Shadow IT spending to increase 20 per cent this year

Companies are spending millions on shadow IT, and the costs are expected to escalate next year, according to a survey released last week.

Canopy, the cloud service business operated by large systems integrator Atos, surveyed 75 CIOs, 75 CFOs and 50 business decision makers in the UK, German, France and the US, along with another 150 people in the Netherlands. Half of the business decision makers – the people in non-IT departments responsible for allocating budget – said that 5-15 per cent of their departmental budget for IT was being spent on shadow IT (IT products and services procured from another supplier instead of a company’s own IT department). That amounts to €8.6 million ($11.8 million) per company, on average.

Although the survey didn’t cover Canada, US companies were the worst offenders in terms of unauthorised IT spend, shelling out an average of $35 million per firm per year on shadow IT.

The amount spent on shadow IT will grow 20 per cent this year, according to those surveyed.

What’s causing departments to move to this unauthorised IT spend? The move to mobility is a big driver, said 3 per cent of respondents. Another common factor is a lack of responsiveness on the part of IT departments. An equal number of people said that IT departments’ inability to help with short-term pilot projects by quickly setting up hosted services were driving them into the arms of third party operators.

The kinds of services being purchased online are indicative of where departments are feeling the lack. Strangely, these aren’t innovative productivity-style apps, but more in infrastructural services needed to get the job done. 44 per cent of respondents said that they had invested in third-party data backup services, for example, while archiving services drew 33 per cent away from their own IT department.

The implication here is that the IT department must become more agile to tempt customers back. If an IT department goes above and beyond traditional service models, in which requisitioning a new server or a bump in storage capacity can take weeks, then they will be able to woo customers with fast provisioning.

While private clouds under the control of IT departments may be able to provide infrastructure as a service (IaaS), though, in the long term they may need to go beyond this. In time, it may be useful to offer the same kinds of application-level functionality that employees have been used to sourcing from elsewhere. Online collaborative applications may be a good example.

One way to do this is the try and replicate the software by buying it in from third parties (if your company offers hosted Sharepoint, with easy on-ramping for departments, there’ll be less need to seek out a hosted version online).

The other method may be to simply partner with third party cloud service providers for business-ready versions of their service, offering them as part of a quickly executed IT service catalogue that makes it easier for departmental managers to source things in-house.

Perhaps the first task for many CIOs, though, will be to increase the visibility of shadow IT in their organisation. Visibility is a key problem; business departments may not necessarily tell IT operations when they’re spending money elsewhere. A Cloud Security Association survey conducted in January found that 72 per cent of executives and IT managers didn’t know how many shadow IT applications were running in their departments.

Before making any grand plans to make more responsive to departmental managers, then, it might behoove CIOs to have a frank conversation with business managers and find out just what kind of problem they’re dealing with.

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Jim Love, Chief Content Officer, IT World Canada

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Danny Bradbury
Danny Bradbury
Danny Bradbury is a technology journalist with over 20 years' experience writing about security, software development, and networking.

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