Refreshed and updated on July 24, 2025.

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Shadow IT is not what it used to be.

The definition of Shadow IT typically refers to information technology systems, software, and solutions that are used within an organization without explicit organizational approval or oversight from the IT department. But the shadow IT meaning has changed over time as technology deployments have transitioned from on-prem servers and networks to cloud-based infrastructure and SaaS applications. 

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In modern workplaces built on cloud-based software and distributed teams, employees often bypass formal IT and purchasing processes in order to quickly adopt the tools they need to work more efficiently. While this is great for productivity, businesses are increasingly concerned about the security risks posed by the growing estate of unknown and unmanaged software, or shadow IT.

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Understanding the growth of shadow IT means recognizing the underlying factors driving its adoption. Today, businesses must balance agility with security and governance. Traditional IT processes can often be perceived as slow, cumbersome, and overly restrictive. As a result, individual teams or employees may decide to use unauthorized tools or applications to complete tasks more quickly and drive business goals.

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The nature of shadow IT can result in a host of problems. Here are some of the biggest shadow IT security risks that businesses should look out for:

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• Data Security and Breaches: One of the primary concerns with shadow IT is that the systems used don’t always meet the organization’s vendor security standards. This makes them more vulnerable targets for cyberattacks, potentially leading to data breaches.
• Redundancy and Inefficiency: When different departments or teams within an organization adopt unsanctioned tools, it can lead to redundancy and wasted spend because multiple teams end up paying for similar services.
• Loss of IT Governance and Control: Without a unified view of all the tools and solutions in use within an organization, it becomes challenging to manage resources, ensure data integrity, maintain IT compliance and drive a cohesive IT strategy.

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Addressing the challenges posed by shadow IT requires a two-fold approach. Organizations must foster an environment where employees feel they have access to the tools that best meet their needs without excessive time and effort required to gain approval. They should also implement a robust SaaS management platform to detect the use of unsanctioned software and facilitate bringing new tools under IT governance.

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Shadow IT in cybersecurity

Shadow IT in cyber security is a major concern for modern enterprises. Though IT departments strive to maintain strict control over technology assets, the rise of shadow IT has introduced a new set of challenges that impact their overall security posture.

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So what is shadow IT in cyber security? In the cyber security realm, shadow IT refers to any tech system used without the IT department’s oversight. Such unauthorized deployments range from employees using unsanctioned cloud storage solutions to entire departments implementing third-party software applications.

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This ungoverned approach can result in a plethora of risks, including:

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• Data Breaches: Unauthorized tools may not adhere to the organization's security standards, making them prime targets for cyberattacks. Without proper oversight, these tools may lead to vulnerabilities that hackers can exploit.
• Data Leakage: Employees using unauthorized cloud storage or collaboration tools may inadvertently share sensitive information with external parties. An example would be an employee sharing a file containing personal data of clients via a non-secure, public link.
• Malware and Ransomware Attacks: A classic shadow IT example is the downloading of third-party, malware-infused software from unverified sources. Once this malware is introduced into the company's network, it can spread, compromising systems and opening the door to ransomware attacks.

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Given these risks, it's clear that shadow IT presents significant challenges for modern businesses. To get around this Pandora's box of potential threats, organizations should:

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• Promote Awareness: Educate employees about the risks associated with unsanctioned tools and the importance of adhering to approved IT solutions.
• Implement Detection Mechanisms: Use monitoring tools to detect unauthorized software or hardware and establish shadow IT security best practices to address issues.‍
• Conduct Regular Audits: Conduct IT audits to uncover the use of shadow IT and evaluate the associated risks.

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Shadow IT risks and examples

Shadow IT continues to skyrocket alongside the rise of SaaS adoption. With Gartner projecting global SaaS spend to reach over $300B in 2025, many organizations are grappling with how to manage apps that bypass IT oversight. 

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Here are the five biggest risks to watch out for, along with real-world examples of how each one plays out.

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1. Greater Exposure to Data Breaches

When business units and employees procure SaaS applications without IT’s involvement, these tools often go unvetted and unmonitored, which makes them easier targets for attackers. Even small apps can carry big risks when they’re used to handle sensitive data. According to IBM, the average data breach now costs $4.88M, and nearly half of those breaches stem from human error or system glitches. Which means it’s not hackers behind so many breaches.

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Example: An employee signs up for a marketing tool using their corporate email and uploads a client list to test the platform. The app lacks SSO and doesn’t encrypt data at rest. Days later, the service is compromised, exposing customer information without IT ever knowing the tool existed.

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2. Decreased Compliance with Privacy Regulations

For regulated industries, unapproved SaaS tools can be a compliance nightmare. Tools that handle personal data must meet strict standards under laws like GDPR, HIPAA, and CCPA. Shadow IT makes it nearly impossible to verify whether these standards are being met, leaving the business open to fines and legal risk.

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Example: A healthcare team starts using an unvetted SaaS form builder to collect patient intake info. Because it hasn’t gone through a HIPAA compliance review, the company could face fines for improper data handling—even if no breach occurs.

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3. Uncontrolled Spend

Shadow IT is both a big security risk and a pretty significant budget risk, too. As more employees expense apps individually, finance teams lose visibility into what’s being spent and where. This leads to ballooning SaaS budgets, redundant licenses, and missed opportunities to consolidate tools under centralized contracts.

