What Are the Risks of Shadow IT?

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min read time
March 1, 2023
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SaaS apps' ease of purchase and a lack of application visibility have made shadow IT more prevalent in today’s organizations. Moreover, users' active involvement in shadow IT is influenced by their lack of understanding of the associated risks.

It poses a significant security threat to your SaaS stack as they are not subject to the same risk assessment and vetting process as approved software.

If your SaaS ecosystem is plagued by shadow IT, then this article is just what you need. Learn about shadow IT risks and clever ways to mitigate them in this quick read.

Let us talk about this in detail.

What is Shadow IT?

Shadow IT refers to the use of software and applications by employees or departments within an organization without the knowledge or approval of the IT department.

This can create security risks and issues since these applications often do not go through the same vetting and security processes as the organization's approved software.

One of the most common occurrences of shadow IT is the use of cloud services. Employees may use cloud-based storage or collaboration tools like Google Drive, Dropbox, or Slack without the IT department's knowledge or approval.

They may also use cloud-based applications or software as a service (SaaS) solutions such as Salesforce, HubSpot, or Trello. While cloud-based tools and services can offer many benefits for businesses, using them without proper vetting and security measures can create significant risks for organizations.

Six common shadow IT risks

1. Lack of control on applications

There is an urban folklore, “ You cannot protect what you can’t see.” This rings true for shadow IT as it pertains to the apps outside the IT team's purview.

As a result, teams cannot effectively track and control shadow IT. This means there's a greater chance of security issues, errors, and non-compliance within the system.

2. Loss of sensitive customer and business data

Another issue associated with shadow IT is that information or data saved in personal accounts may not be available to other company members. If an employee quits or gets fired, they might still retain access to those resources saved in the cloud while the business loses them.

It's also essential to note that shadow IT is not bound by corporate rules and regulations. As a result, the data saved on a cloud server may not be secured, archived, or encrypted according to company policies.

3. Increased expenses due to unverified spending

Shadow IT can increase SaaS expenses for an organization due to unverified spending on unauthorized software, applications, and services. Employees may subscribe to cloud services or purchase software without approval from the IT department or the organization's budgetary department.

Without proper oversight, unverified spending on shadow IT can result in duplicate expenses across departments, conflicting licenses and subscriptions, and a lack of centralized management of IT resources.

Additionally, IT teams may face difficulties in tracking and managing shadow IT expenses, resulting in difficulties reconciling invoices and managing budgets effectively.

Shadow IT risks

4. Security breaches

Dealing with cybersecurity breaches is arguably the most pressing IT operations challenge today. As shadow IT practices may involve using unauthorized third-party vendor apps, this can lead to security vulnerabilities such as firewall breaches.

Moreover, internal shadow IT activities may compromise existing security software, such as virus detection, or security equipment, like intrusion detection systems.

5. Non-compliance with industry regulations

Organizations are subjected to security audits and regulations to ensure that the software is capable of securing sensitive customer data. Shadow IT practices may inadvertently lead to issues like security breaches, system failures, and data thefts.

These issues will lead to non-compliance with security standards and have a detrimental impact on the organizations. Most third-party vendors falsify compliance certifications, and shadow IT will open the doors for those vulnerable vendors to exist in your system, leading to security risks and non-compliance.

6. Automated renewals

Automated renewals of unauthorized subscriptions and services in shadow IT will create challenges for the finance team.

It’ll lead to continued billing of unauthorized services, making it difficult to track costs effectively as there will be no visibility, leading to increased SaaS expenses and related security risks.

How to Mitigate the Risks of Shadow IT?

Here are a few tips that can help mitigate the risks of shadow IT;

100% visibility and control

To mitigate the risks of shadow IT, enterprises must have complete visibility of the apps purchased and used by the employees. Implement a SaaS management platform that ensures a centralized system for purchasing and provisioning IT resources. 

An image of CloudEagle's dashboard showing apps

This will help ensure complete application visibility of the SaaS stack and ensure all resources are acquired through approved channels. Thus reducing the likelihood of unauthorized purchases. 

Improve compliance

Businesses must establish clear policies, procedures, and guidelines for IT practices and ensure adherence to regulatory needs. This can be achieved by implementing compliance frameworks and SaaS management software which provide a framework for managing security risks. 

