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Why smart companies are embracing shadow IT



By Jeanne Ross, Research Director and Principal Research Scientist,
Center for Information Systems Research, MIT Sloan School of Management

Companies have no end of opportunities when it comes to spending their technology dollars. And over the years, individual business units have become adept at making their cases for the IT projects they want funded.

But according to our research at MIT Sloan School, top-performing companies are bypassing nice-to-have projects in favor of absolutely must-do ones by focusing on their most strategic opportunities for business transformation.

Practically speaking, this means narrowing down the programs that get funded to just a handful—and rejecting proposals for any IT projects that don’t advance one or more of those programs.

We call this “demand shaping.” Demand shaping is the process of negotiating and learning that goes on within a company as it identifies its most valuable and achievable business-change opportunities, and decides which IT programs will best support those opportunities. (Read my HPE Business Insights article "Don’t satisfy demand for IT services—shape it instead" for more on this process.)

But what about the projects that don’t get funded? Isn’t there a risk that they will just be driven underground, contributing to the ever-growing shadow IT challenge companies face today? Shadow IT, of course, is what happens when technology is brought into an organization without IT’s permission or knowledge. Some estimates put shadow IT expenditures as high as 30% of official IT budgets.

Getting a leg up in the digital economy

You might think shadow IT is anathema to good demand-shaping practices. But in fact it’s the opposite. Top-performing companies are actually embracing shadow IT.

Why? Because, under the right circumstances, shadow IT encourages experimentation, innovation, and creativity—all the things companies need to survive in the digital economy.

If the high-level business–IT relationship is working—if demand shaping is working—the company will be building and continuously enhancing a strong technology foundation that supports the organization’s top strategic goals. But business units or departments within the company should be free to use this foundation for their own initiatives.

A general shadow-IT rule of thumb should be: If an IT project will impact the company’s underlying platform or architecture, it should go through the central demand-shaping vetting process. But if an IT project piggybacks on top of one of the “big” IT programs—leveraging, but not changing, the underlying environment—it should not only be allowed, but encouraged.

Ultimately, this all comes down to relationships, and to the right conversations happening between people at all levels of IT and business. But if mutual respect exists between IT architects and program managers and their counterparts within the business units, demand shaping and shadow IT can forge an extraordinarily productive partnership.




Jeanne Ross conducts research at the Center for Information Systems Research. Read her HPE Business Insights article “Don’t satisfy demand for IT services—shape it instead to learn more about managing the business of IT.

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I think that this is an incredibly important trend. Business IT, and third parties that they employ, are creating a larger proportion of the applicaitons inside a business. They are also doing their own data science on the data these applications generate. In fact, I think that this is why Gartner estimates that over 50% of a company's spend on IT will be out of the hands of central IT by 2017. 

I've talked to a lot of central IT groups about this in the past few months. Some try to stop it, and some, like you point out, are trying to figure out when business IT can create an application, and how to make it easy for them.

This then raises the importance of three things ..

  1. Creating APIs onto central IT"s Systems of Record
  2. The creation of a series of private cloud services that help business IT. These private cloud services are things like a service to create a development environment onto the company's Systems of Record, a testing environment for these applications, and a run-time environment for the applications, which includes putting the applications under proper management.
  3. They then think about creating a Single IT Storefront - one place where the APIs and the private cloud services, and all the other things that business IT needs, are all in one place - one catalog, one knowledge base about how to use these services and one place to raise support calls.

One final thought - I ran a workshop on this subject with 12 central IT customers in Sweden. It was entitled, "Bring Shadow IT in from the cold". The central IT people started the workshop by requesting that I stop calling this trend "Shadow IT". They said that shadow IT was what happened 10 years ago when busines IT "shadowed" the systems that central IT should be running like SAP or PeopleSoft. They said that what was happening now didn't shadow what central IT did at all. They said I should call it Busines IT because that better reflected what was happening. 

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