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Guest Accounts: The Shadow IT Problem Hiding in Plain Sight
Remember when Shadow IT meant employees sneaking SaaS tools like Monday.com, Slack and Dropbox into the office? Those days feel old-fashioned now. Today's Shadow IT crisis is happening right inside your approved Microsoft 365 environment, and it's probably worse than you think. I'm talking about guest accounts. You know, those external user invites that seemed like such a great idea when your team needed to collaborate with that consultant last quarter. The ones that are still active six months later, long after the project ended.
How We Got Here
Guest accounts had the right intention. I remember in 2020 when Microsoft 365 adoption reached a tipping point; the enterprise response to “external sharing” was to use guest accounts. If the organization was only worried about having to manage upwards of a hundred individual guests, then I understand the attraction to guest accounts. However, the reality for enterprises is that they must manage not just thousands of individual guests, but in some cases thousands of external organizations. This would be like asking your users to submit a ticket to IT every time they wanted to send an email attachment outside the organization; the centralized nature of guest accounts was never going to scale to the enterprise.
The worst part? Unlike traditional Shadow IT, these guest accounts live inside your "secure" environment. You must open up your tenant, provide access to your SharePoint sites, and their lifecycle is often not managed until the next compliance audit rolls around.
The Real Cost of Guest Sprawl
Here's what keeps me up at night: Microsoft 365 has over 50 different external sharing settings spread across Entra ID, Teams, SharePoint, OneDrive, and Purview. Each service has its own admin center, its own defaults, and its own way of handling permissions.
The result? A governance nightmare that would make even the most organized IT team throw up their hands. When organizations finally take a closer look at their guest accounts, the picture is rarely pretty. It’s common to find accounts that belong to people who left their companies months ago, or worse—accounts still holding access to sensitive, even confidential, information.
This isn’t just an IT oversight. Ιt’s a business risk. And regulators are starting to notice.
A Better Way Forward
The solution isn't to shut down external collaboration (good luck with that conversation). Instead, we need to rethink how we approach it entirely. At eSHARE, we've been advocating for what I call "Trusted Collaboration" built on three principles:
1. Bring Your Own Identity (BYOI)
Instead of creating guest accounts in your tenant, let external users authenticate with their own company credentials. This eliminates the identity lifecycle management headache entirely. No more provisioning, no more forgotten accounts, no more wondering how many different external users might be “sharing” a guest account.
2. Keep Data Contained
This might sound obvious, but you'd be surprised how often "external collaboration" ends up meaning "email attachments" or "copy files to a third-party platform." By sharing links directly from Microsoft 365, you keep data contained in the tenant(SharePoint, Teams, OneDrive), you maintain one source of truth and full control over the lifecycle of the data. Wait – but how do I do this without enabling “anyone links” and opening up my tenant? You use eSHARE.
3. Dynamic Policy Enforcement
Enterprise collaboration has many different signals that must be considered during external collaboration driven by the need to protect sensitive information and maintain compliance. File sensitivity, file type, expiration, file size, allow/deny lists, authentication methods, location, are just a quick list of considerations that must be made when collaborating externally. To be able to analyze these signals Site permissions and team memberships are too rigid for modern collaboration. Instead, use Microsoft Information Protection labels to embed security directly in the files. This lets you control who can view, edit, or download specific documents, set automatic expiration dates, and even add watermarks—all while maintaining a clear audit trail.
The AI Factor
Here's something that's making this even more urgent: Copilot and other AI assistants are coming whether we're ready or not. And here's the thing about AI—it amplifies everything, including your governance gaps. If you have overshared files sitting in your tenant today, Copilot might surface that sensitive content in ways you never intended. I've seen demos where an AI assistant helpfully suggested confidential pricing information from a document that was shared too broadly months ago. This is why many CIOs are requiring proof of external governance before they'll greenlight AI tools at scale. It's not about being anti-innovation—it's about making sure the innovation doesn't accidentally expose what shouldn't be exposed.
