“Shadow IT” is a growing risk of digital transformation. Learn how shadow IT threatens organizations and its solutions, including SaaS license management.

Despite its many benefits, digital transformation can have unintended—and often invisible—drawbacks. One such drawback comes as the result of employees making ad hoc use of IT-related software or hardware, which experts have come to refer to as “shadow IT.”

While at times seen as a benign or even beneficial byproduct of individuals’ and departments’ desire to take advantage of the latest digital business solutions, shadow IT comes with serious risks related to IT visibility, organizational inefficiency, unexpected costs, data security, and compliance.

Thankfully, here at Boston SoftDesign, we’re on the cutting edge of one particular solution to these risks: SaaS (Software-as-a-Service) license management, or SLM. Let’s explore exactly what shadow IT is and the risks that it poses before turning to how BSD’s SLM solution can help your organization to avoid them.   

What is shadow IT?

Broadly speaking, shadow IT refers to the use of any software, hardware, or information technology tool purchased without proper analysis of an organization’s current application and SaaS portfolio, alternatives that may already be in use, or other solutions available on the market. 

When it comes to SaaS, for instance, shadow IT tends to begin with shortsighted decision-making. Imagine, for example, that a Customer Success (CS) team buys Calendly for its call scheduler functionality without knowing that SalesOps is already using Zoom Scheduler for the same purpose. Elsewhere in this same company, IT or InfoSec teams might not be aware of the CS purchase until they receive a request from CS to integrate Calendly and Salesforce. Unbeknownst to CS, Zoom Scheduler has already been reviewed by InfoSec for corporate use and properly integrated with Salesforce.

The example above highlights why anyone would go against their CIO, CFO, or IT manager’s wishes by circumventing established IT review and approval processes. Put simply, shadow IT could at first glance seem to offer individuals and teams more flexibility to respond to and adopt the latest productivity-enhancing solutions.

What are the 5 key risks of shadow IT?

Left unchecked, however, the “advantages” of shadow IT (particularly “shadow SaaS”) can quickly turn into costly organizational risks. What’s more is that while these risks are of particular concern for IT departments, they can have significant consequences on other parts of the organization.  

1. Reduced IT visibility 

Given that IT teams and CIOs are by definition unaware of shadow IT, they have no understanding or control of what resources are being used (and, in the case of SaaS, automatically updated). Individuals and teams that make use of IT tools behind the scenes could therefore remain in the dark about SaaS permissions, inefficiencies, and security or compliance risks.

2. Organizational inefficiencies 

Without proper oversight and control, IT solutions can throw a wrench in an organization’s functioning. For example, it could be difficult to integrate shadow IT assets with approved SaaS solutions that are already in-use. Outside of integration, shadow IT can also lead to work silos that prevent key members of a company’s hierarchy from seeing—and potentially improving—different teams’ workflows, i.e., by centralizing data management to prevent inconsistencies across the organization.   

3. Unnecessary spending

In addition to compromising IT visibility and organizational efficiency, shadow IT tends to come with a price tag. For example, a startup founder might opt to use ten of the latest SaaS solutions to manage different parts of their business—all without realizing that, due to overlapping features between these tools, they in fact only need five. While on a small scale, $10 or even $100 SaaS subscription fees might not add up to much, shadow SaaS like this can later result in thousands of dollars of extra spending on redundant, excessive, or even unused functionality.

4. Data security 

One key reason that IT departments and CIOs need oversight over a company’s use of information technology is to limit its data security risk profile. Because sensitive data can be stored, accessed, and processed through SaaS tools, productivity apps, and chat clients (among others), shadow IT exacerbates companies’ exposure to data leaks, breaches, and hacks—particularly when it comes to business AI. Moreover, data stored on shadow IT assets might not benefit from the backup procedures that an organization may have in place, and could be lost permanently in the event of a system issue or failure. 

5. Compliance

By leaving organizations vulnerable to similar data security issues, shadow IT also increases the risks of violating regulatory frameworks and SaaS licensing agreements. If employees spin up shadow IT that leads to the unauthorized dissemination of data or to the violation of SaaS terms and conditions, penalties and even legal action from regulators or SaaS providers themselves may be quick to follow. 

How does SaaS license management reduce the risks of shadow IT?

It’s no secret that the average company’s SaaS portfolio contains hundreds of cloud-based applications. Because of this, organizations that overlook SaaS license and subscription management often find themselves with overlapping subscriptions, unused features, and compliance issues, among other risks. 

While not a silver bullet, BSD’s solution for centralized SaaS license management solves these issues all while mitigating the risks posed by shadow IT. More specifically, CIOs and IT teams that work with us gain: 

  • Increased visibility into which of the departments that are expected to be using specific tools are in fact using them, as well as insight into the precise contract terms of each SaaS application;
  • Organizational efficiency by using our dashboard to visualize, monitor, and optimize current vendors, run rates, costs, and actual license utilization for under- or unused licenses and new SaaS applications or users; and
  • Robust security and compliance thanks to our subscription management solution’s ability to ensure adherence to SaaS licensing terms and to lower security and non-compliance risks by identifying and reducing unauthorized software use.

In addition to these benefits, BSD’s approach to SLM can also be tailored to your organization’s needs. For instance, many of our customers opt for our pre-built templates for SaaS license management and reporting, while others request that we craft a more customized solution that can effectively integrate their go-to iPaaS, BI, or collaboration tools. 

Regardless of the path you choose, it won’t be long before you’re enjoying an SLM system capable of weeding out shadow IT—and saving your organization precious resources.