Techaisle: SMB Shadow IT, BDM spending amount to nearly $100 billion in the US alone

ATN-300InsightaaS: Readers of this site are well aware that we respect (and work with) Techaisle, the leading source of reliable research on IT trends in the SMB and channel markets. Because Techaisle invests heavily in primary research (globally, the company has 500,000 SMB panel members and 125,000 channel panel members), it is able to develop unique insights into IT evolution within small and medium businesses.

The post featured today highlights a fascinating perspective into SMB IT budgets and control. Late last year, Techaisle surveyed over 800 IT decision makers (ITDMs) and business decision makers (BDMs) at US SMBs. By comparing the perspectives of the two groups, Techaisle president Anurag Agrawal and his statistical team (with some input from InsightaaS) was able to isolate "shadow IT" spending - spending by non-IT staff on technology products and services that happens without IT oversight, and often, without IT knowledge. The research finds that in 2014 this spending will amount to $29 billion; Techaisle finds that if this amount is added to the 'formal' IT spending that is managed by BDMs, non-IT spending on technology will reach $99 billion in 2014.

The trend towards greater shadow IT has enormous implications for both buyers and sellers of technology. As the featured post says, "IT itself generally portrays {shadow IT]  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." Both perspectives have some merit. Shadow IT is a response to immediate needs within the business; it also may create security vulnerabilities, disrupt audit trails, work at cross-purposes with supplier relationships and have other detrimental impacts to the IT infrastructure as a whole. In short, while shadow IT exists for an understandable reason, so too do IT processes. The magic lies in finding an appropriate balance that considers both sets of requirements.

Is IT losing its authority over IT expenditures 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...

Read the entire post on the Techaisle website: Link  

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