Coming into the Centralized IT Fold: How to Mitigate the Risks of “Shadow” IT Organizations with a Roadmap for Sourcing Integration

As large organizations grow, both organically and via acquisitions, they tend to develop pockets of cross-functional capabilities within their business support departments. The most common cross-functional capability to develop is the management of information technology (IT) functions within other support departments, such as Finance. Various conditions can create these “shadow” functional departments, but the primary ones are slow response times, low confidence in the mainstream department’s service performance and support levels, and a lack of trust among the parties involved.

Shadow IT groups are likely to exhibit these characteristics:
1. Broken processes,
2. Highly custom application portfolios built over a period of time, with little to no documentation,
3. Use of non-standard technologies,
4. Presence of independent, small contracts with third-party vendors that cannot leverage the standard corporate tool sets,
5. Often perform business support activities that a typical corporate IT department would not.

Most organizations do realize the potential risks that shadow groups pose to their business, in terms of compliance with controls, data integrity, etc., as well as the inherent inefficiencies of a lower leverage of scale. When organizations decide to address these risks by integrating such cross-functional groups within their IT departments, they often do not follow through, or the integration is long and unpleasant, with less-than-desirable results. This ISG white paper explores how organizations can improve the process of integrating shadow IT groups into corporate IT organizations.