Is your company’s software use out of control? You’re not alone. 

Recently, research determined that 59% of IT professionals find SaaS sprawl challenging, and 65% of all SaaS apps are not approved by IT. 

Managing shadow IT Risk, or Shadow SaaS, is one of the main reasons IT spending is increasing by 6.8% in 2024. It also accounts for 30 to 50 percent of an enterprise's IT spend. 

Clearly, it’s a huge problem in today’s cloud services-driven world. And for your company, you must be aware of these risks to help mitigate them. 

What is Shadow IT in Cybersecurity 

Shadow IT refers to the use of hardware, software, or online services within a company without the approval or knowledge of the IT department. 

What is Shadow SaaS? 

Shadow SaaS is a subset of Shadow IT, which refers to the use of cloud-based software applications (SaaS) within a company without the knowledge of the IT team. 

Shadow SaaS Examples 

Risk Description Example Shadow SaaS Applications
Data Breaches & Leaks Unauthorized access to sensitive company data due to insecure applications or misconfigurations. Unvetted file-sharing apps (e.g., personal cloud storage accounts), messaging apps used for business (e.g., WhatsApp), unsanctioned project management tools (e.g., Trello)
Compliance Violations Using unsanctioned software that doesn't meet industry regulations (e.g., GDPR, HIPAA) or internal policies. Cloud storage used for sensitive data (e.g., medical records on unapproved cloud drive), unapproved HR tools storing employee data
Loss of Visibility & Control Lack of awareness and control over data flows, usage, and potential vulnerabilities within Shadow SaaS applications. Marketing automation tools not integrated with IT systems, unauthorized financial software used for expense tracking

Is Shadow IT a Growing Issue?

Each year, shadow IT security risks are worsening as more SaaS products become available and more people are working remotely. 

In fact, it’s been reported that shadow IT has increased by 59% because of remote work and the use of personal devices. Additionally, API attacks have increased by 20% from January 2023 to January 2024, something that many SaaS products use. 

These issues are a growing problem for businesses of all sizes. Even 16 Wall Street firms were fined a total of $1.1 billion for using shadow IT communication tools. 

What are the Risks of Shadow IT

The risks of shadow IT can be quite significant. These include but are not limited to the following: 

Risk 1: Increased Chances of Data Breaches 

IT leaders no longer retain control over their environment if security teams are unaware of what SaaS applications are being used on their network. 

This, in turn, can lead to more data breaches. These aren’t cheap, either. On average, a data breach can cost upwards of $4.45 million, an increase of 15% over the last 3 years. 

Risk 2: Decreased Compliance with Data & Privacy Regulations

The corporate data your company collects has to be handled according to data and privacy regulations. 

For example, the European Union’s GDPR. This organization regulates hundreds of millions of EU citizens' information to ensure businesses (If they’re doing business in or with an EU citizen) abide by their data and privacy regulations. 

If your company files to comply with these regulations and a data breach occurs from shadow IT, it could be fined millions. 

Risk 3: More Uncontrolled, Unknown Costs 

The security risks of Shadow IT can also present a lot of uncontrolled and unknown costs. For example: 

Cost Category Description Example Scenarios
Unknown Costs Hidden expenses from unauthorized SaaS subscriptions. Free trials converting to paid plans, departmental purchases without approval.
Duplicated Spend Multiple teams unknowingly buying the same or similar tools. Different departments using separate project management or cloud storage solutions.
Surprise Renewals Subscriptions automatically renewing without review. Yearly software charges for short-term projects, forgotten monthly bills.
Productivity Loss Time wasted due to scattered information and compatibility issues. Employees manually transferring data between apps, difficulty collaborating.
Information Loss Critical data trapped in isolated Shadow SaaS apps. Customer data stuck in an unapproved marketing CRM, project files in a discontinued tool.
Reputation Damage Data breaches or security incidents due to insecure apps. Leaked sensitive data from an unapproved file-sharing app, negative media attention.

Risk 4: Higher Risk of External Attacks 

Alongside the above, shadow IT can also increase the risk of external attacks. Every single piece of unauthorized tech that your team uses can potentially get hacked. 

As early as 2018, Gartner predicted that by 2020, one-third of successful cyberattacks would be on tools located on shadow IT resources. We predict that in 2025 and beyond, this will be much higher. 

Risk 5: Increased IT Workload 

As mentioned earlier, 30 to 50 percent of an enterprise's IT funding is going towards mitigating Shadow IT risks. 

This really goes to show how big of a problem Shadow IT is. And if it’s taking up a lot of budget, it’s probably taking up a lot of your time also. 

With a proper strategy and system in place, however, you can reduce the time spent dealing with Shadow IT-related problems. 

Risk Management of Shadow IT with Trelica 

After reading the above, you should know the negative effects of Shadow IT on cybersecurity. 

Without question, if not dealt with correctly, it can cause a tone of problems regarding time, money, and a company’s reputation. 

But you don’t need to continue with this risk. You can use Trelica, an all-in-one tool that helps you gain complete visibility into your SaaS landscape, identifying and eliminating unnecessary expenses, mitigating security gaps, and streamlining SaaS operations. 

Don’t wait until it’s too late. Strategize now for a secure future. To learn more about how Trelica can help, see this page. 

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