AI is causing a new wave of shadow IT, warns HCL’s Ashish K Gupta

Ashish Gupta

The explosion of AI adoption is leading to a rise of shadow IT in many enterprises – unsanctioned technologies being used without IT leaders’ knowledge or permission.

That’s according to Ashish K Gupta, Head of EMEA for multi-national IT services company, HCL Technologies, who cautions:

AI now is being used a lot by business stakeholders, but not by IT folks. For example, a lot of Life Sciences firms are starting to deploy AI, and other specialist organizations are doing a lot of experiments. But the IT department is just not involved.

It’s in the nature of technology that it always starts at the edge [of an organization], then moves towards the center and the core. But with things like ChatGPT and Bard coming into the picture, the need for the technology function to start getting involved with AI adoption is only increasing.

As seen before - with cloud computing for example -there are risks in piecemeal adoption taking place without oversight from the IT department, or from the CIO or CDO.  In this case, one issue is that unwary line-of-business users may be divulging IP and other privileged data to AI companies. This may create data privacy or security threats that leave IT leaders in regulators’ crosshairs as the senior responsible owners. Gupta continues:

When a technologist implements AI in an organization, he or she will consider – far more than a business person will – issues like data privacy and intellectual property. They are not going to experiment with a technology just because it’s there! But at the moment, large-scale AI experimentation is largely being done between AI researchers and innovation units, and not by core technology functions.

That begs the question as to what percentage of AI and other new technology adoption is being driven by IT and how much is covert – based on departmental needs, or a desire to be on trend with faddy new toys? Gupta can’t quote exact figures, but says:

There was a time when everything used to run through IT, or the CIO’s desk. But I can tell you that is now a rapidly falling curve. And as technology becomes more democratized, and as business becomes more intelligent about using it for competitive advantage, the percentage of IT department involvement is only going to decrease further.

Gartner has said that the buying center is not just the technology department anymore. Like oil, it's being consumed everywhere, so buying power is shifting to where decisions are made about how best that technology can be used.

Right now, there are specialist researchers, say in pharma companies, who know AI and machine learning like the backs of their hands. So, they understand three domains: chemistry, biology, and computation – including AI and machine learning.  Yet there is no IT person who can really contribute to that conversation. But IT does understand the importance of data security.

But departments that have a niche, specialist focus are surely only one factor in AI adoption. In recent months, large-scale, popular uptake has taken place in broader business functions, such as sales, marketing, and content generation. Workers are rushing to use tools like ChatGPT, Bard, Stable Diffusion, Midjourney, and others, for day-to-day, creative tasks – sometimes to impress corporate shareholders.

As seen in diginomica's recent interview with the CEO of start-up Private AI, this has security implications too, as more and more data is divulged to technology providers, often without IT’s knowledge or consent. And as previously reported (see diginomica, passim), that wave of adoption also dispels the myth that AI and other Industry 4.0 technologies will automate boring tasks, and thus free up staff to be more creative. 

In reality, the reverse is happening. AI is increasingly doing the creative work while humans feed the machines, forcing down the earning potential of skilled, creative professionals in the process. Gupta acknowledges these problems, observing:

Taking more and more of the work that we would classify as creative? It’s an unstoppable trend. AI is only going to take more of those tasks, and technology will become much better at doing them.

Then he makes an interesting point:

But think about the human brain: the left lobe, and the right lobe. Our computers can master what we do on the left side of our brains [logical reasoning and calculation] very well. But the reason why a Michelangelo or Mozart existed is because they had highly developed right brains [centres of creativity and intuition]. 

I don't think the technology industry is anywhere near to creating a right brain [AI], and combining that with the left to recreate what a human mind can do.

Perhaps not. But it could be argued that AI companies appear to be reducing many human workers to a mass of left-brain thinkers, and – implicitly – devaluing our more creative halves and instincts.

Aside from all this, IT services companies such as HCL Technologies have a key role to play in educating businesses about the tools available to them, and enabling leaders’ strategic visions. Particularly when it comes to digitization initiatives, such as moving workloads into the cloud.

On the face of it, HCL has capitalized on these trends in recent quarters. Gupta says:

We had a very robust year in 2022. Our year end is in March, and we were among the top fastest-growing providers in the IT services industry globally. And within HCL, EMEA was the fastest-growing region. It was propelling a lot of that growth.”

Great news for HCL, and for Gupta as head of region. However, the COVID spike in many customers’ transformation projects is now less of an influence on sales, he acknowledges:

Levels of growth have decreased, so they are no longer in the high twenties. It's going to be a lot more muted: we've given guidance of about seven percent this year. But that is still more than most organizations will report in the services space.

This may be one reason why HCL has, to date, not made the large-scale job cuts of many other big players, laying off relatively small numbers of staff in specific regions and projects, such as India, the Philippines, and Guatemala. Gupta explains:

There's no systemic pressure for us to not honour the offers we’ve made, which is what a lot of tech companies have done, or to significantly reduce staff. If you hear such news in a particular region, it will be local to that delivery center, or to a specific client and market context.

That said, digitization is still the major driver of that growth as services companies help clients shift workloads into the cloud. One healthy market for HCL has been the energy, oil, and gas sector, according to Gupta. There, companies have grasped the financial opportunity to push for digital transformation – in part to help them on their journey towards 2050’s Net Zero emissions target:

Top of mind is the energy sector, obviously given Ukraine. In energy, oil, and gas, people now have a lot more money. And a lot of that is flowing back into transformation programs, which they couldn't, or wouldn't, have funded if they were not making the money they are now.  So, you're starting to see significant amounts of cash flow into technology transformation and digitization in the energy, oil, and gas sectors.

This assertion that energy giants have begun ploughing their (in some cases) vastly inflated profits into digital transformation is fascinating, because it contradicts the words of Dhara Vyas, Deputy CEO of trade association Energy UK, last week, when she told a techUK event on digital transformation in that sector:

It's been a really tumultuous political, media and public space, which has impacted on the security of supply, and on cost, and on the complexity and resources that have been required. As a result, data and digitization projects have effectively been put on the back burner, especially since the Energy Data Taskforce made their recommendations.

For his part, Gupta observes:

I would say the energy and utilities sectors are not the most aggressive in terms of technology adoption. But I suspect that, given the amount of additional money now available to them, they are using some of that to drive modernization, which they haven't invested in for a very long time. Technology transformation programs are definitely up in in the utilities and oil and gas industries.

My take

Valuable insights from an astute – and refreshingly candid – commentator, insights which reveal that the subtext of many industry narratives is more interesting than the main story that some sectors would have us believe.