Shadow IT

The Upside of Shadow IT

Tech-savvy employees have long bypassed IT to get their hands on hot technologies. Rather than standing in the way, smart CIOs are now embracing and even encouraging shadow IT. Here's why.

First, a scary statistic: Gartner predicts that in less than three years, 35% of enterprise IT expenditures will happen outside of the corporate IT budget. Employees will regularly subscribe to collaboration, analytic and other cloud services they want, all with the press of a button. Others will simply build their own applications using readily available cloud-based tools and development platforms.

Either way, the corporate IT department will be bypassed. As one industry pundit put it, "it will feel like the inmates are running the asylum."

Now, the reality: Employees have been doing an end run around corporate IT and using shadow IT systems -- that is, systems built and used in companies without organizational approval -- for decades. Look no further than the volumes of company and customer data stored in Excel files scattered from here to kingdom come. Indeed, results of PricewaterhouseCoopers' Digital IQ Survey indicate that at 100 of the companies PwC ranks as "top performers," IT controls less than 50% of corporate technology expenditures.

Those percentages "are not shocking at all because in many cases, the person who understands what to buy is not an IT person," says John Murray, CIO at Genworth Wealth Management in Pleasant Hill, Calif. "Classic shadow IT is out there, and if it's something that is serving a purely functional need and is something that is not customer-facing, it's not the worst thing in the world."

So what's the big deal about the Gartner statistic, and why does it spook so many of today's IT professionals?

There's the loss of control, of course. But more alarming is the exponential growth in the number of rapidly emerging consumer technologies, cloud services and roll-your-own apps. It's both a volume and velocity issue. Ten years ago, in contrast, a scant 10% of tech expenditures happened outside of IT, according to Dion Hinchcliffe, a veteran business and IT strategist and executive vice president at Dachis Group, a social business consultancy in Austin. "Now, IT is cheap, often free. That allows people to evaluate and acquire solutions on the ground," he notes.

And more of the workforce is doing just that. "In general, people are much more tech-savvy. They know what is possible. Everyone is trained that 'there's an app for that,' " Hinchcliffe says.

Rather than standing in the way, some of the savviest CIOs are embracing and even encouraging so-called rogue IT.

As Kraft Foods CIO Mark Dajani put it, "Why create a technology environment that will just drive to average [business] performance? To empower employees to do it their way is a huge deal. It's an inevitable reality. As I see it, there's a bigger risk associated with not doing that."

Here's how you can -- and why you should -- lead your technology organization through the transition from "command-and-control IT" to what Hinchcliffe calls "cooperative IT."

Accept the inevitable

At Genworth, the company's trading team is using an outside application developer for certain services. "IT knows about it, but we're not driving it," Murray says, noting that IT doesn't operate at the speed that the trading team requires.

Today, "applications are not done by IT; releases are not done by IT. Instead, [business is] operating in a different sandbox, which requires a different team and a different cycle," he says. Instead of tussling over ownership and control of certain services and applications, Murray says IT focuses on what data the applications use, whether or not an application is mission-critical, and who is in the best position to know the application is running properly.

"The world is changing, and you have to be honest enough to acknowledge that your business customer is sometimes the most appropriate owner of a particular application," he says.

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