Shadow IT is the use of software, hardware, or cloud services inside a company without the knowledge or approval of the central IT department. Employees usually use these unapproved tools to work faster or avoid strict IT rules, but it creates major security gaps, data loss risks, and compliance issues.
Common examples:
Main risks:
This is part of a series of articles about cyber risk management.
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Shadow IT frequently leads to sensitive data being stored or processed outside approved systems. When employees use unsanctioned applications, data may be uploaded to third-party servers with unclear security measures, increasing the risk of data breaches. The IT department lacks visibility into how this information is handled, making it difficult to enforce encryption, access controls, or audit trails.
This lack of oversight can result in confidential business information, customer records, or intellectual property being exposed to unauthorized parties. Even if the intent is benign, such as sharing files for collaboration, the absence of security reviews or compliance checks means that data is more likely to be leaked or intercepted, putting the organization at risk.
Many industries are governed by data protection regulations, such as GDPR, HIPAA, or PCI DSS. Shadow IT can lead to unintentional violations if employees handle regulated data using noncompliant tools. Without IT’s knowledge or approval, these applications may lack required security certifications or fail to meet data handling standards, exposing the organization to legal and financial penalties.
Compliance audits become more challenging when shadow IT is present. Auditors may find gaps in data tracking, retention, and protection processes, making it difficult to prove compliance. This can result in fines, reputational damage, or loss of business if clients or partners lose trust in the organization's ability to protect sensitive information.
Unsanctioned software and services often lack thorough security vetting, increasing the risk of malware infections and cyberattacks. Employees may download or use applications from untrusted sources, introducing malicious code into the corporate network. Attackers exploit shadow IT by disguising malware as productivity tools or leveraging vulnerabilities in unmonitored applications.
Since IT teams are unaware of these tools, they cannot patch vulnerabilities, monitor usage, or apply security updates. This blind spot enables attackers to move laterally within the network or exfiltrate data without detection, increasing the potential damage of an initial compromise. The spread of shadow IT creates a broader attack surface and complicates incident response.
Shadow IT often results in duplicate software purchases, with multiple teams or individuals subscribing to similar tools without coordination. This leads to wasted resources, as the organization pays for overlapping services and licenses that go unused or underused. Without centralized management, software renewals and costs increase, reducing the efficiency of IT spending.
Uncontrolled spending extends beyond direct financial losses. It complicates budgeting and vendor management, making it difficult to negotiate volume discounts or ensure consistent service levels. Shadow IT bypasses procurement processes intended to optimize software investments, undermining the organization’s ability to manage costs and maintain a standardized technology environment.
Related content: Read our guide to ransomware protection
One of the most common forms of shadow IT is the use of unsanctioned SaaS (software as a service) applications. Employees may sign up for cloud-based project management, file sharing, or productivity tools that have not been approved by IT. These tools are attractive because they are easy to adopt and require no installation, but their use can fragment workflows and create data silos.
Without IT oversight, these SaaS applications may not align with organizational security standards or data protection policies. Sensitive company information may be stored on third-party servers without adequate encryption or access controls. Additionally, IT loses the ability to monitor usage, manage licenses, or respond to security incidents, increasing the risk of data leakage or compliance violations.
Example scenario:
A marketing team signs up for an online project management platform using a corporate credit card to collaborate with an agency, without informing IT or reviewing its security controls.
Employees often turn to personal cloud storage services such as Dropbox, Google Drive, or OneDrive to store and share work-related files. While these platforms offer convenience and flexibility, using personal accounts for business data creates security and compliance challenges. Data stored in personal cloud accounts is outside the control of IT, making it difficult to enforce retention policies or monitor access.
This practice can result in sensitive information being mixed with personal files or shared with unauthorized individuals. If an employee leaves the organization, there is no guarantee that business data stored in their personal cloud account will be deleted or transferred securely. The use of personal cloud storage as shadow IT poses ongoing risks to data integrity and confidentiality.
Example scenario:
An employee copies customer documents to a personal Google Drive account to work from home, leaving sensitive files outside the company's managed environment.
Unauthorized messaging and collaboration tools, such as WhatsApp, Slack, or Telegram, are often used by employees to communicate outside official channels. These platforms can support quick discussions and file sharing, but they may lack required security features or fail to comply with company policies. Messages and attachments shared over these apps can evade monitoring and archiving requirements.
The use of such tools as shadow IT can lead to untraceable business communications and lost institutional knowledge. Important decisions or sensitive information may be exchanged without documentation, making it difficult to maintain records or respond to legal discovery requests. This undermines operational transparency and regulatory compliance.
Example scenario:
A sales team shares customer contracts and pricing information through a private WhatsApp group because it is faster than the company's approved collaboration platform.
The rapid growth of AI and generative AI tools, such as ChatGPT, DALL-E, or other LLM-based services, has introduced a new dimension of shadow IT. Employees may use these tools to automate tasks, generate content, or analyze data without IT approval. While they can improve productivity, these tools may process sensitive company information on external servers with unknown security practices.
Unapproved AI tools can also introduce risks related to data privacy, model bias, and intellectual property. Outputs generated by AI may leak confidential information or violate copyright laws. Since IT lacks visibility into how these tools are used or what data they process, organizations face increased risk of data loss, regulatory breaches, and reputational harm.
Example scenario:
A developer pastes proprietary source code into a public AI chatbot to troubleshoot a bug, unintentionally exposing confidential intellectual property.
