How to Discover and Mitigate Shadow IT in Your SaaS Stack

Shadow IT, the use of unauthorized or unapproved software and applications within an organization has become a significant challenge in the SaaS-dominated landscape. While employees may turn to these tools to increase productivity, shadow IT introduces risks such as data breaches, compliance violations, and increased costs.

In this comprehensive guide, we’ll dive into what shadow IT is, why it occurs, and practical steps to discover and mitigate its impact on your SaaS stack.

What Is Shadow IT?

Shadow IT refers to the use of software, tools, or applications that are not officially approved or managed by an organization’s IT department. In the SaaS era, shadow IT often takes the form of employees signing up for cloud-based tools, free trials, or personal accounts on platforms like Google Drive, Slack, or Trello.

While shadow IT can sometimes address immediate business needs, it creates significant risks:

Security Vulnerabilities: Unauthorized tools may lack robust security measures, exposing sensitive company data to breaches.
Compliance Risks: Shadow IT can lead to violations of industry regulations such as GDPR, HIPAA, or SOX.
Financial Inefficiencies: Unmonitored SaaS subscriptions can duplicate functionality, leading to unnecessary costs.

Why Shadow IT Happens

Shadow IT often stems from employees trying to solve problems or improve workflows. Here are some common reasons why it occurs:

Lack of Suitable Tools: Employees may feel that the officially approved software doesn’t meet their needs.
Ease of Access: Many SaaS tools offer free trials or freemium models, making it easy for employees to adopt them without IT approval.
Delayed IT Approvals: Lengthy approval processes can lead employees to bypass IT to meet deadlines.
Remote Work Culture: The rise of remote work has made it easier for employees to explore and use SaaS tools independently.

The Risks of Shadow IT

While shadow IT might seem harmless, it poses several risks to organizations:

1. Security Risks

Shadow IT applications often lack the security protocols required by enterprise software. This can lead to:

Data breaches and leaks.
Compromised credentials if employees reuse passwords across multiple platforms.

2. Compliance Violations

Industries governed by strict regulations (e.g., healthcare, finance) require businesses to ensure all tools meet compliance standards. Shadow IT bypasses these checks, exposing organizations to legal penalties.

Explore compliance strategies in SaaS Compliance Checklist: Key Steps for Every Business.

3. Cost Inefficiencies

Shadow IT can lead to duplicate subscriptions, unoptimized licensing, and difficulty in negotiating vendor contracts due to fragmented usage.

Read more about optimizing SaaS costs in 7 Tips to Optimize SaaS Costs for Maximum ROI.

How to Discover Shadow IT in Your Organization

Discovering shadow IT is the first step to mitigating its risks. Here are effective strategies:

1. Conduct SaaS Discovery Audits

A SaaS discovery audit involves analyzing your organization’s network traffic to identify all active applications. Many tools and platforms can assist with this, such as:

SaaS Management Platforms (SMPs): Tools like BetterCloud and Zylo automatically detect SaaS usage across your organization.
Cloud Access Security Brokers (CASBs): CASBs like Netskope provide visibility into cloud app usage and enforce security policies.

2. Analyze Expense Reports

Employees often expense shadow IT tools on their company credit cards. Reviewing expense reports can help identify unauthorized subscriptions.

3. Survey Employees

Sometimes, the simplest approach is to ask employees directly about the tools they use. Conduct anonymous surveys to identify popular but unapproved applications.

4. Leverage Endpoint Monitoring

Endpoint management solutions like Intune or Jamf can monitor installed applications on company devices, helping you spot unapproved tools.

Learn more about discovery processes in How to Conduct a SaaS Audit in 6 Easy Steps.

How to Mitigate Shadow IT

Once shadow IT has been identified, it’s essential to mitigate its risks while fostering a culture of collaboration between employees and IT. Here’s how:

1. Create a SaaS Policy Framework

A well-defined SaaS policy outlines the rules and processes for procuring and using software in your organization. Key elements include:

Guidelines for requesting new tools.
Approved vendors and applications.
Security and compliance requirements.

For detailed guidance, see How to Build a SaaS Policy That Works for Your Organization.

2. Improve IT Procurement Processes

Long approval times for new tools often drive employees to bypass IT. Streamline your procurement process by:

Reducing the time it takes to review and approve new tools.
Offering a centralized catalog of pre-approved applications.
Setting up a fast-track process for urgent requests.

3. Educate Employees

Shadow IT often arises from a lack of awareness about the risks involved. Conduct regular training sessions to educate employees on:

The risks of using unauthorized tools.
The benefits of adhering to IT policies.
How to request new tools through the proper channels.

4. Leverage Automation

Automating key aspects of SaaS management can help you mitigate shadow IT without overwhelming your IT team. Examples include:

Automating SaaS Discovery: Use tools like Torii or SaaS management platforms to continuously monitor SaaS usage.
Automating User Provisioning: Implement IAM systems to manage user access automatically.

Explore automation strategies in How SaaS Automation Can Streamline Your Business Processes.

5. Establish Regular Audits

Periodic audits ensure that shadow IT doesn’t resurface. Use these audits to:

Identify new unauthorized tools.
Evaluate the usage of approved SaaS applications.
Adjust your SaaS policy based on employee feedback and changing needs.

The Role of SaaS Management Platforms in Managing Shadow IT

SaaS management platforms (SMPs) play a critical role in discovering and managing shadow IT. Key features of these tools include:

Real-Time Monitoring: Track SaaS usage across your organization in real time.
Automated Alerts: Receive notifications about new, unapproved tools being used.
Integration Capabilities: Integrate with financial systems to identify SaaS-related expenses.

Check out our recommendations for the top SMPs in Best SaaS Management Platforms for 2024.

Real-World Examples of Shadow IT Risks

1. Data Breach in Healthcare

A healthcare organization experienced a data breach when an employee used a personal Google Drive account to store patient records. The breach resulted in a HIPAA violation and significant financial penalties.

2. Compliance Violation in Finance

A finance company was fined for using an unapproved SaaS tool that did not comply with GDPR regulations. The incident highlighted the risks of shadow IT in regulated industries.

These examples underscore the importance of proactively discovering and mitigating shadow IT.

Balancing Security with Innovation

While shadow IT poses risks, it’s also a sign of innovation within your organization. Employees often turn to unauthorized tools because they feel their needs aren’t being met. To strike a balance:

Foster Open Communication: Encourage employees to share their tool preferences and suggestions with the IT team.
Embrace an Experimentation Mindset: Allow employees to test new tools within a controlled environment, ensuring IT oversight.
Continuously Improve IT Services: Regularly review your approved tools to ensure they meet employee needs.

Conclusion

Shadow IT is a challenge that every modern organization must address. By understanding its causes and implementing robust discovery and mitigation strategies, you can minimize risks while fostering a culture of innovation and collaboration.

Take the first step in managing your SaaS ecosystem effectively by conducting a comprehensive audit of your SaaS stack. For a detailed guide, visit How to Conduct a SaaS Audit in 6 Easy Steps.

Ready to transform your SaaS management strategy? Explore our complete guide: Mastering SaaS Management: A Comprehensive Guide to Success.