Walk through almost any Colorado office this month and you’ll find someone using AI. A bookkeeper cleans up a spreadsheet in ChatGPT. A practice manager drafts a patient letter with an AI writing assistant. A project lead lets a note-taker bot join a client call. A sales rep installs a browser extension that summarizes every email.
None of them are trying to cause a problem. They’re trying to get through the day faster. But in most small and mid-sized businesses, nobody in IT or leadership could list which AI tools are in use, who signed up for them, or what company data has been pasted into them. That gap has a name: shadow AI.
This guide explains what shadow AI is, why it’s spreading, what it puts at risk, and the practical steps ABT recommends to get control of it without slowing your team down.
What is shadow AI?
Shadow AI is the use of artificial intelligence tools for work without the knowledge, approval or oversight of the people responsible for IT and data security. It’s the AI-era version of “shadow IT,” the old problem of employees using personal Dropbox accounts or unapproved apps. The difference is speed and data: AI tools are free or cheap, take seconds to start using, and work by having people paste in exactly the kind of information you’d least want leaving the building.
Shadow AI usually shows up in five forms:
| Key point | Shadow AI isn’t the same as “bad AI.” The exact same tool can be shadow AI in one business and approved AI in another. What changes is whether you know it’s being used, whether it’s set up under a business agreement, and whether there are rules for what data goes in. |
Why shadow AI is growing so fast
The short answer: AI is useful, and people found it before their employers did. Microsoft’s 2024 Work Trend Index found that 78% of AI users bring their own AI tools to work. At small and mid-sized companies, that number rises to 80%.
A few things make it worse in smaller organizations:
- No one owns the decision. Without a dedicated security team, nobody has been asked to pick an approved tool, so everyone picks their own.
- Free is frictionless. Signing up takes an email address. There’s no purchase order to trigger a review.
- AI arrives through updates. Vendors keep adding AI assistants to tools you already approved, so “approved software” quietly gains new capabilities.
- Policies lag behind. Many businesses either have no AI policy or have one nobody has read.
What’s actually at risk
The risk isn’t that AI exists in your business. It’s that sensitive information flows into tools you can’t see, can’t control and can’t audit. IBM’s 2026 Cost of a Data Breach research, as summarized by Baker Donelson, puts numbers on how common that gap has become:
Here’s what typically ends up in shadow AI tools, and why it matters:
There’s also a business-continuity angle. When an employee leaves, any AI accounts, saved chats and automations they built under a personal login leave with them, along with whatever company data is stored inside.
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Free Webinar · Wed, Oct 28 · 9:00 AM MT
Getting Control of Shadow AI, with ABT and FireTail
Finding the AI already in use, setting guardrails and proving governance. Recording sent to all registrants.
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Why it hits regulated industries hardest
Every business has data worth protecting, but some have legal obligations about where that data can go. If your organization handles health, financial or payment information, shadow AI creates compliance exposure on top of security risk.
This isn’t legal advice, and each framework has its own details. The common thread is that regulators and cyber insurers increasingly expect you to know which AI tools touch sensitive data and to show that you’ve set rules for them.
For more on the IT side of these rules, see our guides to managed IT for Colorado clinics and HIPAA and managed IT for Colorado law firms.
Why banning AI backfires
The instinctive reaction is to block AI entirely. In practice, blanket bans rarely work. People keep using AI on personal phones and home laptops, where you have even less visibility. You lose the productivity gains your competitors are getting. And employees learn that the policy is something to work around rather than follow.
| Tip: A better goal than “no AI” is “known AI.” Give people approved tools that are as easy to use as the ones they found on their own, and most will switch willingly. |
Five steps to get control of shadow AI
You don’t need an enterprise security program to make real progress. These five steps work for a 20-person office or a 400-person organization.
| 1 | Find it. Inventory the AI tools already in use across browsers, accounts and devices. Ask teams directly, then confirm with technical discovery, because self-reported lists always miss things. Platforms like FireTail can build this inventory automatically. |
| 2 | Rank it. Sort what you find by risk: which tools touch customer, patient, financial or confidential data, and which are low-stakes (rewording a social post is not the same as summarizing a patient chart). |
| 3 | Pick approved tools. Choose one or two business-grade AI tools with proper data agreements, single sign-on and admin controls, and make them easy to get. |
| 4 | Set simple guardrails. Write a one-page AI use policy covering what’s approved, what data never goes into AI, and who to ask. Back it with technical controls where you can, like blocking unapproved AI sites or restricting AI tools to company accounts. |
| 5 | Monitor and prove it. Revisit the inventory regularly and keep records. Frameworks like the NIST AI Risk Management Framework give you a common language for showing auditors, insurers and boards that AI use is governed. |
If the policy step is where you’re stuck, start with the basics you’ve likely already covered for other risks. Our Cybersecurity Awareness Month checklist and our guide to choosing the right MFA both apply directly to locking down AI accounts.
Signs you already have a shadow AI problem
| ☐ You couldn’t list every AI tool your team used last week ☐ You don’t have a written AI use policy, or nobody has signed it ☐ Meeting bots you don’t recognize are joining client calls ☐ AI features were added to your software and nobody reviewed the settings ☐ Employees use personal email to sign up for work tools ☐ Your cyber insurance renewal asked about AI and you weren’t sure how to answer |
If you checked two or more, you’re not alone, and you’re not behind. Most businesses are at exactly this stage. The good news is that getting visibility is usually quick, and it makes every decision after that easier.
How ABT helps Colorado businesses get control of AI
ABT’s managed IT services and cybersecurity teams work with businesses across Denver, Colorado Springs and Northern Colorado to bring AI out of the shadows. We help you see what’s in use, choose and configure approved tools, write practical policies, and keep it all monitored as your business and the AI landscape change.
Frequently asked questions about shadow AI
Is using ChatGPT at work considered shadow AI?
What’s the difference between shadow AI and shadow IT?
Should we just block AI tools?
How do I find out which AI tools my employees use?
Does shadow AI affect HIPAA or PCI compliance?
What should an AI use policy include?
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See shadow AI in action, and how to get control of it
Join ABT and FireTail live on Wednesday, October 28 at 9:00 AM MT. Free, with the recording sent to everyone who registers.
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| Bottom line: Your team is already using AI. Shadow AI becomes a risk only when you can’t see it. Find what’s in use, approve tools that fit how people work, set a few clear rules for sensitive data, and keep watching. That’s how you keep the productivity and lose the exposure. |
| Wendy Campbell, Director of Marketing Wendy leads marketing at Automated Business Technologies (ABT), a Colorado-owned managed IT, cybersecurity and office technology provider serving businesses since 2005 from offices in Centennial, Colorado Springs and Westminster. |