Shadow IT Costs — A Force to be Reckoned With in 2014

Spend Matters welcomes another guest post from Jon Winsett of NPI, a spend management consultancy focused on eliminating overspending on IT, telecom, and shipping.

What’s your biggest IT concern in 2014? Security? Spending? BYOD? For many enterprises, the answer is “all of the above” thanks to stealth IT purchases and implementations across the organization. Shadow IT – the unsanctioned, decentralized technology spending that happens in business departments every day – will be a force to be reckoned with in 2014.

CIO Insight’s Tony Kontzer reports on a recent study conducted for McAfee by Stratecast:

“In surveying 300 IT workers and 300 line-of-business workers at enterprises in the United States, United Kingdom, Australia and New Zealand, Stratecast found that more than 80 percent of both groups admit to using SaaS apps at work without IT's approval. Despite the fact that many respondents are aware that they're circumventing IT approval processes and introducing potential risks, they feel that the business value in rogue SaaS apps outweighs any potential concerns.”

Experts estimate that shadow IT spending in the average enterprise business amounts to as much as 20% of the entire IT budget. Thanks to BYOD and the cloud, it is easier than ever for employees and departments to run their application of choice on their corporate and personal devices.

Shadow IT introduces security and compliance issues. It is also a symptom of IT sourcing dysfunction, as noted by Stratecast’s survey findings:

  • 38% of business and 32% of IT workers use non-approved apps because IT approval processes are too slow
  • 24% of those surveyed use non-approved SaaS apps because they are better than the approved alternative
  • 18% of business and 14% of IT workers use these apps because the approved tools don't perform needed functions
  • More than 30% of those surveyed express a "high level of concern" over potential security breaches and data loss

For companies that want to thwart shadow IT spending and risk in 2014, the solution must address the growing disconnect between IT sourcing and departmental users. IT sourcing processes should vet and expedite – not impede – the purchasing process. They should also operate cross-functionally in collaboration between procurement, finance, and the business/department owner (e.g. IT, marketing, logistics). It’s impossible to expect a sourcing or IT professional to understand the nuances of marketing technology, just as it’s impossible for marketing professionals to understand how best to benchmark pricing and terms or negotiate effectively with vendors.

Shadow IT is a growing problem, but one that can be tackled head on by addressing its root causes – many of which lie in sourcing’s jurisdiction.

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