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IT ‘Shadow Spending’ Has Doubled - Computerworld

Computerworld has a piece, IT ‘Shadow Spending’ Has Doubled, discussing an undercurrent within IT spending that could have a large impact upon how sales are made.

In the late 1990s, shadow IT spending was estimated to be 10% of the formal IT budget. Most of the shadow IT spending was due to support and training shortfalls from formal IT. Business-unit resources often provide informal support for various technologies and applications as users seek “how to” or technical assistance from local peer experts rather than the service desk. This informal support mechanism was estimated to be four times more costly than formal support. By improving service levels and running public relations campaigns to improve the image of the service desk, CIOs sought to reduce this hidden cost and, in turn, reduce shadow IT. Such best-practice efforts were effective for many companies — often resulting in 40% reductions in shadow IT costs.

But today’s new form of shadow IT spending is much more costly and extremely difficult to manage. Recent research estimates that shadow IT spending has doubled from 2000 to 2003 to consume 20% of total IT spending in the average organization. According to our research, the average U.S. company spent around 3.7% of revenue on IT in 2003, or $10,283 per employee. With rogue spending at 20% of the official IT budget, shadow spending adds more than $2,000 per employee. In several organizations where the business was rapidly changing (typically because of mergers and acquisitions) and formal IT spending was severely constrained, we found shadow IT expenses as high as formal IT spending.