Do you know how many unofficial systems are running your business right now?
Most executives would like to think they have a clear picture of the technology their organisation relies on. The reality is often very different. Beneath the surface of official platforms and approved software sits a patchwork of unofficial tools, quietly keeping parts of the business running.
This is Shadow IT — systems and processes developed outside official IT governance. Although it often begins with good intentions, Shadow IT poses risks that can gradually turn into serious issues.
What Shadow IT Looks Like
When people hear the term, they often picture employees sneaking in a SaaS subscription without approval. That does happen, but more often Shadow IT hides in plain sight:
- That one spreadsheet (you know the one), which has become the unofficial system of record.
- An Access database, built by Jane years ago, is now relied upon daily. Jane is 6 months away from retirement and can’t keep the grin off her face.
- A small PowerApp or no-code tool that one team created to fix a gap. No one knows the login to update the app.
These solutions may feel harmless — even helpful. They fill gaps, keep work moving, and give employees a sense of control. But the longer they remain unrecognised, the more dangerous they become.
Why Shadow IT Happens
Executives should see Shadow IT not as rebellion but as a signal of unmet needs. Employees rarely set out to create risk; they’re just trying to get their jobs done.
Some common drivers:
- Legacy systems that frustrate staff – If the official software is slow, outdated, or doesn’t meet the team’s needs, employees look for alternatives.
- IT resourcing gaps – When requests sit in a backlog for weeks or months, staff feel forced to build their workarounds.
- The accessibility of modern tools – With spreadsheets, low-code apps, and cloud software readily available, it’s easier than ever to “just build it ourselves.”
From an executive perspective, Shadow IT is a symptom. It’s pointing directly to the friction between business needs and the existing official systems.
The Hidden Risks
Shadow IT may feel like a practical fix, but it introduces vulnerabilities that most leaders can’t afford to ignore.
1. Single Points of Failure
Often, these tools are created by one person, with no documentation. If that individual leaves, the business loses not just knowledge but the system itself. Suddenly, a critical process is broken with no clear recovery path.
2. Lack of Documentation and Oversight
Unofficial systems rarely come with clear records of how they were built or how they should be maintained. This creates knowledge silos and makes it nearly impossible for others to step in.
3. Compliance and Security Gaps
When data is stored in unsecured spreadsheets, shared through personal accounts, or handled outside approved systems, compliance risks escalate. Sensitive information can leak, and audit trails disappear. For businesses in regulated industries, this can have serious legal and reputational consequences.
4. Operational Inefficiency
Shadow IT often means duplicate data entry, manual workarounds, and conflicting information across departments. What starts as a time-saver can end up creating more work and more errors.
5. Fragility and Scalability Issues
Spreadsheets and Access databases may work fine at first, but as the organisation grows, these tools quickly reach their limits. Without the proper controls, they can break under the weight of increasing users, data, or complexity.
The Real Business Impact
The risks above aren’t theoretical; they translate directly into measurable impacts:
- Productivity loss when key people leave and undocumented systems collapse.
- Delays and errors occur when fragile spreadsheets crash or calculations don’t scale.
- Compliance fines/infringements or reputational damage if sensitive data escapes secure systems.
- Frustration between staff and IT, eroding trust and creating silos.
- Missed opportunities, as resources are spent patching and firefighting rather than innovating.
Shadow IT may start small, but over time it can quietly shape the way whole business units operate — without leadership even realising the risks.
How Executives Can Respond Constructively
The worst mistake leaders can make is to treat Shadow IT purely as a disciplinary issue. Employees create these tools to solve problems, not to undermine the organisation. Instead of stamping it out, the more innovative approach is to recognise and channel it.
Here are practical ways executives can respond:
1. Acknowledge the Intent Behind Shadow IT
Recognise that staff are innovating because the official tools don’t fully meet their needs. This initiative is valuable — it just needs to be guided into a safe framework.
2. Create Safe Pathways for Innovation
Encourage employees to bring forward the tools they’ve created. Set up a process where IT and business leaders can review these solutions, assess risks, and decide whether to adopt, replace, or retire them.
3. Provide Modern Platforms with Guardrails
Invest in platforms that allow rapid problem-solving while meeting security and compliance requirements. For example, sanctioned low-code tools or modular systems give staff flexibility without opening the door to unmanaged risk.
4. Turn Shadow IT into Supported Solutions
This is where many organisations find real value. Spreadsheets and Access databases can be transformed into enterprise-grade applications, supported and documented so they benefit the whole business instead of relying on one person. Similarly, disparate tools can be combined into cohesive applications that teams can share safely.
In our experience, even well-intentioned employees can introduce mistakes into these systems. An incorrect formula in Excel, or a poorly written macro in Access, can quietly skew results for years (or decades). The errors are often invisible until they’re reviewed by an experienced developer — or until the consequences show up in lost revenue, poor decisions, or reputational damage. The true cost of this bad data is impossible to measure, but it can be significant for both the business and its customers (e.g. that one compound interest calculator I converted that assumed every year has exactly 365 days).
By bringing these hidden systems into the light, you not only reduce risk but also unlock the chance to validate, improve, and scale the processes that employees have already worked hard to build.
5. Foster a Collaborative Culture
Show employees that raising needs won’t be punished. Instead, position IT as a partner in helping them solve problems. A culture of collaboration reduces the temptation to go underground with workarounds.
From Risk to Opportunity
Shadow IT isn’t going away. Employees will always look for ways to work smarter and faster. The key for executives is to ensure those innovations don’t put the organisation at risk.
Handled correctly, Shadow IT can be a source of competitive advantage. By surfacing these hidden systems, organisations can:
- Learn where staff are experiencing friction.
- Identify opportunities for process improvement.
- Harness employee innovation as a driver of change.
The difference lies in how leaders respond. Suppress it, and you risk alienating staff while problems go underground. Support it, and you can turn risky quick fixes into secure, scalable solutions.
Where to Next?
If your business relies on spreadsheets, Access databases, or ad-hoc apps, it’s time to ask whether these hidden systems are supporting growth or silently holding you back.
Shadow IT doesn’t have to be a liability. In our next article, we’ll explore how you can turn Shadow IT from a risk into an opportunity — harnessing employee innovation while protecting your business.
