Why is Shadow AI considered a dual-edged sword for businesses?/ai-insights/why-is-shadow-ai-considered-a-dual-edged-sword-for-businesses

Why is Shadow AI considered a dual-edged sword for businesses?

April 25, 2024

Why is Shadow AI considered a dual-edged sword for businesses?

Artificial intelligence is one of the major technologies today that has been transforming businesses across industries globally. However, there is a hidden force that is quietly driving this transformation – Shadow AI.

What is Shadow AI?

Shadow AI refers to the unauthorized or uncontrolled use of AI tools and technologies within an organization. Employees deploy and use these tools outside of the purview of the IT department, without any formal approval or considerations. If you are looking to make a career in AI or any other field, this is one important thing to learn about.

According to a recent survey by Forbes, it was found that a staggering 70% of businesses admit to having experienced Shadow AI within their organization. This phenomenon of using AI technologies discretely without proper authorization serves as a double-edged sword for organizations that though offer huge benefits also pose significant risks.

What leads to the emergence of Shadow AI?

There are several factors leading to the emergence of Shadow AI. One of the most prominent reasons is the need for improved efficiency.

According to a report by McKinsey Global Institute, AI has the potential to increase global productivity by up to 1.5% annually by 2030. Therefore, employees who are eager to boost their individual performance and team output can convincingly use the readily available AI tools to automate their tasks and do it faster. They might also not wait for the slow and bureaucratic IT approval processes and may use the tools and technologies instantly when available.

Another factor contributing to the rise of Shadow AI is innovation at the departmental level.

Departments that are facing any specific challenges related to their work may inadvertently experiment with available AI solutions to address their problems without obtaining prior permission or involving central IT.

Not just that, today internet is bombarded with different kinds of efficient AI tools that are easily accessible and very user-friendly democratizing AI tools and technologies. Many of them offer drag-and-drop interfaces and pre-built functionalities that make working even more fun and easier for those who have less technical expertise but want to use AI for their work.

Potential Benefits of Shadow AI

Shadow AI can be very beneficial for organizations if used properly.

  • Increased Productivity and Efficiency

    Shadow AI can significantly improve employees’ efficiency and productivity as there are various AI tools available to automate repetitive tasks helping free up valuable time to focus on more strategic work. A recent PwC report also mentioned that AI-powered automation can free up to 30% of a professional’s time.

  • Better decision-making

    With the use of AI, employees analyze huge amounts of data more accurately which can help to identify hidden patterns and trends that otherwise would have been not possible with human expertise. Thus, using Shadow AI can lead to better decision-making as well.

  • Encourage Innovation and creativity

    As Shadow AI can automate several tasks, it can help employees dedicate more time and energy to creativity and innovation. Generative AI tools can also help with the generation of new concepts, brainstorming alternative solutions, and providing fresh perspectives.

  • Improved Employee Satisfaction

    When used properly, Shadow AI can also improve employee satisfaction as it can streamline workflows and assist in doing their jobs more efficiently. AI tools are like personal assistants. So, having them around will always be good.

    These benefits shouldn’t be an encouraging factor for the widespread use of Shadow AI. Instead, professionals can leverage the top AI certification programs to learn AI skills and use various kinds of AI tools and technologies ethically.

Risks of Shadow AI

Now, let us explore some of the biggest risks that can arise because of Shadow AI.

  • Security concerns and data breaches

    Since Shadow AI tools often come from outside vendors or are downloaded from unsecured sources, they typically bypass the organization’s security checks to authenticate the software and tools. This can make them vulnerable to cyber-attacks and data breaches.

  • Bias and Discrimination

    AI algorithms are good only up to the quality of data used to train them. So, if there is bias in data, it will get exaggerated via algorithms and Shadow AI can lead to discriminatory outcomes.

  • Lack of oversight and control

    Unauthorized use of AI tools and AI technologies can lead to hazardous consequences, ethical violations, and breaches of compliance with set regulations. Organizations may face heavy fines if anything goes wrong because use of Shadow AI.

How can organizations handle Shadow AI effectively?

It is very difficult to completely eliminate the usage of Shadow AI, however, organizations can take some preventive steps to minimize its impact.

  • Encouraging transparency

    Organizations must establish a clear policy on the acceptable use of AI and data security. They must encourage open communication so that employees can disclose Shadow AI tools.

  • Setting benchmarks for Security

    Companies can create a central repository of scanned and checked AI tools that can be integrated into work in various departments. It will help them ensure security and compliance.

  • Educating and empowering employees

    Organizations should also train their employees on responsible AI practices and make them aware of the potential risks they can bring to the organization and themselves by using Shadow AI.

  • Continuous monitoring

    The security teams within the organizations should conduct regular audits and monitoring to identify and assess the use of Shadow AI tools. Organizations must also regularly check the new AI tools available in the market and integrate the ones they find useful.


Shadow AI presents great challenges for organizations to address with only little benefits to offer. However, by adopting a balanced approach, organizations can outweigh challenges with benefits. Businesses need to understand Shadow AI is a reality that they cannot ignore. Therefore, they must strategically integrate the right AI tools within various departments of their organization to reap the benefits Shadow AI offers to the employees.