Nearly Half Of SaaS Applications Operate Outside IT Visibility, New Report Finds

As AI adoption accelerates, midsize organizations are struggling to keep pace with an increasing mix of unsanctioned applications, disconnected data and governance challenges that reach beyond traditional shadow IT management.

Rapid AI adoption is creating a host of new management challenges for midmarket teams already stretched thin. Unsanctioned applications, disconnected data and governance challenges extend far beyond traditional shadow IT management.

According to BetterCloud's 2026 State of SaaS Report, only 56 percent of applications in use have received formal IT approval.

The report also found that midsize organizations experienced a 41 percent increase in SaaS application usage over the past year, up from an average of 116 apps to 164.

The findings suggest that the "shadow IT" problem many organizations have been wrestling with for years has evolved. Now, unsanctioned AI tools, unmanaged SaaS applications, and data flowing outside of IT's purview, all contribute to environments that are potentially more difficult to control.

For midmarket IT, the central issue isn't simply about technology sprawl, Instead, governance, security and risk management concerns are creating a tapestry of challenges.

AI Is Expanding The Governance Problem

AI is giving rise to new concerns about security and visibility. BetterCloud found that 18 percent of organizations experienced data leaks originating from AI tools and chatbots, while another 18 percent reported data breaches linked to offboarded users who retained access to systems after leaving the organization.

These findings reinforce a broader concern that MES Computing has been tracking throughout the year: AI adoption is moving faster than governance.

MES Computing previously looked at how organizations are rushing to deploy agentic AI capable of making decisions and performing tasks independently. Security experts have warned that excessive permissions and inadequate oversight could introduce significant risk as organizations hand over greater authority to autonomous systems.

The same concerns apply to SaaS environments, where employees may connect AI applications to business systems, collaboration platforms and corporate data repositories without IT's involvement.

Visibility: A Persistent Challenge

Many midsize organizations lack the staffing and resources available to large enterprises—maintaining visibility across expanding application portfolios can become difficult.

The challenge deepens as organizations continue to invest in cloud services, security platforms, and AI-powered applications. In fact, MES Computing's analysis of the 2026 MES Midmarket 100 found that security remains the largest tech investment category among vendors serving the midmarket. That finding signals continued concern about cyber risk, access management, and governance.

Most organizations are not seeking to stop employees from adopting new tools. Rather, line-of-business teams are seeking productivity gains by experimenting with technologies that they believe will help them work more efficiently.

The problem arises when IT cannot determine which applications are being used, where sensitive data resides, and who has access to what.

Offboarding Risk Exposure

One of the more troubling findings in BetterCloud's report was the impact of incomplete offboarding processes.

As the number of SaaS applications grows, so does the complexity of managing identities across multiple platforms. Organizations can struggle to ensure that user accounts, permissions and application access are fully revoked when employees leave.

Whether an end user is an employee, contractor, or AI agent, unmanaged access can create unnecessary risk.

Practical Steps For Midmarket IT Leaders

Eliminating shadow IT may be an impossible goal. However, organizations can reduce risk by focusing on visibility and governance.

Some considerations for IT leaders:

Conduct regular SaaS discovery audits.

Renew application inventories as well as unused licenses.

Strengthen employee offboarding procedures.

Set policies for approved AI tools

Monitor access permissions for high-risk applications

Create governance that balances security with business transformation goals.

As AI adoption accelerates, and SaaS applications continue to dominate the software landscape, IT leaders may discover their biggest challenge isn't about managing shadow IT. It's managing an environment where employees, apps, and AI tools are increasingly operating out of IT's traditional governance boundaries.