Today I want to talk about Shadow IT. Not Shadow AI — I’ll cover that another day. Shadow IT is those tools and systems folks spin up outside IT’s blessing: sprawling Excel workbooks, legacy Access databases, SaaS apps bought quietly. They’re not always reckless — most of the time they’re born from urgency and ingenuity.

I recently heard an anecdote that gives the flavour. A payroll specialist, wrestling with a tedious task, asked if their company could buy Python. They had asked Gemini how to solve the problem, and the model suggested Python. Taken at face value, it is a ’lack of context’ problem but it also reveals a powerful instinct: people will chase any tool that promises a quick fix, even if they don’t quite know what they’re asking for. That impulse — the creative scramble — is the heartbeat of Shadow IT.

Why Shadow IT Exists

Shadow IT doesn’t emerge from rule-breaking — it springs from constraint. IT budgets and attention often vanish into long, broad projects: ERP rollouts, compliance mandates, multi-year digital strategies. Meanwhile, frontline teams in finance, HR or operations face urgent problems. They aren’t being mischievous — they’re just trying to get things done. So they whip up an Access DB, build a monster Excel file, or attach a quick script. Over time, these patch-work tools become mission critical.

From an IT lens these creations look brittle and risky. From the business side, they’re lifelines.

The High-Stakes Spreadsheet

Here’s a real Kiwi example of Shadow IT at scale. Health New Zealand (HNZ), managing roughly a NZ$28 billion budget, relies on a single Excel spreadsheet for consolidation and critical reporting.

A Deloitte review flagged issues including:

  • Hard-coded values that aren’t clearly traceable
  • Mistakes — like incorrect accruals or duplicates — going unnoticed until later
  • Changes to earlier periods not flowing through properly
  • No reliable auditing of sources
  • Human-error hazards like missing zeros or mistyped numbers
  • Slow turnaround: 12 to 15 days just to consolidate each month

Yet that one spreadsheet is the core reporting tool for a national health system. This isn’t just a quirk — it’s a signal. When formal tools fall short, people innovate. And sometimes those innovations run the show.

👉 Source: The Register – Deloitte review of Health NZ spreadsheet reliance

The AI Twist

Shadow IT used to be spreadsheets and Access. Now, it’s taking on a new shape — AI. But there’s a twist: many companies are actively pushing employees to use AI. It’s not shadow anymore — it’s sanctioned.

For example:

  • A recent survey found that nearly seven in ten companies now use AI at work, with leaders actively encouraging staff to adopt it. 👉 HR Dive report
  • At Google, engineers face an unspoken requirement to show daily AI use, or risk being left behind. 👉 Business Insider story

When AI is encouraged — or mandated — Shadow IT becomes less about hiding and more about shaping. The real question shifts to: How do we harness that energy without losing control?

What to Do (and What This All Means)

  • Shadow IT often signals genuine gaps where official IT fails to keep up
  • The Python anecdote isn’t just amusing — it shows how people chase solutions, often at the edges of understanding
  • In NZ, lean teams and tight budgets make DIY systems inevitable. That gives us an edge: we can build trust and guide clever fixes before they run wild
  • Once AI is encouraged, strategy must shift from policing to shaping. It’s about empowerment, governance and support

Written for KiwiGPT.co.nz — Generated, Published and Tinkered with AI by a Kiwi