Shadow IT refers to the use of IT systems, software, applications, or services in an organisation without the approval or knowledge of the IT department. These unofficial IT practices are usually used by employees or departments looking for solutions that meet their specific needs quickly or get around perceived internal red tape. Common examples of shadow IT include using unauthorised cloud storage services and unsanctioned software applications.

How can shadow IT affect your TCO?

The term "shadow" is a pretty accurate description. It implies that these IT activities are sneaky, operating outside of the direct view and control of the IT department, which is exactly what they are. This makes them difficult to monitor and manage effectively.

While the intentions behind shadow IT might be to improve productivity and innovation, it can have various negative impacts on an organisation, particularly in terms of the Total Cost of Ownership (TCO). For example:

  • Duplicate investments: Shadow IT often leads to duplication of resources and services. Different departments or teams might unknowingly invest in similar or overlapping IT solutions, meaning wasted spending on licences, hardware, or subscriptions.
  • Integration challenges: Shadow IT systems aren’t designed to be part of the organisation's overall IT infrastructure. Because of this, they might lack proper integration with existing systems, leading to data silos, compatibility issues, and additional expenses to connect different applications.
  • Security and compliance risks: Unsanctioned IT solutions might not follow the organisation's security standards or compliance requirements. This can expose the company to potential data breaches, legal liabilities, and financial losses related to cyber incidents.
  • Support and maintenance costs: The IT department is responsible for providing support and maintenance to officially approved systems. When shadow IT applications are used, IT staff may need to spend extra time and effort troubleshooting issues they aren't familiar with, increasing operational costs.
  • Lack of scalability: Shadow IT solutions may not be scalable to meet the entire organisation's needs. As the company grows, these ad-hoc systems might struggle to keep up, leading to inefficiencies and the need for expensive upgrades or replacements.
  • Vendor management challenges: Managing relationships with multiple IT vendors starts to get tricky when different departments independently talk to their preferred providers. This can lead to inadequate contracts, pricing, and reduced negotiation leverage.
  • Loss of control: Shadow IT can lead to a loss of control over the organisation's overall IT environment. This lack of visibility can hinder strategic decision-making and governance, making it difficult to optimise IT resources effectively.

How can we help prevent shadow IT and the growing bill that comes with it?

To address shadow IT's negative impacts on TCO, organisations should focus on having open conversations with employees. Communication is key. Encouraging employees to share their technology needs and concerns with the IT department leads to a better understanding and more effective solutions that fit with the organisation's overall goals and reduce TCO.

If you'd like to learn more about shadow IT, how you can manage it and open up conversations with employees, check out the following blogs: