Shadow IT Department and Selling to the Enterprise

Contributed by Phil Morettini

If you’ve ever worked in a large corporation or been in the enterprise software or hardware business for any length of time, you’re familiar with the frustrations expressed by AND about the IT department. The IT department is typically the scorn of many folks who rely on them for the systems and support which allow them to do their jobs.

Let’s face it, we’re totally dependent on technology these days. When was the last time you did anything of significance in your work life with pen and paper? If the systems (or electricity) go down in a major office building the occupants might as well (and often do) go home–not much is going to get done until things are restored to normal.

IT departments therefore usually control the keys to the kingdom–the ability to enable or prevent you from getting your work done can depend upon how well they do THEIR jobs. But in many cases from a user perspective IT departments have appeared to be slow-moving bureaucracies, with no real motivation to be particularly responsive to end users. In some situations this view may be unfair (although in some it is definitely true!).

If you look internally at the operations within an IT department you often see under-staffed but extremely committed folks who never catch up and are constantly putting out major fires. While some IT departments are very poorly managed and don’t understand that internal users are their customers, in other cases the departments are considered a cost center to be squeezed to increase profitability–making a sub-optimal outcome fait accompli.

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So the reasons for poor IT performance are many and varied. As a result of this perception, internal users have sometimes taken things into their own hands because they HAVE to get their work done somehow, someway.

This phenomenon of money spent on technology outside of the official IT budget has been labeled as “Shadow” or “Stealth” IT. I can tell you it has been going on since the dawn of IT time in the days of the technology dinosaurs (The glass house of IBM Mainframes). Even in the early days  there was always tension and an ongoing tug-of-war between corporate end users and the guys in the glass house. When I worked at an HP division back in the 80′s our marketing department created (and funded) our own “mini-IT” department of four people, just to allow us to get the data we needed in any kind of timely fashion. The was necessary because the Divisional IT department was a black hole for nearly any request. Not long after that the networking (LAN) market started at the department level by users as a way to wrest back some control over their technology destiny from the folks in the glass house.

Gartner in a recent study forecast that the Shadow IT portion of technology spending will account for 35% of total spending by 2015. Whether or not the exact number is right, this is indeed huge and can’t be ignored by vendors selling into major corporations.

Key trends and implications for enterprise software & hardware vendors:


This is one of two defining trends in the evolving enterprise IT marketplace. Mobility is no longer a luxury in corporate life, but a necessity. Since consumer mobile devices swamped those originally favored by IT, it’s become commonplace in many corporations to be able to work using the mobile device of your choice. This has put the IT department in the uncomfortable position of reacting and adapting to users desires, rather than dictating device and application usage driven by their own goals. This has opened up the enterprise market to a wider variety of hardware and software vendors than would have been under the old order. While traditional enterprise marketing and sales methods to end user management and IT are still applicable, it’s also possible now to reach this market through a much more “mass market” or “bottoms up” approach: Get enough individual end users to love your product and the corporate types will have to work with you. This is essentially how both the iPhone and Android devices started out and eventually came to dominate the corporate Smartphone market.

Cloud Services

Along with BYOD this is the other major defining trend of the modern Shadow IT movement. Defined broadly this can include SaaS applications, file sharing, storage, social media, etc. The common thread is that they are hosted, web-based and easy enough to use so that corporate end users can deploy them without IT intervention if they choose. Similar to BYOD this enables many more vendors to penetrate the corporate world than when there was a short list of traditional on-premise vendors approved by IT. In many corporations there is a constant struggle by IT to rein this in, as it does create some real concerns within companies (see below). But at least for now, many smaller technology vendors with shorter track records have a greater shot–IF they have truly innovative, easy-to-use applications and services valued by corporate end users.

Market & Sell Direct to Users

Appealing directly to end users has always been important to many enterprise vendors. In many, if not most cases enterprise deals have always been some form of a co-sell to end-users & IT. But the direction internally within major corporations is that more and more of the technology budget is in the hands of business users rather that the IT professionals. The recent trends discussed here have IT departments “on the run” with a corresponding positive outcome of greater IT responsiveness to user desires. So even for money not officially controlled by end users, it’s more important than ever to identify the actual users within the account and strive at all costs to gain their buy-in. The days of IT departments dictating enterprise-wide applications with minimal input from major users are waning.

Applications that give IT back some control

IT Departments are understandably concerned and bitter about the loss of budgetary and overall control.  Some of this attitude is sour grapes, but not all. Anytime applications and data become more distributed, concerns about inconsistent business logic, security and compliance increase–and appropriately so. So ironically while many application developers may be able to now sell directly to end users with minimal or no IT interference, there is a correspondingly increased need to secure and manage this distributed technology. As a result, vendors of products which enable IT to do this key part of THEIR jobs have a big opportunity and should find themselves in ever greater demand.

So there’s a few things I think about the Shadow IT phenomenon and enterprise vendors. Agree, disagree–any other thoughts? Fill us in with a comment below

Phil Morettini is an accomplished senior executive with over 25 years experience in high tech businesses. He  specializes in maximizing traction for High Tech firms in both high growth and challenging operating environments. He can be reached at [email protected]

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