Managing the Rise of Shadow AI: A Strategic Approach for Businesses

May 07, 2024 | Posted in:

Artificial Intelligence

Posted by Kevin Beling

In the previous decade, the rise of shadow IT, characterized by the use of unsanctioned cloud applications, became a major concern within organizations due to the proliferation of free and inexpensive cloud-based tools. Now ten years later, we are witnessing an explosion in Generative AI  (GenAI), which is the ability to generate written or visual content using text prompts. This rising use of AI applications outside the control of an organization has created a new risk known as “shadow AI.”

(Recent) history lesson … Shadow IT

In the 2010s, the promise of the cloud gave organizations the means to easily enable work from anywhere, which at times, outpaced the adoption of sanctioned web-based tools within a controlled business environment. Early adopters had ample opportunity to use unsecured, shadow IT applications to make their work lives easier. 

Using shadow IT meant potentially sensitive data could be uploaded to applications lacking proper security controls, such as multi-factor authentication (MFA) and data loss prevention (DLP), resulting in confidential data leaks. Over time, however, through the proliferation of Microsoft 365, sanctioned tools like OneDrive and Teams became increasingly available, and users gradually became less dependent on those unsecured cloud apps. Adding proper security controls on company-managed apps led to enhanced security, marking an end to the wild west approach to cloud tools.

info-systemsengineering-comhubfsSE_ImagesEvent_ImagesCyber Risk PD 0822Landing PagePublic FacingCyber resilient_600x400pxIntroducing … Shadow AI

We are now witnessing a similar trend with GenAI, where the use of free and inexpensive tools is outpacing official business adoption rates. In this scenario, users are entrusting confidential data to GenAI tools, inadvertently exposing company data to advertisers or, in more severe cases, malicious actors. The potential consequences of these actions could range from reputational damage to legal ramifications. This underscores the critical importance for all organizations to take proactive measures now to safeguard against the misuse or inadvertent leakage of company data.

Many businesses have spent nearly a decade attempting to understand and manage shadow IT. Given the rapid pace of AI adoption,  how can organizations proactively address shadow AI to avoid any major consequences?

Shadow AI Strategy

If your company hasn’t embraced AI tools (yet), it is likely employees may already be experimenting with AI applications on their own. Now is the time to initiate discussions about AI strategy. Here are some proactive steps you can take to protect your data from the impacts of shadow AI:


With this first step, you don’t have to be an early adopter. This is simply the phase to begin research and due diligence. Consult with trusted partners and educate your leadership on industry trends and new AI capabilities. Your findings here will inform steps 2-4.


Once you have defined the acceptable AI tools for your organization (if any), use technology security measures to block unwanted AI web applications. Strategies such as web filtering, mobile application management (MAM) and Data Loss Prevention (DLP) may already be available within your environment. Be cautious, however, as this strategy may have limited impact and unintended consequences like blocking critical applications.

Google Search now leads with GenAI answers, and you aren’t going to block Google Search, are you?


Realistically, security can only be part of your overall AI strategy. Managing human behavior through company policy and training is another valuable measure to include. Begin with adding AI to your technology acceptable use policy (AUP) to delineate what users can and can’t do with company data. An AUP would then be reviewed and updated annually, providing clear direction for employees, including consequences for non-compliance. 

The fast-paced adoption and intrigue of GenAI may even justify a company-hosted training session to review your new AI policy, ensuring your message is delivered with clarity.


Now that the evaluation, tools, and policies are in place, you are prepared to deploy trusted GenAI applications. Copilot, part of Microsoft365, is an AI tool with data governance policies that can be deployed to limit user access to data based on roles and responsibilities, preventing unauthorized users' exposure to sensitive information. By deploying a trusted AI tool like Copilot, organizations can proactively mitigate the use of shadow AI within the organization.

It's important to recognize that employees will inevitably want to engage with AI tools. As an employer, you can guide and empower employees by providing education on the impact of sharing company data with AI tools, steer them away from inappropriate applications, and carefully introduce AI tools that offer a safe user experience. The reality is, AI is becoming increasingly integrated into business landscapes, necessitating a strategy, even if immediate deployment isn't on your radar.

AI Image_2000x530px-1-1Summing it Up

The rise of GenAI presents organizations with new challenges in managing shadow AI. Companies can proactively address the associated risks by initiating discussions about AI strategy, evaluating AI tools, employing cybersecurity measures, updating acceptable use policies, and introducing AI tools with safeguards in place. Embracing AI in a secure and controlled manner will not only enhance efficiency and productivity but also protect your company from potential risks.

If you are ready to learn more, follow the link below for information on our Teams-based training program for Microsoft365 designed to provide continuous education on productivity applications like Copilot and improve adoption and proficiency with a wide range of Microsoft programs.

Stay informed, stay proactive, stay ahead! 

To learn more about protecting your organization from shadow AI and leveraging AI tools like Copilot, reach out to your account executive for guidance and support. For others, please contact us at info@systemsengineering.com or call 888.624.6737.

Beling_Kevin_886-005 - SQ-1Kevin Beling, an Account Executive at Systems Engineering, is dedicated to cultivating lasting and beneficial client partnerships. With a focus on helping clients harness technology to reach their desired business goals, Kevin has been a valuable member of the Systems Engineering team since 2015.