Glossary
Shadow AI
AI tool subscriptions bought by individuals or teams outside any procurement or IT process: a ChatGPT seat on a personal card and expensed, a team plan on the company card, an annual invoice for seats nobody added to the software budget. It is shadow IT with a faster purchase loop and vendors that change price and tiers more often.
How is shadow AI different from shadow IT?
Shadow IT is the parent category, and the definition is the same: software bought without going through the people who track software. What sets AI spend apart is the purchase pattern. Seats are bought one at a time, by the person who wants one, on whatever card is nearest, and expensed afterwards. The vendors are young, ship new tiers often, and reprice at renewal. So the same tool can appear in a ledger three ways inside a year: a reimbursement, a card charge, and an invoice.
What does shadow AI look like in a ledger?
- A small monthly card charge from an AI vendor, often several from the same vendor on different cardholders.
- A reimbursement line to an employee whose expense report carried a personal AI subscription, which posts to the person rather than to the vendor.
- An annual invoice paid by bill pay or ACH once a team standardises on a tool, which a card feed never sees.
All three are recurring vendor charges, and the ledger holds all three, which is why it is the one place a client's AI spend can be totalled. The invoice is the card-blind one, and in a ledger it is usually the largest.
What can a ledger not tell you about shadow AI?
Who is using the tools, or whether anyone is. A ledger records what was paid, not who logged in. It can show that a team plan and an annual invoice for a second assistant are both being paid; whether either is idle is a question for the client, not for the books.
Every term in this glossary is defined from the general ledger, because that is the one place a company's whole software estate is already written down. See how a software spend audit reads a ledger for what that involves.