Shadow IT is estimated to be 20-40 percent beyond the traditional IT budget. The ease by which organizations can purchase apps and services from cloud service providers (CSP) contributes significantly to this spending. This is an eye-catching number worthy of investigation-not only to identify and reduce costs, but to discover business risks. So, it is no surprise that CIOs and CFOs have started projects to identify and monitor unknown CSPs.

I often get questions from customers asking if it is possible for IT to monitor cloud service usage and discover shadow IT using existing technologies, and what the pros and cons would be.

The first CSP monitoring approach I am asked about is the use of secure web gateways. A gateway captures and categorizes incoming web traffic and blocks malicious malware. The benefit of this approach is that the gateways are typically already in place. However, there are several limitations in relying exclusively on this approach. Gateways cannot differentiate between a traditional website and a CSP which might be housing business data. They also have no way of discerning whether a given CSP poses a compliance or business risk. Most importantly, to use gateways to track CSPs, IT would need to create and maintain a database of thousands of CSPs, and create a risk profile for each CSP in order to truly understand the specific service being consumed.

The second approach I get asked about is whether organizations can use NetFlow traffic to monitor CSPs. Many customers feel that they can build scripts in a short amount of time to capture usage. Simply answered, yes this can be done. But organizations would face a similar challenge as if they were using web gateways. To capture CSP traffic using NetFlow, IT would need to develop scripts to capture every CSP (numbering in the tens of thousands). Then identify how each CSP is being used, the risk profile of the CSP to an organization, and how much the CSP costs to project overall spend. This is just the beginning. An IT department would then need to build reporting capabilities to access the information as well as continually maintain the database; and apply resources to this undertaking on a monthly basis to ensure the database was current.

The good news, Cisco has done this work for our customers! We have developed Cloud Consumption Services to help organizations identify and reduce shadow IT. Using collection tools in the network, we can discover what cloud services are being used by employees across an entire organization. Cloud Consumption includes a rich database of CSPs and can help customers identify the risk profile of each CSP being accessed, and identify an organization's overall cloud spend.

Cisco has helped many IT organizations discover their shadow IT. For example, we worked with a large public sector customer in North America who was struggling to embrace the cloud, but were concerned about business risks. Employees were pushing for cloud services to improve productivity when 90% of Internet traffic was blocked by the organization's policy. Despite these restrictions, 220 cloud providers were being used already and less than 1% were authorized by IT. Leveraging Cloud Consumption Services, the customer was not only able to manage risk, but also authorize future cloud services based on employee needs in a controlled manner.

It is a good practice for every IT organization to understand how employees are using cloud services and monitor usage on an on-going basis. I encourage our customers to determine which approach would work best for their organization; otherwise they may face unknown business risks and costs.

To learn more about avoiding the pitfalls of shadow IT and how you manage cloud services, please register to attend an upcoming webinar on Dec 11, 2014 at 9:00 a.m. PT.