Effective Strategies for CTOs to Manage Shadow IT and Unmanaged Endpoints

TL;DR

Shadow IT now makes up 30-40% of IT spending in large companies. With 92% of ransomware attacks targeting unmanaged devices, CTOs need a balanced approach that gives teams visibility and control without crushing innovation. This guide covers identification methods, monitoring tools, best practices, and how to build policies that work.

Key Takeaways

• Shadow IT accounts for 30-40% of enterprise IT spending, with employees using an average of 975 unknown cloud services
• 92% of ransomware attacks in 2024 involved unmanaged devices, making them critical security blind spots
• Network monitoring, CASB tools, and identity-first discovery help detect unauthorized applications
• Building shadow IT policies requires balancing security needs with employee productivity
• Secure.com's Digital Security Teammates augment your security team with automated asset discovery and risk prioritization to manage shadow IT

Introduction

A marketing manager uploads client data to an unapproved cloud storage tool because the company's official platform is too slow. A developer signs up for an AI code assistant to hit deadlines. A remote employee joins project calls on Zoom instead of the approved Microsoft Teams.

None of these people are trying to cause problems. They're just trying to get work done. But each action creates a security risk that most IT teams can't see.

Here's the reality: 41% of employees now use technology their IT departments don't know about. By 2027, that number jumps to 75%. Meanwhile, 92% of ransomware attacks involve unmanaged devices — personal laptops, contractor equipment, and IoT gadgets that lack proper security controls.

For CTOs, this isn't just an IT problem. Shadow IT costs large companies millions in wasted spending each year, with the average data breach costing $4.4 million.

This guide shows you how to spot Shadow IT before it becomes a breach, monitor it without micromanaging your team, and build policies that actually work.

What is Shadow IT?

Shadow IT refers to the use of technology within an organization without the knowledge or approval of the IT department. This can include things like applications, software, devices, and cloud services. Examples of shadow IT that you might not think of include: Dropbox accounts that were created using work email addresses; ChatGPT subscriptions being used to write reports; or Slack workspaces set up by departments because they find Microsoft Teams too complicated. 

In fact, it’s estimated that around 65% of all SaaS applications are used without authorization— meaning they have not been vetted or approved by IT— so there’s a good chance that many of the tools your employees use on a daily basis have not even made it as far as your desk for review.

Why Employees Turn to Shadow IT

People don't bypass IT because they're careless. 91% of teams feel pressured to prioritize business operations over security, and 38% are driven toward shadow IT due to slow IT response times.

When approved tools are clunky, take weeks to get access to, or don't solve real problems, employees find their own solutions. They're not thinking about compliance gaps or security risks. They're thinking about hitting deadlines.

Common Shadow IT Examples

• Cloud storage services like Google Drive or Dropbox for file sharing
• Communication tools like Discord, Telegram, or unapproved Zoom accounts
• AI tools like ChatGPT, Jasper, or Notion AI for content creation
• Project management platforms like Trello, Asana, or Monday.com
• Personal devices accessing company data

Shadow IT creates three main problems: security vulnerabilities from unvetted tools, compliance violations when sensitive data lives in unapproved systems, and wasted spending on duplicate subscriptions.

How Do You Identify Shadow IT?

You can't control what you can't see. Most companies discover Shadow IT only after a security incident or during an audit. Here's how to spot it before it causes damage.

Network traffic analysis

Keep an eye on your network logs so that you can see any unusual outbound communication attempts. Look out for repeated connections to cloud-based services that aren’t part of your approved list— because these could indicate potential problems such as data exfiltration or shadow IT.

Network monitoring can also pick up on abnormal amounts of data being sent outwards which may indicate someone is trying to exfiltrate information from your organisation.

It is important to set up alerts for new domains and to look for patterns in the data traffic: for instance if 20 people in marketing are all connecting to the same unauthorised tool then this would be an example of Shadow IT at work.

