How do I identify shadow IT spending in my company

Emiliano’s company was bleeding money – not from a hack, not from ransomware, but from a thousand tiny, unauthorized subscriptions. He’s the CFO of a mid-sized manufacturing firm in Sparks, and discovered over $30,000 annually was going to cloud services, SaaS tools, and even hardware purchased outside of approved IT channels. That’s $30,000 of wasted budget, increased security risk, and a complete lack of visibility into what tools his teams were actually using. It nearly derailed their annual budget projections.

Shadow IT – the use of information technology systems, devices, software, applications, and services without explicit IT department approval – is a pervasive problem for businesses of all sizes. It’s not necessarily malicious; often, it stems from employees trying to be productive and solve immediate problems. However, it introduces significant risks, including security vulnerabilities, compliance issues, wasted spending, and integration challenges. As someone with over 16 years in the managed IT services and cybersecurity space here in Reno, I’ve seen firsthand how a proactive approach to identifying and managing shadow IT can save companies money and headaches. It’s about bringing visibility to what’s happening outside the IT department’s control, and then strategically addressing it.

What are the biggest risks of unchecked Shadow IT?

Beyond the financial implications like we saw with Emiliano, shadow IT creates a fractured IT environment. Here’s what keeps me up at night when I’m talking to clients about this:

Security Vulnerabilities: Unapproved software and devices often lack necessary security patches and configurations, creating entry points for malware and cyberattacks.
Data Breaches: Sensitive company data stored in unsanctioned applications is at greater risk of being compromised. NRS 603A.215 requires us to ensure “reasonable security measures” are in place; shadow IT undermines that effort.
Compliance Issues: Depending on your industry (healthcare, finance, etc.), using unapproved tools could violate regulations like HIPAA, PCI DSS, or others.
Integration Problems: Shadow IT creates silos of information, hindering collaboration and data sharing between departments.
Wasted Spending: Multiple departments may be purchasing redundant services, leading to unnecessary costs.

How can I uncover hidden IT spending?

The good news is, you don’t need to launch a full-scale investigation to identify shadow IT. Here’s a multi-pronged approach I recommend:

Strong Network Monitoring: Implementing network monitoring tools can reveal unauthorized devices and applications accessing your network. Look for unusual traffic patterns or applications not on your approved list.
Cloud Access Security Brokers (CASBs): CASBs are a powerful tool to discover cloud applications being used within your organization, even if they haven’t been officially sanctioned. They provide visibility and control over cloud usage.
Expense Report Analysis: Review expense reports for purchases of software, hardware, or cloud services. This is a surprisingly effective method for uncovering shadow IT.
Employee Surveys & Interviews: Conduct anonymous surveys or informal interviews with employees to understand what tools they’re using to get their work done. Focus on understanding why they’re using those tools.
Web Proxy Logs: Examine your web proxy logs to identify applications and websites employees are accessing.
Regular Audit of SaaS Subscriptions: Many companies end up paying for SaaS licenses that aren’t being used. A regular audit can identify and eliminate these wasted costs.

What do I do once I’ve identified Shadow IT?

Simply shutting down all unauthorized applications isn’t the answer. That will likely frustrate employees and drive them to find even more clandestine solutions. Instead, take a strategic approach:

Strong Evaluate: Determine if the shadow IT solution addresses a legitimate business need. If it does, consider officially adopting it after proper security assessment.
Offer Approved Alternatives: Provide employees with sanctioned tools that meet their needs. If the shadow IT solution isn’t secure or compliant, guide them toward a better option.
Develop a Clear IT Policy: Establish a clear policy outlining approved and prohibited IT tools and services. Communicate this policy to all employees. NRS 598.950 is vital to consider when implementing auto-renewal clauses for any IT services your company offers.
Streamline Procurement: Make it easy for employees to request and obtain approved IT tools and services. A cumbersome procurement process can drive people to find their own solutions.
Ongoing Monitoring & Education: Continuously monitor your network for shadow IT and educate employees about the risks and the importance of following IT policies.

Addressing shadow IT isn’t about policing employees; it’s about proactively managing risk, optimizing spending, and empowering your teams with the tools they need to be productive, securely. By taking a thoughtful, strategic approach, you can turn a potential liability into a competitive advantage. Remember that a robust cybersecurity posture, going beyond just basic IT services, provides a quantifiable business advantage.

To explore related concepts and strategies, check out these resources:

• Can IT consulting help prevent downtime and outages?
• Can I get hacked if I use the cloud?
• Can a roadmap help me prepare for compliance audits?

About Scott Morris and Reno Cyber IT Solutions LLC.

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