071301: Is Shadow IT a good thing?

Shadow IT, or IT services being procured and managed through departments other than the business’ internal IT department, are an endless struggle between the two parties, but is it a good thing?

No other department within a business has a greater consistent influence on the capabilities of its peers in both the front and back offices than the IT department.  This department is responsible for providing resources and solutions to automate, facilitate and report on every process within a business, for each and every function.

I believe that one of the causes of shadow IT is the fact there is often a disconnect between how individual departments are measured for success.  It is common to find an antiquated standard for how the individual departments within the front and back offices are measured versus what drives success for the combined business.

Back office functions including IT:

  • Generally measured on a reduced total cost to the business.
  • Focus on improving services and scope without increasing costs per headcount/transaction.
  • Predominantly long term spending commitments.

Front office functions:

  • Generally measured on organic and inorganic growth.
  • Focus on increasing new products, R&D, product profit and growth.
  • Predominantly short term to immediate spending habits with very limited long term spending commitments outside of headcount.

Because of these competing spending strategies within a business, front office functions traditionally have more abilities and influences to obtain short term “spend to grow” commitments than the back office departments that try to “spend to save” with long term commitments, especially when competing for the same funds.  Unfortunately, the short term spend and flexibility required to deliver a “spend to grow” strategy directly conflicts with the current long term commitments and standardisation necessary to deliver an IT solution.  Since department heads will do whatever is necessary for them to meet their commitments or targets, when their needs conflict with that of another department or if IT is hampered by budget constraints, these leaders search out and fall prey to suppliers offering immediate solutions to meet their needs.

It is unusual to restrict or measure an individual department’s spending ability for items such as IT, but quite common to regularly measure and restrict their total spend or cap their spending limits.  In many organisations, unallocated costs such as shadow IT are “hidden” in a department’s miscellaneous bucket.  These buckets can be spread across the entire organisation but when combined may rival the total IT spend of that business.  Identifying and monitoring these costs is very difficult without a conscious effort, and therefore the total cost and impact that shadow IT functions pose within a business are not immediately evident.  With the advent of cloud and contract services, more and more department heads find it easier to procure and obtain IT services from third party suppliers than from their own business.

I think that shadow IT departments can be used to initially point out failures in the IT department’s ability to meet its customer’s needs.  Whether that is due to its inability to deliver based on budget constraints or by not understanding the priority of their customers’ needs well enough in relation to other commitments.  Once shadow IT departments are established, it can be very complex and costly to adapt them to the corporate standards and bring them into the existing support model of today.

While I do see the merit for using shadow IT at times, I do not think that allowing it to continue is a good long term strategy for a business.  Shadow IT departments deplete a business’ finite resources in a piecemeal fashion and, if left unchecked, can restrict a business’ freedom to adapt and evolve as necessary to meet the ever changing market demands.  I do think that its manifestation and steady rise will force a fundamental shift in how an individual function’s goals and objectives are set, which in turn will drive coherent organisation targets and significantly improve a business’ strategic focus and delivery.

These are my thoughts, do you agree?  I, as well as many of the other readers, would be interested in understanding your thoughts on this matter.  Helping you understand and/or weed out the true costs of shadow IT to achieve the best outcome for your business are some of the things that Willard Enterprises specialise in.  If there is something I can do to help your business or someone you know achieve their next challenge, please contact me for more information.  If you would like to stay up to date with news from Willard Enterprises including new blogs, service changes and availability, please subscribe to the newsletter.

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Posted in General, IT Transformation, IT Transparency
One comment on “071301: Is Shadow IT a good thing?
  1. Jose says:

    As slow as “formal IT” may seem at times, we have to deal with legacy and company implications ; usually “shadow IT” try bleading edge with no foresight of the consequences … leaving it to IT to fix (or integrate) as required …

    … maybe a necessary evil? IT can’t do all to everyone, a scape valve is needed…

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