What is Shadow IT? Examples, Risks, and Solutions

Shadow IT is defined as any unauthorized applications, hardware, or software implemented and managed by departments other than IT. With the rise of cloud-based SaaS solutions, shadow IT use has exploded — and could be up to ten times higher than known IT usage.

Shadow IT often seems innocuous. But it can leave the enterprise open to significant risk. From regulatory noncompliance to data exfiltration, organizations have good reason to want to prevent shadow IT in their digital workplaces.

Why Employees Use Shadow IT

Most employees don’t set out to break rules — they simply want to get their work done efficiently. Shadow IT usually arises when approved tools feel restrictive or outdated.

Common causes include:

• Frustration with slow or complex internal systems
• Gaps in existing software capabilities
• The need to collaborate quickly with external partners
• Personal familiarity with a preferred platform
• Delays in IT approval processes

Example: An employee might use personal Gmail to send large attachments or Slack for cross-department communication if corporate tools feel cumbersome.

Common Examples of Shadow IT

Shadow IT can take many forms, ranging from cloud-based applications to personal devices that employees use for convenience. Some of the most common examples include popular collaboration and productivity platforms such as Slack, Trello, and Asana, which are often used by teams to manage projects outside of approved systems. File-sharing and communication tools like Gmail, Google Drive, and Dropbox are also frequent culprits, as employees rely on them to store or exchange information quickly. Messaging apps such as WhatsApp and Signal, along with generative AI tools used for writing, analysis, or coding, further contribute to the shadow IT landscape. Even personal Microsoft 365 accounts can fall into this category when used to handle company data.

Shadow IT isn’t limited to software. It also includes physical devices and hardware used without approval, such as personal laptops, tablets, and smartphones that connect to corporate networks or email accounts. External storage devices, including USB drives and portable hard disks, are particularly risky because they can easily transfer sensitive information outside the organization’s controlled environment. Each of these examples bypasses IT oversight, creating blind spots that make it difficult for security teams to maintain visibility and protect company data effectively.

The Rise of Mirror IT

While shadow IT involves unapproved tools, mirror IT happens inside approved software — when employees use personal accounts within sanctioned apps.

Examples:

• Using a personal Google Drive or Gmail to store work files
• Uploading sensitive documents to a personal Slack channel
• Sharing client data through a private OneDrive account

Mirror IT blurs accountability. Even though the tool itself is approved, data moves outside the organization’s monitored environment.

Detection requires:

• Visibility across both corporate and personal account usage
• Monitoring that considers file context, user intent, and data sensitivity, not just the destination

Shadow IT Security Risks 

If the purpose of shadow IT is to help employees to work better, what’s the problem? Especially if workers are using programs designed for enterprise use. It’s tempting to dismiss shadow IT as an inevitable part of doing business, and consider its risks overinflated. 

But without oversight from legal, compliance and IT officers, shadow IT assets can leave the organization vulnerable to data exfiltration, regulatory noncompliance and more.

Security gaps and data exfiltration

Perhaps the biggest risk posed by shadow IT is to your company’s data. When employees use unauthorized programs to store and share proprietary information, the organization loses control over where that data ends up — or who ends up seeing it. That’s a big problem when 83% of IT professionals report their coworkers store company information on unsanctioned platforms (G2).

Shadow IT case study: The increase in remote work since the onset of the pandemic has gone hand-in-hand with a rise in data leaks. Incidents are up 63%, with exposure from shadow IT assets increasing 40% in 2021 alone. More than half of all cyber attacks now stem from shadow IT.

Regulatory noncompliance

Also of significant concern to modern enterprises, shadow IT is often used, intentionally or not, to circumvent legal and regulatory compliance measures. Staff members storing or sharing PII/PCI/PHI via private channels won't pass any audits.

Companies that must abide by rules and regulations such as HIPAA, FINRA, or CMMC 2.0 are particularly vulnerable, but any organization can find itself in hot water due to shadow IT. If you don’t have full oversight of where employees are creating or storing data, you can’t exercise compliance with legislation such as GDPR or CCPA.

Shadow IT case study: The banking industry was hit with a series of wide-reaching investigations — and record-breaking fines — after the SEC and other regulatory authorities began investigating the use of messaging apps for business purposes. The SEC has long made it clear that the Securities and Exchange Act retention rules apply toward any form of modern communication, including collaboration and messaging apps. Institutions which fail to wrap their arms around all the ways their employees are communicating leave themselves open to massive risk as a result.