Organizations should also regularly educate and train their employees on IT policies and guidelines to ensure they know the risks associated with shadow IT and the consequences of non-compliance.

Create a centralized procurement process 

Businesses should build a centralized procurement process to ensure all purchases are authorized and comply with organizational policies. 

An image showing CloudEagle's procurement workflows

This can be achieved by implementing a SaaS procurement platform that streamlines the process for purchasing IT applications, including who is authorized to purchase them, the process for approving purchases, and how purchases are tracked.

Perform regular audits 

Organizations should conduct regular audits to identify any unauthorized IT activities and take suitable actions to combat the risks. This can be achieved through the use of SaaS management software which provides governance and management of enterprise IT as well as audits.

These audits will reveal the duplicate applications existing in your SaaS ecosystem due to shadow IT, so you can take counteractive measures to eliminate such applications. 

An image of CloudEagle dashboard showing duplicate applications

A SaaS spend management platform can help you audit your spending on SaaS applications. You can use the platform to detect anomalies within your stack, as it integrates with your financial systems. 

You can use a SaaS spend management platform to identify paid and free tools and optimize them to keep your tech stack secure. 

Communicate with the team and consider their needs

Organizations should communicate with their employees and consider their needs to ensure they have access to the tools and resources needed to perform their jobs effectively while adhering to organizational IT policies and guidelines. 

This can be achieved through regular IT policy training and by providing employees with the tools and resources to perform their jobs effectively. Additionally, organizations should establish a process for employees to request new tools and resources that are not currently available, which IT administrators can review and approve.

Eliminating the risks of Shadow IT with CloudEagle  

CloudEagle is a SaaS management platform that can help organizations eliminate the dangers of shadow IT as it is equipped with features like,

Application discovery and visibility: CloudEagle provides a comprehensive view of an organization's cloud environment, including all SaaS applications, which helps IT teams identify any unauthorized applications in use.

Cost optimization: CloudEagle's cost optimization features can help organizations save money on their cloud spend by identifying and eliminating duplicate apps, and unused or underutilized SaaS applications.

Centralized procurement: CloudEagle offers a centralized procurement process that allows IT teams to manage all SaaS application purchases in one place, ensuring that all applications are authorized, compliant, and cost-effective.

An image of CloudEagle's dashboard

CloudEagle also provides a user-friendly interface that allows IT teams to easily manage their SaaS stack. It can integrate with popular SaaS applications, SSO, financials, and HRIS systems of businesses, enabling the IT teams to gain better visibility into their entire SaaS ecosystem.

Overall, CloudEagle can help IT teams fight to shadow IT risks, optimize their SaaS stack, and ensure that all SaaS applications are authorized, compliant, and secured.


Shadow IT poses a significant challenge for organizations, and taking steps to mitigate its risks is imperative.

Organizations can reduce shadow IT risks by implementing the above-mentioned measures, ensuring 100% application visibility, improving compliance, centralizing procurement processes, creating a transparent culture, and communicating with the team.

Cloud management softwares like CloudEagle can assist IT teams in managing SaaS applications and optimizing their SaaS stack while mitigating Shadow IT risks. Organizations can protect their data, systems, and reputation by proactively addressing Shadow IT.

Are you already aware of the risks of shadow IT and looking for a way to minimize it?

Frequently Asked Questions

1. What are some common types of shadow IT, and why do employees turn to them?

Some common types of shadow IT include cloud storage services, communication apps, project management tools, and file-sharing platforms. Employees turn to shadow IT because they may find that the tools provided by their organization are inadequate for their needs or because they prefer using a particular tool that the IT department does not authorize.

2. What are the risks associated with using unapproved software?

Using unauthorized software enhances the chances of external entities gaining access to sensitive data. Such software is often managed without proper updates, patches, configurations, and security protocols. Consequently, IT managers may be unaware of the software or have the necessary tools to secure their data and information.

3. What is the biggest problem of Shadow IT?

The security risks associated with shadow IT are significant. One of the most significant dangers is the potential for data leaks, which can result in substantial financial losses for a company. The cost of recovering lost data can also be high.

Written by
Vibhu Jain
Product Manager, CloudEagle
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