For many of our customers, gaining control of (or at least management of) Shadow IT through better IT Cost Transparency has shown business leaders the real “full” cost of Shadow IT and IT leaders the need to better align services to business needs.

Before cloud computing, Shadow IT (tech services that are purchased or developed outside of IT’s control or organization) was so small and relegated to the niche that IT leaders didn’t see it as a real problem.  The practice was even considered by some as an important source of innovation, turning into prototypes for future approved IT solutions. (…as it still should be.)  But the drawbacks (lack of central control, documentation, security, the eventual migration of support costs to IT and the lack of alignment to IT’s strategic plan), made Shadow IT a painful thorn in the side of IT’s leaders.

However, as more companies become accustomed to purchasing technology through the Cloud, the problem of Shadow IT is becoming a lot worse – with the potential to grow well beyond Forrester’s current estimate of 15% in some organizations.

So, what’s wrong with that? If the demand for IT Services is not being met by internal IT, shouldn’t the business units be able to “innovate” and look elsewhere to get what they need?  We all know that budget requests in IT are notoriously riddled with complexity, so why not opt for the simpler and faster route of making smaller requests that can be more easily approved at the department level?  Couple that with the immediacy of the Cloud, and anyone can have self-service access to software, business solutions, infrastructure, and other computing services they need. They can do it faster and more easily than any other source, including their own IT department. IT leaders should see this as a wakeup call to improve their ability to deliver IT Services, particularly if that means embracing Cloud solutions.

The problem with this approach is that all the issues stated earlier still hold true: The list price of Cloud services is not the “true” cost of maintaining that service.  There are security, support, documentation, fit with enterprise architecture and best-price negotiating considerations. IT has a “strategic plan” that takes into account enterprise-wide business capabilities, optimizing ROI and resource planning that Shadow IT completely ignores. And, in the end, Shadow IT usually ends up creeping into the IT organization for support and maintenance, so it should go through proper budgeting and planning processes.  

However, IT leaders should still consider Shadow IT as a wakeup call to improving IT Service delivery and focus on these services that are so critically important to the business.  If business units are taking all the time and energy to pursue tech solutions outside IT, they must be pretty important and if IT wants to be “aligned with the business” they ought to treat these services requests as high priorities.

By bringing Shadow IT into the fold of IT Cost Transparency—tracking the total cost of IT across the organization, including the granular cost drivers rolled up to the services they support and reporting these costs to all business and IT stakeholders—IT can both track the use of Shadow IT without “owning” it and improve IT-Business alignment. This gives the business the ability to track how Shadow IT effects the overall cost of IT services, report how it still creates a burden on central IT for support, maintenance and infrastructure (networks) and enable IT with a early warning system to adjust their service strategy to meet critical business needs.

IT can achieve greater efficiencies of scale by gaining visibility into these activities.  For example, by breaking down costs by service IT can begin developing chargeback systems that reflect the actual cost of what it does and the services it supports to the business. In the case of the Cloud-driven Shadow IT, IT should embrace the Cloud and make it part of their strategic plan where it provides a better delivery mechanism than internal services, and begin managing Cloud contracts with vendors instead of ending up with a mashup of disparate contracts and no single point of control or management.

There’s no time like the present to get serious about managing Shadow IT.  If Cloud adoption takes off like analysts and pundits predict it will, then those investments in Shadow IT need to be included in IT Cost Transparency before it becomes a multi-headed monster too big overcome.