What is Shadow IT and How Does It Impact Organizations?

The rapid adoption of cloud-based tools and remote work has made Shadow IT a growing cybersecurity concern. Experts estimate that shadow resources will be the target of up to 50% of successful cyberattacks this year (Gartner). With the average cost of a data breach now at $4.88 million—a 10% rise from last year (IBM, 2024)—the financial and security risks posed by shadow technology demand urgent attention.

In this blog, we’ll explore the shadow IT meaning, its root causes, risks, and impact on IT departments. We’ll also outline strategies to mitigate these dangers, discuss tools to combat them, and examine the evolving role of shadow IT in cyber security.

What is Shadow IT?

Shadow IT, or shadow technology, refers to the use of IT systems, software, or devices within an organization without the approval or oversight of the IT department. Examples include using file-sharing apps like Dropbox or collaboration tools like Slack, often adopted by employees to enhance efficiency.

While these tools may boost productivity, they bypass security protocols, creating blind spots that leave organizations vulnerable to cyber threats. This dual nature of shadow IT in cyber security—offering convenience but increasing risk—underscores the importance of addressing it proactively.

Why Does Shadow IT Occur in Organizations?

The rise of shadow IT is often a response to a disconnect between employee needs and the solutions provided by IT departments.

When existing tools fail to meet expectations or feel cumbersome, employees naturally seek out alternatives that seem more efficient or user-friendly. This behavior is further encouraged by a lack of awareness about the risks associated with shadow technology, as many employees perceive their actions as harmless.

Departments like marketing or sales, which frequently have specialized requirements, may also find IT-approved tools too rigid or slow to implement.

Employees’ Need for Convenient and Fast Solutions

Adding to the problem, employees often prioritize convenience over compliance, especially when under tight deadlines. Bypassing lengthy IT approval processes, they turn to easily accessible cloud-based apps that promise quick results. While these tools may address immediate needs, they are often adopted without consideration for security risks, leaving the organization vulnerable. This need for speed and efficiency illustrates why shadow IT in cyber security continues to grow despite its dangers.

Common Risks Associated with Shadow IT

Shadow IT brings several risks that can harm an organization’s security, compliance, and efficiency. When employees use unauthorized tools, they bypass IT oversight, creating blind spots that make businesses vulnerable to cyberattacks, fines, and financial losses.

Data Breaches and Security Vulnerabilities

One major risk of shadow IT is data breaches. Unauthorized tools often lack strong security measures, such as encryption, making them easy targets for hackers. IBM’s 2024 Cost of a Data Breach Report found that 1 in 3 data breaches involved shadow data, showing how hard it is for companies to monitor and secure these tools. These weaknesses can cause financial losses, damage reputations, and expose sensitive data.

Compliance and Regulatory Risks

Using shadow technology often breaks important compliance rules like GDPR, HIPAA, or CCPA. These tools may store sensitive data in unsafe locations, and companies can’t guarantee proper handling. This can lead to expensive fines, legal trouble, and loss of trust from clients and stakeholders. As compliance regulations get stricter, ignoring shadow IT in cyber security will create even bigger problems.

Unmonitored Costs and Resource Usage

Shadow IT wastes money and resources. Research from Gartner shows that unmanaged tools can increase IT costs by up to 30%, due to duplicate software and overlapping subscriptions. Unapproved tools also slow down systems, use up resources, and make maintenance harder. Over time, these hidden costs reduce productivity and damage a company’s financial health.

How Shadow IT Impacts IT Departments

The spread of shadow IT significantly increases the workload for IT departments. Teams must identify unauthorized tools, address security risks, and ensure compliance, all while managing their regular responsibilities. This extra work forces IT teams to take a reactive approach, focusing on immediate problems instead of long-term strategies. As a result, their ability to implement key initiatives, strengthen cybersecurity, and support business goals is weakened.

How to Identify Shadow IT in Your Organization

Shadow IT can quietly expose your organization to risks, as employees often use unapproved tools to meet work demands. Identifying it requires understanding its causes and taking steps to uncover unauthorized software and devices. Here’s how to tackle the issue:

• Audit network traffic to detect unapproved tools and devices accessing your systems. Look for unusual activity or third-party services that haven’t been authorized by IT.
• Collaborate with department heads to understand the tools their teams use. This helps uncover unsanctioned apps adopted to meet specific needs.
• Leverage advanced monitoring tools like Cloud Access Security Brokers (CASBs) to gain visibility into unsanctioned cloud applications and track shadow activities.
• Conduct employee surveys to gather insights into the tools employees are using. Anonymous surveys can encourage honest feedback and highlight gaps in existing IT solutions.

By following these steps, your organization can uncover shadow IT and address its risks more effectively.

Strategies to Manage and Mitigate Shadow IT

Effectively managing shadow IT requires both proactive measures and collaboration across the organization. Start by fostering a culture of transparency where employees feel comfortable discussing their software needs with IT teams. Pair this with advanced monitoring tools to track unauthorized usage and enforce compliance. Lastly, ensure regular audits are conducted to identify potential risks early and address them before they escalate.