Identity provider audits

Check your identity federation logs. Many SaaS apps let employees sign up using "Sign in with Google" or "Sign in with Microsoft" buttons. These identity federations, when associated with a corporate email address, reference the originating application.

Your SSO provider keeps a list of every application that's used corporate credentials. Review it monthly to spot new tools.

Financial discovery

Employees sometimes subscribe to tools, pay with their own credit card, then submit the cost as an expense. Up to 51% of software expenses are miscategorized and appear under unrelated categories like "Office Supplies" or "Meals."

Review expense reports for vague line items. Look for recurring charges to unknown vendors. Your finance team sees Shadow IT spending before IT does.

Employee surveys

Sometimes the easiest way to find Shadow IT is to just ask. Send anonymous surveys asking what tools people use to get work done. Include questions about frustrations with current systems.

You'll get honest feedback about which approved tools aren't working and which unapproved ones are filling the gap.

How to Monitor Shadow IT?

Finding Shadow IT once isn't enough. You need continuous monitoring to catch new tools as employees adopt them.

Cloud Access Security Brokers (CASBs)

CASBs are positioned between the users and cloud services to enforce security policies; they also provide insight into cloud service usage & create logs of activities.

Conventional network-based solutions can be very “noisy” & may have difficulty verifying if a real account was created. By correlating accounts with users and domains, an identity-first approach is more efficient.

This is why CASBs are effective: they don’t simply detect unapproved apps — they can prevent users from accessing them or demand that they authenticate themselves before connecting.

Automated discovery tools

Set up tools that continuously scan your network for new applications. These tools watch for Shadow IT patterns and alert you when employees start using unapproved services.

Look for solutions that integrate with your existing security stack. The less friction in your monitoring setup, the more likely your team will actually use it.

Endpoint monitoring

Install lightweight agents on company devices to track installed software. This catches desktop applications that don't show up in network logs. You can proactively detect any hardware connected to your network, even without agents installed, making it an ideal tool to identify shadow IT.

Create smart tags that automatically flag devices with unauthorized software. Set up email notifications when someone installs a banned application.

Regular asset audits

Schedule quarterly reviews of all IT assets. Compare what's in your inventory against what's actually on your network. The gaps reveal Shadow IT.

Document everything you find. Track which departments use which tools. Understanding usage patterns helps you decide what to block and what to bring into compliance.

Best Practices for CTOs to Manage Shadow IT and Unmanaged Endpoints

Blocking everything isn't realistic. Here's how to manage Shadow IT without killing productivity.

Take an education-first approach

Don’t try to control shadow IT by simply blocking apps -- this approach can backfire and lead to even more problems. Instead, set up some guidelines for safe usage, create a quick approval process for new tools and give employees clear directions on what they should be using.

If you want staff to choose wisely when it comes to technology, tell them why it matters; show them the risks associated with shadow IT. Use real-life examples from data breaches caused by shadow IT to illustrate the dangers.

Create fast approval processes

Only 12% of IT professionals chase approvals. If your approval process takes three weeks, users will simply bypass your system.

Low-risk tools should move through your approval process quickly — and high-risk ones slowly but surely. Create tiers of risk: low, medium, and high. Here are examples of what that might look like:

• Low risk: Simple, standardized apps that meet basic security criteria get immediate approval.
• Medium risk: Slightly more complex or less familiar apps get a quick review by someone on your team.
• High risk: Any app that handles sensitive data or financial transactions gets a full, formal assessment.

Provide secure alternatives

When you block an unapproved messaging app, offer Microsoft Teams or Slack. When you shut down someone's personal cloud storage, give them enough space in the approved system.

Match the functionality people need. If your approved tool is harder to use than the Shadow IT alternative, adoption will fail.

Implement Zero Trust for unmanaged devices

The risk of infection increases by 71% when accessing data from unmanaged devices. While you can't monitor every device entering the network, you can control what those devices are allowed to do.

