You cannot name the AI services your company’s work went through last month, and neither can anyone who works for you. Try it. Write down every one from the last thirty days, including the free accounts nobody expensed. Past the tools with an invoice attached there is nothing to consult, because there was no purchase order and no login the company ever issued.
You assessed one vendor. Possibly two. Everything after that arrived without a decision from you. Ten people with a chat window each, two or three services apiece, and you are already in the dozens before you count the contractors.
The count itself is survivable. What should bother you is that you have no way to produce it, and that you are the one answerable for what is on it.
Shadow IT used to be a department
The term is older than any of this. Marketing needed something done and the route through IT took six weeks, so marketing bought its own tool on a credit card and went around the department whose actual job was keeping the company safe. Sales did the same thing with a different tool. It was a known corporate pattern with a known shape.
The useful thing about the old version is that it always surfaced. Somebody had to buy the thing, so it turned up on a card statement. Sooner or later it needed to talk to another system, and that request landed with IT. The unit of the problem was a team, and teams leave a trail. You fixed it by changing how the company was organized, because that is where it started.
I made this argument in an interview a while back, and the line I used was that the moment you start using AI, you have stood up your own shadow IT department. The unit collapsed. It is one person and one chat window now.
There is no purchase to turn up on a card statement and no integration request to land in anyone’s queue, so IT never hears about it at all. A person opens a tab, pastes in the thing they are working on, gets a good result back, and closes the tab. The whole transaction lasts forty seconds and leaves no mark anywhere in your company.
What actually leaves the building
“Data” is the word everyone reaches for here and it is the reason nobody acts. It sounds like a database. Say what the material really is.
What goes into that text box is a client’s email that needs a better reply, a contract somebody wanted the termination clause explained on, the internal planning document that needed summarizing before a management meeting, and a customer list that needed sorting into something usable.
Every one of those is a document you would not send to a company you had never spoken to. That is what happened to each of them.
It gets more specific than that. Consumer accounts and company accounts run under different policies at the same provider, and on the consumer side, whether your conversations are kept and used to improve the model can come down to a setting inside an account you have never seen. Somebody on your team made that choice on your client’s behalf, or more likely never saw that there was a choice to make.
And there is no record. If a client called you this afternoon and asked which third parties have held their material this year, you could answer for the vendors you signed with. For the rest, you would have to go and ask your team, and hope they remember.
The people doing it are your best people
This is the part that decides whether you handle it well.
The person doing this most is usually the person who cares most about the work landing properly. They wanted the email to read better and the summary to be right, and they got there faster than they would have on their own. That is the behavior you hired for.
Nobody ever sat them down and explained that dropping a document into a text box hands it to a company your business has never had a conversation with. From where they are sitting it looks like using a tool that happens to be very good at its job. The screen carries no warning, and nothing in that person’s day tells them they have just made a decision on behalf of the company.
They made a reasonable call with the information they had. You are the one who never gave them any more.
Both of the obvious responses make it worse
There are two reflexes here, and both of them make things worse.
The first is to ban it. You send the email and you have the accounts closed on the work machines. The work still needs doing, so the same documents go into the same services that evening, from a personal laptop at home. You have changed nothing about the exposure and you have removed your last way of asking about it, because the question now requires someone to admit they broke a rule. That leaves you in a worse position than the one you were in this morning, when at least nobody had a reason to keep it from you.
The second is to publish an approved list. It feels like the careful, grown-up option and it has a shorter shelf life than anyone expects. What that document records is a decision somebody made a year ago, and the work has kept moving every week since. Tools that are doing real work in your company this month came along after that list was written, so it already describes a company that no longer exists.
I said this publicly yesterday and I will say it again here. Technology is moving fast enough that if you want to take advantage of it and grow in real time, you have to capture what is actually happening on a regular basis.
So what you need is a live record. A written list of which services your company’s work is going into, updated because somebody keeps asking, with the new ones added the week they show up.
The part you already signed
Here is where this stops being an operational annoyance.
Open the client contracts in your drive. There is a confidentiality clause in there, and somewhere in the longer ones a data handling schedule names who is allowed to touch the client’s material and where it is permitted to be processed. At least one of those clients made you sign an NDA before you started. Those are real documents with your signature on them, and they were signed by you, on behalf of the company, to a customer who believed you.
None of those documents care whether the person who pasted the material understood what they were doing. When client material goes into a service nobody assessed, you are outside a commitment you made. Nobody has to find out for that to be true, and good intentions on the day do not put you back inside it.
I have written before about the vendor you did choose, and the continuity risk in building your operation on a model you rent from somebody else. That piece is about what happens the morning access disappears. Here the vendors were never chosen by anyone at all, and the obligation attached to them was already yours before any AI product existed.
It does not route to IT either. IT can implement a rule once you have made one, and it can configure an account properly. The promise was made founder to client. A queue cannot hold a promise you signed.
Treat it as something to enable
Handled as a discipline problem, this gets quieter and nothing else about it changes. You will have the same documents going to the same places, with a team that has learned it is safer to say nothing.
The version that works starts from the fact that your team is ahead of you here, and your job is to catch up in public.
That looks like four things.
Ask people what they are actually using, and make the honest answer free. You only get the real list if nobody is in trouble for giving it to you, and you should say that out loud before you ask.
Give them a company account for the things they are already doing, with the terms read properly and the retention settings chosen by somebody who understood them. The behavior stays the same and the account moves somewhere you control.
Write down what is fine to paste and what is not, using their real work as the examples. A rule like “client material and anything with a customer’s name in it goes in the company account only” survives contact with a working day, because a person can check their own screen against it in a second. Vaguer wording gives them nothing to check against.
Put a name against the question. Somebody has to keep the record current, because the record decays the moment nobody is maintaining it.
You could do all of that this week with a notebook and four conversations. At the end of it you know what your company runs on, which is a thing you are supposed to know.
Where to start
You cannot write a sensible rule about AI until you know what is already happening under your roof.
So before you decide what is allowed, find out what is being used. Go to the four or five people who produce the most work in your company and ask them what they used this week and what they put into it. Frame it as a question about the work itself, and tell them plainly that nothing they say gets anyone in trouble.
Write down every answer, including the ones that make you wince. That list is the actual state of your company, and it is the only honest place to start. Get it on paper this week, then decide what your clients would want you to do about it.