System inefficiencies

One of the goals of an IT solutions stack is to integrate programs so employees can work efficiently. But if one team switches to a different application, that can create problems when working with others. Variations in user access and edit permissions between programs can create unnecessary barriers that prevent different departments from collaborating effectively.

A wider-reaching impact of shadow IT is to bake inefficiencies into the wider tech stack. Without full oversight, IT departments cannot accurately assess capacity and can’t plan for performance and security. Any analysis of the stack is incomplete and therefore inaccurate. And reports on business functions themselves might also be incomplete. This loss of control can lead to major decisions being made based on incorrect data.

Wasted expenditure

The price of software is increasing. With more and more businesses locked into SaaS contracts in place of one-time purchase licenses, IT departments need to manage their costs more carefully than ever. Yet over a third of all software expenditure is wasted, costing U.S. businesses more than $30 billion annually.

Shadow IT impacts expenditure in several ways. First, most products begin to infiltrate the organization through free personal accounts. But to switch on a popular shadow IT program for business use typically requires enterprise licenses that come at considerable expense.

Existing software can also go unused if employees prefer shadow IT solutions, contributing to the $30 billion wasted each year. And shadow IT programs don’t always integrate well with the company’s existing IT infrastructure. This creates additional costs for security and compatibility.

Benefits of Shadow IT

Despite its risks, shadow IT can offer several benefits when approached with awareness and proper governance.

1. Increases Productivity and Flexibility

Employees often use unauthorized applications to streamline tasks, especially when official tools are too rigid or limited. Adopting faster or more intuitive platforms like Google Drive, teams can collaborate more efficiently and maintain momentum in their workflows.

2. Encourages Innovation and Agility

Shadow IT allows teams to test and adopt new cloud services without waiting on traditional approval cycles. This exposure to emerging tools can help organizations stay competitive and uncover better ways to solve problems.

3. Surfaces Unmet Needs

The rise of unsanctioned applications often highlights gaps in the existing corporate IT infrastructure. A security team monitoring shadow IT trends can better understand what users need—and update the approved tech stack accordingly.

Why Is Shadow It a Big Deal, and Can It Really Cause Harm?

Your employees want to do their jobs effectively. Collaboration tools can accelerate communication and break down internal silos that otherwise slow work down. As such, the implementation of shadow IT is rarely malicious. However, it can still do serious harm to the company and its employees by opening the door to data loss and regulatory noncompliance.

• HIPAA fines in 2020-21 reached all-time highs, and to date HIPAA fines have cost noncompliant practitioners more than $133 million
• PCI non-compliance can run from $10k to $100k USD per month, depending on the circumstances
• GDPR non-compliance can range up to 4% of a company’s global revenue or €20 million, whichever is greater

These regulations exist to protect consumers, and employees may inadvertently harm them or their coworkers by using unapproved software.

How to Control Shadow It in the Workplace

Getting ahead of shadow IT usage is critical for IT leaders looking to secure business data and maximize their budgets. The most important step is to audit the existing tech stack to understand where shadow IT already exists within the business infrastructure. Speaking to different departments across the company is fundamental, as each field uses unique software solutions.

Consider how to word questions about shadow IT usage to fully uncover a true picture. Four in five employees admit to using unauthorized IT applications for work purposes (G2). Some may not even consider the tools they use to be shadow IT or understand the risks they have introduced. Focus first on discovery, and then on reeducation to control shadow IT effectively.

How Mimecast Helps Organizations Manage Shadow It

Addressing shadow IT can be intimidating. Where do you even start, when there could be small leaks from hundreds of different applications? Traditional data protection software and data policies only cover what you think is at risk. Code42 offers a solution that detects data movement to both sanctioned and unsanctioned applications.

Mimecast Incydr is an intelligent data protection solution that identifies all risky data movement – not just the exfiltrations that security has classified – helping you see and stop potential data leaks from employees. Incydr automatically detects data movement to untrusted cloud apps, blocks unacceptable exfiltrations, and tailors security’s response based on the offender and the offense. Employees who make security mistakes are automatically sent educational training to correct user behavior and reduce shadow IT risk over time.