Enforce multi-factor authentication (MFA) across all access points. Implement conditional access policies that restrict data access on unmanaged devices. Use isolated browser sessions for guest users to prevent credential storage on personal devices.

Prioritize risks based on impact

Not every Shadow IT tool poses the same threat. Triage by data sensitivity, scope of users, system integrations, and blast radius if compromised.

A developer using an unapproved code formatting tool is low risk. The same developer uploading source code to an unapproved AI assistant is high risk. Focus enforcement where it matters most.

How to Build a Shadow IT Policy

A good Shadow IT policy balances security with reality. Here's how to build one that people will actually follow.

Define approved tools clearly

Create a public catalog of approved applications. Include what each tool does and how to request access. Make this list easy to find and easy to search.

Update it regularly. When you approve a new tool, add it immediately. Remove deprecated tools so people don't request access to software you've phased out.

Set clear consequences

Explain what happens when someone uses Shadow IT. For most cases, it should be education, not punishment. Reserve strong consequences for repeat violations or high-risk situations.

Document the escalation path. First offense: conversation with IT. Second: manager notification. Third: access restriction.

Create exception processes

Some Shadow IT exists because there's a legitimate gap in your toolset. Build a formal exception process for cases where the unapproved tool is genuinely better.

Require a risk assessment, manager approval, and security review. If approved, add monitoring and set a review date to reassess whether the tool should become officially sanctioned.

Involve department leaders

Don't write this policy in a vacuum. Talk to department heads about their team's needs. Get buy-in from executives who will enforce the policy.

Shadow IT thrives when IT acts like a blocker instead of a partner. Position yourself as someone who wants to help teams work safely, not slow them down.

Review and update regularly

Your Shadow IT policy shouldn't be static. Schedule annual reviews to assess what's working and what's not. Technology changes fast — your policy needs to keep up.

Track metrics

• How many Shadow IT incidents do you detect?
• How long does tool approval take?
• Are certain departments chronic offenders?
• Use data to refine your approach.

How Can Secure.com Help Manage Shadow IT and Unmanaged Endpoints

Managing Shadow IT manually doesn't scale. You need automation that works without adding headcount.

Secure.com's Digital Security Teammates augment your security team with always-on monitoring that identifies Shadow IT and unmanaged endpoints before they become problems. The platform offers:

Automated asset discovery that uncovers every device, application, and cloud service in your environment—no agents required. It correlates network scans with identity data to build a complete picture of your attack surface.

Real-time risk scoring that prioritizes threats based on actual business impact, not just generic CVSS scores. You'll know which Shadow IT tools pose real danger and which ones are low risk.

Alert triage and investigation that cuts through noise and surfaces only critical issues. The platform enriches alerts with context, connects them to affected systems, and suggests remediation steps.

Compliance monitoring that continuously tracks policy adherence and generates audit-ready reports mapped to standards like GDPR, ISO 27001, and PCI DSS.

Unlike traditional security tools that require constant manual oversight, Secure.com's Digital Security Teammates augment your team by handling routine triage, investigation, and remediation while keeping you in control of sensitive decisions.

The platform works with your existing security stack — SIEM, EDR, cloud security, and more — to provide unified visibility without requiring you to replace tools you already use.

For CTOs managing lean security teams, this means you can finally get ahead of Shadow IT by augmenting your existing team's capabilities without drowning in alert fatigue.

FAQs

Conclusion

Shadow IT is here to stay. By 2027, 75% of employees will use unauthorized technology (Gartner). Rather than fighting an unwinnable battle with blanket bans, successful CTOs take a different approach.

They work towards visibility, speed and automation– because these days there’s no point trying to control everything manually. So what exactly does that involve? For starters: discovery. Find out what’s currently being used (both officially and unofficially).

Next: risk-based prioritization rather than assumption-based. Then there’s making policies practical– so they’re actually followed rather than ignored like most rules you create– plus investing in tools that won’t bloat your staff numbers but will help them work more efficiently AND also keep things secure and under control.

Discover how Digital Security Teammates work