The Rise of Shadow IT

The loss of competitive advantage from IT may not be entirely due to its commoditization. It is starting to become clear that at least some of the responsibility lies with business activities taking place outside of the control of IT.

Today, business users and knowledge-workers create and modify their IT infrastructures using “plug-and-play” IT products. These commodity IT products are now so easy to use, cheap, and powerful that business users themselves can and do perform much of the work traditionally done by IT.

But without the planning and wider view into the ramifications of their actions provided by IT this often results in disastrous consequences. Forrester Research found 73% of respondents reported incidents and outages due to unplanned infrastructure modifications.

Welcome to the gritty reality of commodity IT. Aside from the opportunity costs and operational losses resulting from this uncontrolled plug-and-play free-for-all, many companies are missing out on the competitive advantage potential that harnessing commodity IT delivers.

Within this disturbing new reality lie both the seeds of competitive advantage and a viable model for 21st century IT. In the Summer 2006 issue of MIT Sloan Management Review , I proposed in “Finishing Off IT” that even though IT is now a commodity it can and does enable significant competitive advantage. Resource dependency creates complex relationships between consumers and providers.

These interdependent relationships in turn produce organizational problems that require organizational solutions. Offered as a solution was the notion that management and organizational structure, not technology, hold the promise of sustainable competitive advantage from IT, and that manufacturing process control techniques hold a viable model for the future of IT.

21st Century IT

To visualize how a 21st century IT organization could look, it helps to consider the production and consumption of IT services as a manufacturing micro-economy.

IT manufactures information processing, communication, and collaboration products that underpin nearly all business operations. Knowledge-workers consume these IT products in pursuit of business objectives using everything from simple emails to more complicated core activities like forecasts and audits.

A deeper exploration of what actually occurs within the IT micro-economy helps to further clarify the issue. Based on real events I documented between December 2005 and July 2006, the following dramatization presents a composite of the experiences reported by a number of mid-to-senior IT managers.

On the way to the office your Blackberry vibrates. It’s a message from your staff. Users on the east side have been tech-swapping again. You know how it goes: “I’ll trade you this color printer for your wide screen monitor.” You know this is going to raise flags with the auditors.

You get to your office and there is a note from the service desk about that system outage on the west side. It turns out the system went down because its users bought some high-resolution scanners and connected them to the system themselves.

You didn’t even know they had scanners until they called demanding support.

Downtown, a group of users decided that to improve performance they needed to regularly transfer gigabytes of video from the main conference room uptown to a storage area network (SAN) they built on their own. As you suspected, these transfers were responsible for slowing down a business-critical application that has managers all over the company grumbling.

An email from the PMO informs you of a new project that will require extra support staffing starting in two weeks; first you’ve heard of that. You look at the calendar and sigh—budget and staff reductions, increasing user counts, more audits, increased legal regulations, major new and unplanned applications, connectivity and collaboration requirements, and very powerful and unhappy customers to placate.