“Shadow IT” Goes Mainstream

Lines of Business Are Now Outspending IT…for IT

IDC, a leading information technology (IT) analyst research firm, predicted that by 2020 business people will be spending nearly as much or more on IT as will IT itself. As this prediction is bearing out in the selling fields, software and services providers are now urged to cater to business leaders every bit as much as to technology leaders.

The Effects of Pervasive Client Disappointment in the Installed Base

This trend has been slowly but inexorably evolving for a number of years and has been heavily driven by business stakeholders’ persistent disappointment in the business utility of enterprise applications, from ERP to Customer Relationship Management to Supply Chain. It is not merely failed implementation projects that are at fault, but that essential business benefits are realized too rarely to such point that, for business leaders, enterprise software is more pier than bridge.

While blame for such disappointment can be widely distributed, one of the greatest faults is the clients’ failure to create viable numbers-based business cases for their enterprise applications acquisitions and implementations. Thus, the default key performance indicator for these projects tends to be adherence to time and cost estimates – a very poor criterion that leads to rushed projects where benefits fall by the wayside. At the end of such projects, there is no way of knowing what benefit has been derived.

Research has long since shown that the first year after go-live for large-scale ERP, clients’ activities are centered on “shaking out” implementation kinks; the second year, clients find that the “shake-out” is taking longer than anticipated. By the third year, they realize that they have a serious problem at the core of their installation.

At this point what has often been termed shadow IT begins to take hold.

“If You Leave it up to IT, Nothing Will Operate but Everything Will Work”

The notion of whether or not IT systems are working varies from a business-centric what does it do? to an IT-centric how does it do it?

For too long, IT has supported an enterprise applications platform that may well satisfy back-office activities such as sales order processing, stock control and accounting. This is all for the good but it seldom satisfies business staff’s need of business intelligence, analytics, and even basic reporting. Because of this, “business and IT alignment” has been dysfunctional since it was initially instituted in the late 1950’s. (See also: “The Costly, Damaging, and Pointless Myth of Business & IT Alignment”)

All the while, business leaders have largely abdicated their authority surrounding major IT investments to IT leadership on the mistaken notion that enterprise applications are an IT subject rather than a business process optimization subject.

To address this disappointment, business leaders increasingly turned to shadow IT.

Shadow IT is a term that refers to IT applications and infrastructure that are acquired, implemented, and deployed without the knowledge and/or authorization of the enterprise’s IT department.

The benefits of such a practice are obvious. Business leaders get software they need, implement it on their own, and deploy it to their heart’s content without the need of IT support or permission.

The risks are also obvious and they include; potential data incoherence, competing “intelligence” between new and previous systems, security breaches galore, and a rise in hidden costs.

While IT has endeavored to stamp out shadow IT, the practice has survived because the acquisitions made through shadow IT have increasingly been innovations beyond legacy IT.

However efficient these integrated transactional systems may be, shadow IT has ushered in elements of mobility, business intelligence, and analytics. In the realm of digital transformation, shadow IT has been a major bellwether. In a very large number of organizations, the first cloud-based applications were, indeed, shadow IT initiatives.

Shadow IT Goes Mainstream

In the invaluable 2017 IDG Role & Influence of the Technology Decision-Maker Survey, 752 respondents reported a near 50%-50% make-up of influencers across every category of IT investment. Shortlisting is still largely in the hands of IT but, the collaboration of lines of business for the what does it do side of decision-making has freed IT to spend more time on technical due diligence.

No longer do IT staff make purchasing decisions for business people without active input from them. This change leads to better business scrutiny and more focus upon functionality. Given the relative business process inflexibility of SaaS enterprise software, it is not surprising that it merits the highest number of investment influencers.

Source: 2017 IDG Role & Influence of the Technology Decision-Maker Survey

Areas of IT spending that are less IT-ish than others are more than ever in the wheelhouse of business buyers. These include risk and value analysis consulting, strategic consulting and its nexus to IT strategy, executive personal devices, and applications that leverage employee and prospect crowd sourcing.

This study also points out that the emergence of highly attractive digital assets such as analytics, mobility and machine learning have brought business leaders more directly into the technology realm and as a result accelerated their inclusion in the investment process.

Bolstering this inclusion is the fact that the most frequently sought vendor attribute is “Understand the business need…”

“Offer live on-site product demos” and “Bring their engineers and product developers into the discussion” appear with roughly half the frequency Those who have been in the industry for some time can attest to never having witnessed a successful demonstration of integrated enterprise software so this is welcome news.

The ascendance of business influence in these investment decisions has also led to a disruption in the buying habits of enterprises as incumbent vendors and other suppliers are less certain of retention than before. Having said that, many firms have found that changing vendors takes longer than it did before the inclusion of business influence. This is due to the complication of having many more influencers in the mix. All the same, incumbent technology vendors would be wise to adjust their dance steps to cater to ever more business-centric what does it do for business? buying criteria.

In summary:

Over the past ten years or so, we have seen a shift from chronically under-served business needs spawn the practice of shadow IT. The next phase was an ever-growing understanding that this outlaw practice represented positive innovation.

The final step, collaborative investment strategy between business and IT, is the most promising evolution that directly addresses the chronic failures of business and IT alignment, where business interests were underrepresented during the buying process. Maturity of this precious innovation will be achieved once all of “shadows” have been dispersed through diligent risk management that is shared by both business mavericks and IT scolds. As one friend of ours put it: “What happens when the CEO downloads something on her mobile that sets off a virus around the company network? Will the CEO be fired?” Stay tuned.