Shadow IT has clearly become an important force in the SMB IT market.
San Jose, CA (PRWEB) December 03, 2014
Is IT losing its authority over IT spending and directions? Data from the Techaisle report “The 360 on SMB & Midmarket IT Decision Making Authority” suggests that increasingly, business decision makers (BDMs) make technology-related decisions and control technology-related budgets.
The report finds that SMB “Shadow IT” in the US – expenditures made by business management without IT involvement – will amount to $27 billion in 2015. Added to the “formal” IT budget that is visible to IT but under BDM management, technology spending by US SMBs that is outside the control of the IT department will reach $99 billion, a figure that is greater than Microsoft’s annual revenue, twice the revenue of Cisco, and nearly 25 times larger than the revenue recorded by Salesforce.com in its fiscal 2014.
The data clearly illustrates that the earth has shifted from underneath the IT department within small and midmarket businesses. Executives in these companies need to understand what these new spending patterns mean to IT deployment and efficiency within their operations, while suppliers to this market – business application vendors like Microsoft and Salesforce.com, hardware vendors like HP and Dell, and the thousands of services firms that help US SMBs to make sense of technology – need to adjust to the changing patterns of SMB IT investment and control.
Shadow IT is a commonly-understood phenomenon: it represents spending on IT products and services by BDMs that are made without the IT department’s approval, guidance, or in some cases, even without IT’s knowledge. IT itself generally portrays these purchases as dangerous to the organization, creating the potential for security breaches, incompatibility between corporate systems, inconsistency in corporate systems of record, and/or loss of critical data. BDMs tend to portray them differently, positioning these purchases as IT extensions to current business activities that respond to business needs more quickly and directly than the IT department is capable of doing.
Whatever one’s perspective on shadow IT, it is clearly an important force in the SMB IT market. How important has been a matter of conjecture, since by its nature, shadow IT is difficult to isolate and quantify. However, by comparing multiple data sets from surveys that capture both ITDM and BDM perspectives, Techaisle is able to provide fact-based estimates of shadow IT activity within US SMBs. Highlights of these findings include:
Shadow IT spending on business applications
Authority for “formal” business application spending varies widely between small and midmarket businesses. However, the overall level of shadow IT spending on business applications is very consistent across the two SMB segments, at 15 percent of total small business application spending and 14 percent of midmarket business expenditures. In addition, business management (BDMs) within SMBs formally controls 53 percent of business application spending.
Shadow IT spending on infrastructure products
The infrastructure products market is much different than the business application market – both across small and midmarket businesses and with respect to the influence of IT over “formal” purchases. The influence of IT is much greater in the infrastructure category than in business applications: IT is responsible for 23 percent of infrastructure spending within small businesses and controls well over 50 percent of total spending on infrastructure within midmarket businesses.
Overall, shadow IT accounts for 56 percent of small business infrastructure spending. The enormous shadow infrastructure spend by small business indicates a clear problem for small business IT managers, and realistically, for small businesses themselves: the notions that shadow IT creates security and related issues are not merely an IT construct, it is a real issue. Suppliers with solutions that help address shadow infrastructure problems (such as MDM, managed app stores, etc.) will find a very substantial potential market in the US small business segment.
Shadow IT spending on IT services
BDM-led spending on IT services has different implications in different employee size categories: in small business, it often represents an authorized or “formal” spending on mainstream IT services, while in larger businesses, it may represent a means of avoiding IT department involvement in new IT/business initiatives. Techaisle data supports this perspective. BDMs control 35 percent of IT services spend in midmarket businesses. The shadow IT spending within the midmarket – pegged by Techaisle at 48 percent of the total – creates an intriguing opportunity for IT services suppliers. “Official” suppliers to midmarket businesses may continue to sell to IT, which controls a higher proportion of the formal IT services budget than their BDM colleagues. However, when shadow IT is added into the opportunity pool, BDMs are as potent a force in the midmarket business IT services market as ITDMs. This suggests that two different approaches – positioning IT services firm as an extension to IT, or as an alternative to IT – have equivalent market opportunity today.