Implementing Security Behavior and Culture Programs

A Security Behavior & Culture Program offers valuable metrics and insights that shape an organization's cybersecurity culture. It is a comprehensive program for monitoring behaviors, compliance levels, cultural engagement, and strategic outcomes.

By identifying trends and patterns, it can also highlight risks associated with shadow IT—the use of unauthorized applications, devices, or systems within the organization. This connection enables organizations to uncover and address shadow IT behaviors, fostering a culture of accountability and security. By leveraging these insights, organizations can make data-driven decisions and strategically prioritize interventions to mitigate shadow IT risks and strengthen their overall cybersecurity posture.

Implementing Clear IT Policies and Guidelines

The best way to manage shadow IT in cyber security is by creating clear and well-communicated IT policies. Start by educating employees about the risks of using unapproved software, such as data breaches and compliance violations. Provide them with secure, approved alternatives that meet their needs, making it easier for them to stay within IT guidelines.

Benefits of Addressing Shadow IT Proactively

Proactively managing shadow IT offers several key advantages for organizations:

• Enhanced Security: Closing gaps caused by unauthorized tools reduces vulnerabilities and helps prevent data breaches.
• Cost Savings: Removing unnecessary software and managing licenses effectively helps cut IT expenses.
• Improved Compliance: Ensuring all tools meet industry standards minimizes the risk of regulatory penalties.
• Better Data Management: Enhanced oversight allows for more secure handling and storage of sensitive information.
• Streamlined IT Operations: Consolidating approved tools reduces system complexity and improves overall efficiency.

Addressing shadow IT in cyber security not only minimizes risks but also strengthens the organization’s IT foundation, ensuring smoother and safer operations.

Improved Security and Data Management

Proactively managing shadow IT helps strengthen security and improve how data is handled. By identifying and addressing unauthorized tools, organizations can close security gaps and reduce vulnerabilities. This approach ensures that sensitive information is better protected from potential threats.

Improved oversight also ensures that all tools and systems meet compliance standards, such as GDPR or HIPAA. This reduces the risk of fines and legal issues while enhancing trust in the organization’s ability to safeguard critical data.

Tools and Technologies to Combat Shadow IT

To take proactive control over shadow IT, organizations must leverage a Security Behavior and Culture Program. This program not only tracks compliance and behavioral trends but also identifies risky patterns, such as the use of unapproved applications, that can expose the organization to threats. By embedding this program into your cybersecurity strategy, you can cultivate a culture of awareness and accountability, minimizing shadow IT risks and strengthening overall security.

To tackle the human factors driving shadow IT, Keepnet offers the Keepnet Human Risk Management Platform. This platform combines phishing simulations with a behavior-driven security awareness program, helping organizations reduce social engineering threats. By educating employees on the risks of unauthorized tools and promoting secure behaviors, Keepnet ensures businesses can foster a strong security culture.

Also, to effectively manage shadow IT, you need specialized tools like endpoint detection systems and network traffic analysis tools, which are particularly effective in identifying unauthorized applications and devices accessing organizational networks. These technologies offer IT teams detailed, real-time insights into shadow IT activities, allowing them to quickly detect, assess, and address potential threats before they escalate.

Future Trends and the Role of Shadow IT in Organizations

The rise of remote and hybrid work models is expected to increase the prevalence of shadow IT as employees continue to seek convenient tools for their tasks. This growing trend presents new challenges for IT departments to maintain visibility and control over unauthorized tools.

• The use of unauthorized tools is likely to grow as employees in remote setups seek quick solutions to productivity gaps.
• AI-driven monitoring systems will play a key role in detecting and managing unauthorized applications in real time.
• Zero-trust security frameworks will ensure continuous verification of users and devices, protecting sensitive resources.
• Encouraging open communication between employees and IT teams will help identify needs early and reduce reliance on unapproved tools.

By adopting advanced technologies and fostering collaboration, organizations can effectively manage shadow IT and maintain a secure, productive environment.

How Keepnet Can Help Organizations Address Shadow IT

Keepnet provides organizations with tools and strategies to effectively manage shadow IT and its associated risks. The Keepnet Human Risk Management Platform addresses the human element of shadow IT by raising employee awareness and promoting secure behaviors. Key features include:

• Security Behavior and Culture Program: Foster a resilient cybersecurity culture by identifying risky behaviors and promoting secure practices—and Keepnet can help implement this program effectively through its comprehensive Human Risk Management Platform.
• Phishing Simulator: Creates realistic phishing scenarios to test employees’ responses, providing outcome-driven metrics that highlight vulnerabilities and guide targeted improvements.
• Security Awareness Training: Tailored training initiatives educate employees about the risks of shadow IT and promote the use of approved tools, reducing reliance on unauthorized applications.
• Outcome-Driven metrics: Analyze risky behaviors like shadow IT activities across the organization, offering IT teams outcome-driven metrics.

With Keepnet’s Human Risk Management, organizations can reduce vulnerabilities, foster a culture of compliance, and effectively address the challenges posed by shadow IT.