Monitoring network and application activity is a foundational step in identifying shadow IT. IT teams can deploy network monitoring tools to track outbound traffic and detect connections to unsanctioned cloud services or external applications. By analyzing traffic patterns, organizations can spot anomalies or usage spikes that indicate employees are accessing unauthorized tools.
Reviewing application logs and network flow data helps IT departments build an inventory of all software in use, both sanctioned and unsanctioned. This approach provides the visibility needed to assess risks, enforce policies, and respond to incidents. Continuous monitoring is necessary to keep pace with the changing nature of shadow IT.
Single sign-on (SSO) and identity management solutions can provide insight into shadow IT usage. By analyzing authentication logs and access reports, IT can identify which applications users are logging into, even if those applications are not officially supported. This data can reveal patterns of shadow IT adoption and highlight departments or user groups likely to bypass approved tools.
Using identity data allows organizations to correlate user activity across devices and services. IT teams can use this information to prioritize risk mitigation efforts, tailor security awareness training, and refine access controls. Analyzing SSO and identity data helps uncover hidden application usage and reduce the attack surface created by shadow IT.
Cloud access security brokers (CASBs) and other discovery tools can scan for unsanctioned cloud applications used within the organization. These solutions integrate with network infrastructure to catalog all cloud services accessed by employees, providing IT with a view of approved and unapproved tools. Automated discovery helps identify shadow IT at scale, regardless of how employees access these services.
Once unsanctioned applications are discovered, IT can assess their risk level and determine actions, such as blocking access or bringing the tool under management. Discovery tools often provide risk ratings and compliance information, enabling IT to decide which applications to allow, restrict, or monitor.
Endpoint detection tools and browser activity monitoring offer another layer of visibility into shadow IT. By tracking software installations, browser extensions, and web usage patterns, IT can identify unauthorized applications running on company devices. This approach is useful for detecting desktop-based tools, browser plugins, or applications accessed outside the corporate network.
Monitoring endpoint and browser activity enables IT to respond to new risks by isolating affected devices, removing malicious software, or updating security policies. It also provides context for user behavior, helping IT understand why employees turn to shadow IT and shaping strategies for sanctioned alternatives.
Related content: Read our article about browser hijacking
Organizations can better mitigate the risks associated with shadow IT by implementing the following measures.
Application allowlisting ensures that only approved software and services can run or be accessed within the organization. Instead of trying to block every unauthorized application, IT maintains a list of trusted applications that meet security, compliance, and operational requirements. This reduces the likelihood of employees introducing risky tools or malware into the environment.
Allowlisting should be reviewed and updated to accommodate business needs. A clear request and approval process helps employees obtain access to new tools without bypassing IT. Combined with monitoring, application allowlisting provides control over software usage while maintaining business flexibility.
Key actions:
Security policies should account for the user's role, the device being used, and the sensitivity of the data being accessed. Employees in different departments require different applications, so access controls should reflect business requirements rather than applying identical rules to everyone. This reduces unnecessary restrictions while limiting opportunities for shadow IT.
Device-aware policies add another layer of protection by distinguishing between managed and unmanaged devices. Organizations can restrict access to sensitive applications from personal devices or require additional security controls such as device compliance checks and multi-factor authentication. This approach reduces risk without preventing employees from working efficiently.
Key actions:
The principle of least privilege limits users to the minimum level of access required to perform their jobs. Restricting permissions reduces the impact of shadow IT by preventing unauthorized users from installing software, connecting external services, or accessing sensitive data without approval.
Least-privilege access should be supported by regular permission reviews and role-based access control. As employees change roles or projects, unnecessary privileges should be removed promptly. Keeping permissions aligned with current responsibilities reduces the attack surface and limits the spread of security incidents.
Key actions:
Application control is most effective when integrated with existing security technologies such as endpoint detection and response (EDR), security information and event management (SIEM), identity providers, and cloud access security brokers (CASBs). Integration allows organizations to detect unauthorized applications, correlate security events, and automate responses across systems.
Centralized visibility improves incident response and policy enforcement. Security teams can identify affected users, determine whether sensitive data is at risk, and block or isolate unauthorized applications before they become a larger problem. A unified security ecosystem reduces operational complexity and improves protection against shadow IT.
Key actions:
A Deny by Default security model blocks applications, services, and actions unless they have been explicitly approved. This approach minimizes the attack surface by preventing unknown or unauthorized software from running by default. Rather than reacting after shadow IT appears, organizations establish a controlled environment where new tools must be evaluated before use.
Successful implementation requires clear governance and efficient approval workflows. Employees should have a straightforward process for requesting new applications, and IT should evaluate requests based on security, compliance, and business value. Balancing strict controls with responsive approval processes helps reduce shadow IT while supporting productivity.
Key actions:
Shadow IT persists because unapproved software can run on endpoints before anyone in IT knows it exists. Airlock Digital takes the opposite approach: instead of detecting unsanctioned tools after they execute, it enforces a Deny by Default model in which only trusted applications, scripts, and processes are permitted to run. Purpose-built workflows and flexible tooling make enterprise-scale application allowlisting practical to deploy and maintain, so security and IT teams decide what is trusted, and everything else is blocked.
Key capabilities of Airlock Digital application allowlisting:
Learn more about Airlock Digital application allowlisting and how to gain preventative control over what runs on your endpoints.