How to manage and mitigate the risks
of Shadow IT in your company

Shadow IT—the unsanctioned apps lurking in your corporate portfolio—could be exposing your business to hidden risks. Detect it now, before it leads to an expensive surprise.

It’s easy to overlook shadow IT, which includes unauthorized software and cloud services that employees adopt without IT’s approval. But the longer these tools go unnoticed, the more dangerous they become.

Many employees sign up for these apps without seeking permission, thinking they’ll boost productivity or better serve their needs. While that might work in the short term, it opens the door to serious security risks.

These unapproved tools aren’t monitored for vulnerabilities or checked against company security protocols. As a result, they become prime targets for data breaches and cyberattacks.

In fact, a recent Attack Service Management report found that roughly 70% of organizations have experienced security incidents linked to unauthorized technology. In this article, we’ll look at common examples of shadow IT, the risks involved, and how to manage them effectively.

What is Shadow IT?

Shadow IT happens when employees use unapproved technology—software, devices, or services—without IT’s consent. This often includes SaaS tools they adopt on their own to streamline work.

While these apps might boost productivity in the short term, they come with serious downsides: security gaps, compliance risks, and hidden costs due to lack of IT oversight.

Even with good intentions, employees who turn to outside tools unknowingly expose the company to data breaches and compliance failures by working outside approved security measures.

Next, we’ll look at common examples of shadow IT that often go unnoticed in today’s workplaces.

Common types of Shadow IT

Shadow IT typically falls into three main categories: unauthorized software, unsanctioned cloud services, and personal devices connecting to corporate networks. These are the areas where IT departments often lose visibility, heightening the risk of data breaches and compliance violations.

In addition to these common forms, personal cloud storage and messaging platforms are becoming more widespread as employees seek fast, convenient ways to collaborate and share files. 

With the rise of remote work, it’s even easier for staff to introduce these tools, increasing the chances that sensitive data will end up in unsecured locations beyond IT’s control.

Organizations without strong IT governance are especially vulnerable, as employees turn to these unapproved apps for more flexibility in their workflows. Identifying and managing these shadow IT threats is the first step toward reducing their risks.

Shadow IT risks you cannot ignore

With the surge in cloud-based applications, unapproved software is becoming an increasing concern for organizations of all sizes. In fact, Gartner reported that global SaaS spending topped $195 billion in 2023—a 16.7% increase from the previous year.

This growing reliance on cloud services highlights the urgent need to address the risks posed by unauthorized and unmanaged apps. As more employees turn to these tools for daily tasks, the chances of security vulnerabilities and financial inefficiencies only increase.

We’ve identified five major risks tied to shadow IT that every organization should be aware of. These risks can severely affect data security, compliance, and budget management.

Risk #1: Increased potential for data breaches

One of the most serious risks of shadow IT is the heightened chance of data breaches. When employees use unapproved apps, they often sidestep the security measures established by IT.

In 2023, the average cost of a data breach hit $9.44 million, according to IBM, with many incidents traced back to unvetted, unauthorized software lacking proper security.

These unsanctioned apps can expose sensitive business data—like personally identifiable information (PII) or intellectual property—to hackers. Without safeguards like single sign-on (SSO) or multi-factor authentication (MFA), these tools become easy targets for cyberattacks.

Risk #2: Decreased compliance with data & privacy regulations 

For industries governed by strict data privacy laws like GDPR, HIPAA, or the California Consumer Privacy Act (CCPA), using unapproved software can be a major compliance risk. Employees might unknowingly store sensitive information on unauthorized cloud services, violating regulations and exposing the company to fines that can reach millions.

According to Gartner, compliance breaches tied to unapproved SaaS applications will become more common as businesses increasingly adopt cloud-based tools without IT oversight. 

Regulations like GDPR require full visibility and control over how personal data is collected, stored, and processed. Unauthorized apps jeopardize that control, making it harder for companies to stay compliant and avoid costly penalties

Risk #3: Uncontrolled and unmonitored costs

IDC estimates that 70% of all SaaS purchases are made outside of IT budgets. This shift means more departments and employees are sourcing and expensing software on their own, fueling a rise in unauthorized tech.

The result? Organizations often pay for redundant services or subscriptions that fly under the radar. In companies with more than 50 employees, it’s common for different departments to unknowingly subscribe to the same software, causing unnecessary duplicated costs. 

Without a centralized system for vendor management (B2B SaaS), tracking subscriptions, renewal dates, and actual usage becomes difficult—leading to wasted resources and inflated software budgets.

Risk #4: Increased costs due to duplicated spend

Duplicated spending is a common side effect of unauthorized software use. When different departments or employees buy the same tools independently, the company loses out on volume discounts and the chance to negotiate enterprise-level contracts.

This overlap often happens with tools like communication platforms, project management software, or cloud storage—where employees opt for their preferred solutions rather than sticking to the organization’s approved stack.

Beyond inefficient software spending, this can cause friction between teams using different tools, making collaboration harder and less efficient.

Risk #5: Unplanned automatic renewals 

Many SaaS contracts come with auto-renewal clauses. Without proper oversight, unapproved apps can renew automatically, piling on unexpected costs.

On average, a company faces multiple renewals each month, and when unauthorized tools are in the mix, expenses can quickly get out of hand. If IT isn’t aware of these renewals, it’s impossible to evaluate if the tools are still necessary or relevant to the business.