Making the Change
Change is hard, especially when current processes "work" from a user perspective. But the regulatory landscape is tightening, AI is coming whether we're ready or not, and the cost of getting this wrong keeps going up. Here's what we tell the executives we work with: start by understanding your current exposure. How many guest accounts do you actually have? How many external shares are active right now? Most organizations are shocked by the numbers. Then, start small. Pick a pilot group and try the BYOI + in-tenant + content-level approach. See how it feels. Measure the difference in both security posture and user experience. The platforms are getting better too. Solutions like eSHARE are making it easier to implement this model without adding friction for users. You can even maintain your own branded domain for shared links, which helps with trust and reduces the chance that email filters will block them.
The Bottom Line
Shadow IT evolved. It didn't go away; it just got more sophisticated. Today's version looks like a guest account that's been active for two years, with access to documents the original user forgot they shared. The good news? We have better tools now to deal with it. The combination of BYOI, in-tenant sharing, and content-level policy enforcement gives us a way to maintain security without killing collaboration. The question isn't whether you need to address guest account sprawl: it's whether you'll do it proactively or wait for a compliance audit to force your hand. I know which option I'd choose.
Join the Conversation
Forward-looking enterprises are rethinking guest accounts and moving toward Trusted Collaboration. eSHARE is helping global organizations reduce guest sprawl, protect sensitive data, and enable secure external sharing without adding friction. Explore how your peers are making the shift at the Impact Leaders Hub. Contact the Hub today.
Remember when Shadow IT meant employees sneaking SaaS tools like Monday.com, Slack and Dropbox into the office? Those days feel old-fashioned now. Today's Shadow IT crisis is happening right inside your approved Microsoft 365 environment, and it's probably worse than you think. I'm talking about guest accounts. You know, those external user invites that seemed like such a great idea when your team needed to collaborate with that consultant last quarter. The ones that are still active six months later, long after the project ended.
How We Got Here
Guest accounts had the right intention. I remember in 2020 when Microsoft 365 adoption reached a tipping point; the enterprise response to “external sharing” was to use guest accounts. If the organization was only worried about having to manage upwards of a hundred individual guests, then I understand the attraction to guest accounts. However, the reality for enterprises is that they must manage not just thousands of individual guests, but in some cases thousands of external organizations. This would be like asking your users to submit a ticket to IT every time they wanted to send an email attachment outside the organization; the centralized nature of guest accounts was never going to scale to the enterprise.
The worst part? Unlike traditional Shadow IT, these guest accounts live inside your "secure" environment. You must open up your tenant, provide access to your SharePoint sites, and their lifecycle is often not managed until the next compliance audit rolls around.
The Real Cost of Guest Sprawl
Here's what keeps me up at night: Microsoft 365 has over 50 different external sharing settings spread across Entra ID, Teams, SharePoint, OneDrive, and Purview. Each service has its own admin center, its own defaults, and its own way of handling permissions.
The result? A governance nightmare that would make even the most organized IT team throw up their hands. When organizations finally take a closer look at their guest accounts, the picture is rarely pretty. It’s common to find accounts that belong to people who left their companies months ago, or worse—accounts still holding access to sensitive, even confidential, information.
This isn’t just an IT oversight. Ιt’s a business risk. And regulators are starting to notice.
A Better Way Forward
The solution isn't to shut down external collaboration (good luck with that conversation). Instead, we need to rethink how we approach it entirely. At eSHARE, we've been advocating for what I call "Trusted Collaboration" built on three principles:
1. Bring Your Own Identity (BYOI)
Instead of creating guest accounts in your tenant, let external users authenticate with their own company credentials. This eliminates the identity lifecycle management headache entirely. No more provisioning, no more forgotten accounts, no more wondering how many different external users might be “sharing” a guest account.
2. Keep Data Contained
This might sound obvious, but you'd be surprised how often "external collaboration" ends up meaning "email attachments" or "copy files to a third-party platform." By sharing links directly from Microsoft 365, you keep data contained in the tenant(SharePoint, Teams, OneDrive), you maintain one source of truth and full control over the lifecycle of the data. Wait – but how do I do this without enabling “anyone links” and opening up my tenant? You use eSHARE.