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Example: A team lead buys a project management app on a company card for $600, thinking it’s a one-off. But over the year, dozens of similar purchases pile up across departments, inflating SaaS costs with no central oversight or budgeting.

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4. Duplicated Tools and Redundant Licenses

When different teams independently adopt similar SaaS tools, it results in functional overlap, fragmented workflows, and wasted money. Organizations miss out on bulk pricing and risk creating collaboration silos between teams using incompatible tools.

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Example: One department purchases Zoom, while another signs up for Webex—neither knowing the other already has a video tool. Both teams pay full price, missing out on volume discounts or the opportunity to standardize across the org.

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5. Cost Creep from Auto-Renewals

SaaS tools often come with auto-renew clauses buried in the fine print. When these tools fly under the radar, they get renewed automatically, sometimes for years, without anyone realizing they’re still being billed.

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Example: A designer purchases a design tool on a free trial that auto-renews after 14 days. The renewal notice goes to a long-abandoned inbox, and the license is silently renewed—and paid for—every quarter, despite no one actively using the tool.

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In addition to these tangible dangers, the risk of shadow IT includes reputational damage. Today, where data protection and user privacy are so paramount, even a single data breach linked to shadow IT can tarnish a company's reputation. Recovering from such a blow can be a long and arduous journey.

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Reducing shadow IT

While the spread of shadow IT is understandable in modern, highly distributed organizations, the associated risks can significantly harm an organization's security and operational integrity. However, with proper shadow IT management, businesses can strike a balance between flexibility and control.

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The first step is raising awareness. It’s important to remember that employees aren’t necessarily trying to undermine company security or protocols. More often than not, they’re lured by promises of greater efficiency and user-friendly tools. Businesses should educate staff about the risks associated with shadow IT while communicating strategies for improving processes for selecting, approving, and purchasing tools and technologies.

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Businesses also need to adopt systems for detecting shadow IT. It’s not enough to rely on manual audits or checks. Investing in advanced shadow IT detection makes it easy to discover shadow IT as soon as it is introduced, and orchestrate and automate processes to bring new applications under central IT governance. These sorts of tools can identify unauthorized SaaS, IaaS, PaaS, and other potential shadow IT elements.

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Regular IT audits, where departments are required to list and review their software and hardware usage, can further shed light on any hidden IT assets. Once shadow IT elements are detected, be sure to approach the issue judiciously. A heavy-handed approach, where unauthorized tools are immediately banned or removed, might not always be the best solution. (Read our research on the influence of employees’ emotions on security behaviors.)

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Such actions can stifle innovation, harm employee morale, and even undermine cybersecurity efforts. Instead, IT teams can evaluate the detected tools for security and functionality. If an unsanctioned tool is being widely used because it offers features that approved options don’t, it might be worth considering adding it into the official directory of approved applications after thorough vetting.

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A proactive approach to reduce shadow IT is creating open communication channels between the IT department and other business units. Encouraging employees to express their software and hardware needs, and having the IT team act as a solution provider, can preempt the urge to seek out unauthorized tools.

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Shadow IT solutions

Adequately addressing shadow IT requires a comprehensive approach. Shadow IT solutions allow businesses to more easily navigate this complex landscape, automatically detecting issues and potentially integrating unsanctioned software and hardware into their official IT fold.

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The market is flooded with shadow IT software and tools, which can make the selection process difficult. For a full primer, download TAG Cyber’s guide to making informed decisions on securing your SaaS environment. In summary, here’s what to look for when choosing a shadow IT discovery tool:

• Comprehensive Visibility: Shadow IT software should provide an in-depth and holistic view of the entire IT landscape. This includes not just the official, sanctioned software and hardware, but also any unsanctioned tools and applications employees might be using.
• Real-Time Monitoring: Shadow IT is dynamic. New tools and software can be introduced at any time, and existing ones can be phased out by employees. The best shadow IT tools are capable of continually assessing the IT environment, alerting administrators as soon as an unsanctioned tool is detected.
• Detailed Reporting: Detection is just one part of the process. The solution should also provide comprehensive reporting capabilities, including details on who is using the unsanctioned tool, how frequently it's used, the kind of data it accesses or processes, and more.
• Integration Capabilities: The solution should ideally integrate seamlessly with other security and IT management tools in the organization. This ensures that any detected threats or vulnerabilities can be swiftly addressed using the existing security infrastructure.‍
• Governance Support: Shadow IT governance is about setting rules, policies, and procedures. The software should enable users to quickly and easily set up governance protocols. This might include automating responses when certain types of shadow IT are detected or enforcing company-wide IT policies.

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Nudge Security’s shadow IT solution

Nudge Security can help your business identify shadow IT risks and regain control of your security posture. Nudge Security’s powerful, patented SaaS discovery method is designed to identify all of the cloud and SaaS applications in use on an organization’s network—even those that are hidden from traditional IT monitoring tools. Nudge Security’s platform generates a shadow IT report that helps IT teams identify potential risks and take the appropriate actions to ensure that the company’s sensitive data remains protected.

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Ultimately, Nudge Security provides a highly effective solution for organizations to address and manage the many challenges associated with shadow IT. By providing comprehensive SaaS discovery, governance, and continuous management, Nudge Security allows organizations to effectively manage the risks associated with unsanctioned or unauthorized SaaS applications and ensure that the company’s sensitive data is adequately protected.