Once IT leaders grasp the risks of unauthorized tech, they can start tackling the issue. 

Dangerous Shadow IT Examples

Shadow IT can take many forms, from unapproved software to personal devices being used for work tasks. While some cases may seem harmless, others can expose the organization to major security risks, data breaches, and financial fallout.

Here are real-world examples that illustrate the dangers of unauthorized tech and how it can undermine an organization’s security and compliance efforts.

Commonly Vulnerable Shadow IT Apps

Some of the most vulnerable and commonly used unauthorized applications include:

• Productivity Apps: Tools like Slack, Asana, and Trello can expose sensitive communications to security threats when used without IT oversight.
• Cloud Storage: Unapproved services like Google Drive, Dropbox, and OneDrive may bypass security measures, leading to potential data leakage.
• Communication Tools: Platforms such as WhatsApp and personal email accounts often fail to meet corporate security protocols, creating significant gaps.
• Project Management Tools: Applications like Monday.com and Jira can store sensitive project data, which may be inadequately secured outside the approved tech stack.
• Personal Devices: Laptops, smartphones, and tablets accessed without company approval pose serious risks if not managed according to organizational security policies.

While these applications can boost productivity, their unmanaged use presents substantial threats to company operations, as highlighted by the following real-world examples.

Real-World Examples of Shadow IT Risks

The Truecaller Data Breach

• Victims: 47.5 million users
• Issue: A vulnerability in the app allowed cybercriminals to modify user profiles, inserting malicious links that executed malware scripts without user consent.
• Outcome: Personally identifiable information (PII), including names, email addresses, and phone numbers, was sold on the dark web, exposing users to potential phishing attacks and identity theft.

This case underscores the dangers of unsanctioned apps handling sensitive customer information. Without IT vetting, apps like Truecaller can introduce vulnerabilities that lead to severe data breaches.

Docker’s Credential Breach

• Victims: 190,000 developers
• Issue: A data breach allowed hackers to steal user credentials, potentially enabling cybercriminals to alter or compromise the applications built on the platform.
• Outcome: The breach endangers the developers’ data and puts the applications they built at risk, which could have cascading effects on end users.

This breach highlights how unauthorized applications can exist even in development environments where security should be a top priority. Without IT monitoring, development tools like Docker can lead to large-scale vulnerabilities.

Yahoo’s Historic Data Breach

• Victims: 3 billion users
• Issue: A series of data breaches between 2012 and 2016 exposed personal data due to phishing attacks and poor security practices.
• Outcome: Yahoo had to settle for $117.5 million and lost its position as a leading web services provider, showing how vulnerabilities can contribute to long-term financial and reputational damage.

In this case, weak security protocols allowed cybercriminals to exploit shadow IT vulnerabilities, leading to one of the largest data breaches in history.

The five most dangerous types of Shadow IT

Beyond these real-world examples, unapproved software poses risks in several key areas:

• Vulnerability Management. Unapproved apps often lack proper vulnerability scanning and patch management. Without IT oversight, these applications may miss critical security updates, making them prime targets for cybercriminals.
• Identity and Access Management (IAM). Unauthorized software can lead to unmanaged user accounts, including orphaned accounts from former employees. These rogue accounts create opportunities for unauthorized access, heightening the risk of insider threats and external breaches.
• Privileged Access Management (PAM). Noncompliant apps may grant employees privileged access without IT’s knowledge. This can result in excessive permissions for users who don’t need them, increasing the likelihood of security breaches.
• Data Loss and Compliance Violations. Many unsanctioned applications fail to meet corporate security policies or regulatory standards like GDPR and HIPAA. This can lead to mishandling of sensitive data, resulting in fines, data loss, and reputational damage.
• Automatic Renewal Risks. Many unauthorized applications come with auto-renewal features that can go unnoticed, leading to unnecessary costs. Without IT oversight, businesses may continue paying for services that are no longer in use, draining valuable financial resources.

How to detect and prevent Shadow IT

Detecting and managing non-compliant tech is crucial for keeping your company’s data secure and compliant. Unapproved tools can easily infiltrate daily operations, leading to security gaps and financial waste. Here’s how to identify and prevent unauthorized software in your organization.

Regular Software Audits. Start by auditing all software used across the company. This process helps pinpoint any unsanctioned apps employees may have downloaded without IT’s approval. Regular reviews keep the list of tools up to date, enabling IT teams to track all applications in use.

Educate and Involve Employees. Employees often turn to unauthorized applications when they feel company-approved tools don’t meet their needs. Educating staff on the risks of unapproved software is essential. Ensure they understand the consequences of data breaches and compliance violations, and encourage them to consult with IT before adopting new tools. Clear communication can significantly reduce the urge to seek unsanctioned solutions.

Use SaaS Management Tools. B2B SaaS management software provides real-time visibility into all applications used by the company. Tools like Spendbase for Chrome track app usage whenever employees log in with their corporate accounts, instantly flagging unauthorized software. This allows IT teams to manage rogue tech as it arises, preventing risks before they escalate. 

Spendbase also offers insights into app adoption, helping you decide whether to renew or cancel subscriptions based on actual usage data.

By maintaining regular audits, fostering open communication with employees, and leveraging tools like Spendbase for Chrome, you can effectively detect and prevent shadow IT, ensuring your company stays secure and compliant.