Since the introduction of computing into the business cycle, technology has driven changes in the way we work. In today’s environment, as technology becomes more sophisticated, more analytical, and more social, the skills required for success are changing more dramatically than ever. In financial markets, the trader that once slugged out a spread in the pit, has been replaced by a quant who can write software and understand complex trading algorithms. The Mad Men in Don Draper’s martini-soaked office on Madison Avenue are increasingly being replaced by clickstream quants perfecting channel mix and product suggestion algorithms to bump sales with social media analytics.

shutterstock_152699669The increasingly multidisciplinary melting pot of skills necessary for success is clear evidence that the very nature of the work we do is changing. It’s less like an assembly line, and more like a swarm of skills. Marketing doesn’t just market, it points creativity and technology at marketing problems. Operations doesn’t just move the widgets down the line, it tunes the process from stem to stern with technology and analytics. The alchemy of skills required for success is increasingly blurring the lines between business disciplines. Nowhere is that blurred line more evident than in the relationship between IT and the rest of enterprise.

IT organizations have responded to these changes by adding “business relationship managers” and “business liaisons” to be the bridge between the business and IT. Other disciplines across the enterprise are taking advantage of increasingly available cloud-based SaaS-model software, and forming their own pockets of technology — referred to as “Shadow IT”. With a name like that, there’s no way Hollywood could have cast a better villain for this 3-part blog series:

  1. In this first installment, we cover Shadow IT and try to put some parameters on its size and impact (spoiler alert: large and impactful).
  2. In the second installment (coming soon), we will trace the origins of the Shadow IT phenomenon back to its root causes (spoiler alert: changes in the nature of work will drive reorg of the enterprise).
  3. Our final installment makes the case that these changes will increasingly drive the “productization” of work. Rather than see Shadow IT as a threat to be eliminated, CIOs should be figuring out how to further enable it (spoiler alert: if you love something, set it free).

Part One: Shadow IT… Sounds Shady…

Maven Wave recently participated in a CIO industry event that explored the relationship between the CMO and the CIO, the challenges of tapping the creativity of a millennial workforce, and how to take advantage of the SMAC (social, mobile, analytics, cloud) stack.

The first panel discussion featured marketing leaders and the discussion began by focusing on their relationships with the CIO, which all four panelists called theirs “excellent”. With peace, love, and harmony in the air, the panel explored the grungy side where gear grinds gear. The moderator did a nice job of guiding the panel through an unpacking of what’s working in the relationship with IT (“better understand each other’s goals”, “recognize we need each other to be successful”), and what isn’t (“too slow”, “wrong skill sets”, and “respond to change poorly”).

With the dirty laundry out on the table, and the obligatory panelist case study recitation behind us, the moderator opened the floor for questions. After a few softballs, someone asked: “do you ever use Shadow IT?”

There… finally… someone said it, and once it came up, the song remained the same until the end.

The questions posed by this audience of IT execs could have been summed up by their plaintive tones which (in the minds of some) sounded like: “Why marketing… why… why are you leaving us out?” But instead, took verbal form as: why do you feel the need for Shadow IT spending? (“right skill sets”, “move quickly”, “low hassle”).

The more the discussion progressed the more it was clear that what marketing viewed as a necessary part of doing business, IT viewed as a problem (“losing expertise“, ”diluting the IT spend”, “prone to failure”). This contrarian undertone was resolved during the discussion with a pledge of transparency from marketing leadership (how can it be “shadow” if IT knows we are doing it?). But is that really good enough?

Does IT Really Understand the Magnitude of the Tide Coming?

shutterstock_175224353There is no denying that the emerging consumerization of IT, BYOD, and cloud computing have converged to make it easier to try SaaS software solutions. We’ve all become accustomed to the ease of using cloud-based apps on our personal devices and now expect those same experiences at work. If IT can’t provide what we need, we can easily find it with a Google search.

On top of that, low upfront and low ongoing software costs make the cost of failure low, and often make it easy to avoid the need for herculean business cases and mounds of approval. So it’s no surprise that cloud-based SaaS solutions are a perfect fit for that tech-savvy line-of-business person looking to get things done.

Make no mistake, they’re taking advantage of these solutions in droves. A recent study by Gigaom Research found that 81% of line-of-business employees admitted to using unauthorized SaaS applications, with 38% deliberately using unsanctioned apps because dealing with IT involves too much overhead.

In reaction, many IT leaders view Shadow IT as a threat to good corporate stewardship and as something to be shut down. Rationales are a dime a dozen:

  • Dispersed spending is inefficient and the company can’t leverage its scale
  • Data security concerns as IT has no idea how employees are sharing company data
  • IT should make technology decisions for the company

Each of these concerns is legitimate and carries its own measure of truth. But the idea of shutting down experimentation and innovation in the enterprise so that IT can be a part of the process seems like a shot aimed with pinpoint accuracy at that vulnerable target on the end of your ankle.

A recent study by Cisco showed that CIOs are vastly underestimating the extent to which unauthorized applications are used within their organizations. A typical firm has 15-22x more cloud applications running in the workplace than have been authorized by IT. Even in highly regulated industries such as healthcare and financial services, the same study found between 17-20x more cloud applications running than IT estimated.

The first step is acknowledging that this is a tide that cannot (and should not) be turned. Sorry Dorothy. You can’t click your heels together, and no you cannot go home.

So rather than smoking some new holes in that brand new pair of Nikes you’re wearing, embrace the future. We’ll get you started in the second installment of this blog series where we will explore the root causes of the Shadow IT phenomenon and the implications these changes have for the role of IT in the enterprise.

Don’t miss part 2, sign up for our e-mail updates