to recognize. Here’s a closer look at these benefits.

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Benefits	Description
Boosting Engagement Through User Choice	Employees who select their tools are more engaged and satisfied. Allowing them to choose applications that fit their specific needs leads to more efficient workflows and increased employee productivity.
Instant Productivity with Self-Implemented Tools	Employees can implement solutions immediately without waiting for IT department approval, streamlining their tasks, especially in time-sensitive situations.
Reduced IT Workload	When employees independently use cloud-based applications, the IT department receives fewer software requests, allowing them to focus on more critical tasks like monitoring for security risks.
Encourages Innovation	Shadow IT provides employees with the freedom to explore new technologies and experiment with different tools, encouraging a culture of innovation that can drive business growth and adapt to changing market demands.
Enhanced Communication and Collaboration	The use of intuitive and accessible messaging or project management apps improves team coordination, especially in remote work settings where sanctioned tools might not be as flexible or user-friendly.

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Challenges of Shadow IT

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Shadow IT introduces several challenges for companies, primarily due to the lack of control and visibility over unauthorized tools and applications. Below are the most common challenges:

Lack of Visibility: Since shadow IT involves the use of unsanctioned tools, the IT department struggles to monitor how these tools are used. This lack of oversight makes it difficult to identify potential security risks, vulnerabilities, and data leaks.
Increased Security Risks: Shadow IT tools often bypass company security protocols. This creates gaps that can be exploited by cybercriminals, leading to data breaches and loss of sensitive data. Because these tools aren't vetted, they may not have the necessary security measures in place to protect company data.
Compliance Issues: Unauthorized tools can lead to non-compliance with regulations like GDPR, HIPAA, or PCI DSS. Since the IT department cannot control how sensitive data is managed or stored in these tools, the company may inadvertently violate data protection laws, resulting in potential fines and legal consequences.
Operational Inefficiencies: The use of multiple, unapproved tools can fragment workflows and create data silos. Shadow IT applications may not integrate with official systems, leading to communication breakdowns, inconsistent data management, and a negative impact on employee productivity.
Increased Costs: While shadow IT tools may seem cost-effective at first, they can lead to increased long-term expenses. These can include unexpected subscription costs, additional security measures to counter potential risks, and fines for compliance violations.

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Best Practices to Mitigate Shadow IT Risks

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Mitigating shadow IT risks requires a strategic approach to address unauthorized tool usage while maintaining flexibility for employees. Here are some of the best practices that can be helpful:

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1. Use a Shadow IT Discovery Tool

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These tools help identify unauthorized applications and services in use within the company, providing comprehensive shadow IT discovery. By providing a comprehensive overview of shadow IT, companies can assess potential security risks, track cloud-based applications, and take steps to either restrict or formally approve them. Real-time monitoring offered by these tools gives the IT department the visibility it needs to address security risks promptly.

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2. Use a Cloud Access Security Broker (CASB)

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A CASB acts as a gatekeeper between the company's network and cloud services, providing security enforcement like data loss prevention (DLP), encryption, and access controls. By using a CASB, companies gain the ability to monitor and manage both sanctioned and unsanctioned cloud-based applications, ensuring that sensitive data remains protected from leaks and breaches by following SaaS security best practices.

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3. Implement SaaS Security Posture Management (SSPM)

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SSPM tools are essential to ensure comprehensive visibility and control over all SaaS applications in use. They continuously monitor the security posture of these applications, detecting any misconfigurations in real-time. By ensuring that all configurations adhere to security best practices and compliance standards, SSPM significantly reduces risks from shadow IT, enhancing governance and preventing data breaches.

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4. Enhance Employee Risk Management Training

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Many shadow IT issues arise from a lack of awareness. Conduct regular training sessions to educate employees on the security risks and compliance implications of using unauthorized tools. By making employees aware of the potential dangers and promoting the use of approved alternatives, companies can significantly reduce the prevalence of shadow IT.

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5. Discuss Tools Needed with Employees

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Open communication between the IT department and other teams can uncover the specific needs that drive employees to seek shadow IT solutions. By discussing these requirements, the IT department can explore ways to provide approved tools that meet those needs.

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How Reco Helps Detect and Remediate Shadow IT

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Reco’s shadow IT discovery tool offers near real-time visibility into both sanctioned and unsanctioned applications, including shadow apps, within an organization’s SaaS ecosystem. By aggregating all applications into a single view, the IT department can easily identify risky app usage, unauthorized access, and unused applications. This approach helps reduce the attack surface by deauthorizing connections with untrusted vendors and mitigating potential security risks.

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Reco also ensures secure application usage through identity-focused monitoring, which detects insecure app usage and suspicious activities across authorized and unauthorized tools. This enables the IT team to protect sensitive data and respond promptly to potential breaches. By proactively managing shadow IT, Reco strikes a balance between empowering employees with tool flexibility and maintaining security, compliance, and operational efficiency.

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The Future of Shadow IT and IT Governance

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The future of shadow IT and IT governance will require balancing employee tool usage with security and compliance. As digital transformation continues and remote work expands, shadow IT is expected to grow, necessitating an adaptive approach to IT governance.

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To address this, IT governance will increasingly use AI-driven analytics and automation to detect and monitor shadow IT in real-time. Companies will develop policies that provide flexibility while ensuring data protection through tools like Cloud Access Security Brokers (CASBs) and SaaS Security Posture Management (SSPM). Open communication about technology needs will also become central, allowing for early identification of potential shadow IT tools and integrating secure alternatives. This collaborative strategy will support innovation while securing sensitive information.

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Conclusion

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Shadow IT presents both opportunities and risks for modern companies. While it can boost productivity and encourage innovation, it also introduces significant security risks and compliance challenges. To navigate this evolving landscape, businesses must adopt a balanced approach, using tools like Reco for discovery and monitoring, enforcing clear policies, and maintaining open communication with employees. By proactively managing shadow IT, organizations can harness its benefits while minimizing potential vulnerabilities, ensuring a secure and efficient work environment.

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