3. Dynamic Policy Enforcement
Enterprise collaboration has many different signals that must be considered during external collaboration driven by the need to protect sensitive information and maintain compliance. File sensitivity, file type, expiration, file size, allow/deny lists, authentication methods, location, are just a quick list of considerations that must be made when collaborating externally. To be able to analyze these signals Site permissions and team memberships are too rigid for modern collaboration. Instead, use Microsoft Information Protection labels to embed security directly in the files. This lets you control who can view, edit, or download specific documents, set automatic expiration dates, and even add watermarks—all while maintaining a clear audit trail.
The AI Factor
Here's something that's making this even more urgent: Copilot and other AI assistants are coming whether we're ready or not. And here's the thing about AI—it amplifies everything, including your governance gaps. If you have overshared files sitting in your tenant today, Copilot might surface that sensitive content in ways you never intended. I've seen demos where an AI assistant helpfully suggested confidential pricing information from a document that was shared too broadly months ago. This is why many CIOs are requiring proof of external governance before they'll greenlight AI tools at scale. It's not about being anti-innovation—it's about making sure the innovation doesn't accidentally expose what shouldn't be exposed.
Making the Change
Change is hard, especially when current processes "work" from a user perspective. But the regulatory landscape is tightening, AI is coming whether we're ready or not, and the cost of getting this wrong keeps going up. Here's what we tell the executives we work with: start by understanding your current exposure. How many guest accounts do you actually have? How many external shares are active right now? Most organizations are shocked by the numbers. Then, start small. Pick a pilot group and try the BYOI + in-tenant + content-level approach. See how it feels. Measure the difference in both security posture and user experience. The platforms are getting better too. Solutions like eSHARE are making it easier to implement this model without adding friction for users. You can even maintain your own branded domain for shared links, which helps with trust and reduces the chance that email filters will block them.
The Bottom Line
Shadow IT evolved. It didn't go away; it just got more sophisticated. Today's version looks like a guest account that's been active for two years, with access to documents the original user forgot they shared. The good news? We have better tools now to deal with it. The combination of BYOI, in-tenant sharing, and content-level policy enforcement gives us a way to maintain security without killing collaboration. The question isn't whether you need to address guest account sprawl: it's whether you'll do it proactively or wait for a compliance audit to force your hand. I know which option I'd choose.
Join the Conversation
Forward-looking enterprises are rethinking guest accounts and moving toward Trusted Collaboration. eSHARE is helping global organizations reduce guest sprawl, protect sensitive data, and enable secure external sharing without adding friction. Explore how your peers are making the shift at the Impact Leaders Hub. Contact the Hub today.
FAQ
How can CIOs ensure compliance and audit readiness in Microsoft 365?
Balancing collaboration speed with strong governance is the top challenge. Features like Teams/SharePoint external sharing can create oversharing and audit gaps if unmanaged. Pairing Microsoft Purview with a guest-less external collaboration layer like eSHARE keeps data in-tenant, applies existing controls, and gives CIOs/CISOs the visibility they need without slowing work.
What is the biggest Microsoft 365 governance challenge for CIOs and CISOs today?
Balancing collaboration speed with strong governance is the top challenge. Features like Teams/SharePoint external sharing can create oversharing and audit gaps if unmanaged. Pairing Microsoft Purview with a guest-less external collaboration layer like eSHARE keeps data in-tenant, applies existing controls, and gives CIOs/CISOs the visibility they need without slowing work.
How do organizations manage Microsoft 365 guest account sprawl?
Balancing collaboration speed with strong governance is the top challenge. Features like Teams/SharePoint external sharing can create oversharing and audit gaps if unmanaged. Pairing Microsoft Purview with a guest-less external collaboration layer like eSHARE keeps data in-tenant, applies existing controls, and gives CIOs/CISOs the visibility they need without slowing work.
