The world quickly learned that the global tech outage on Friday was caused by cybersecurity firm CrowdStrike. However, determining who will foot the bill for the damages may take much longer, writed CNN
One cybersecurity expert described the event as the “largest IT outage in history,” leading to the cancellation of more than 5,000 commercial airline flights worldwide and disrupting businesses from retail sales to package deliveries and hospital procedures. The resulting losses include significant revenue declines and decreased productivity.
Cause and Impact
The outage was triggered by faulty code in a software update from CrowdStrike. Fixing the mistake proved much more time-consuming than causing it, and it could take days before all systems return to normal. In a social media post late Sunday, CrowdStrike reported that “a significant number” of the approximately 8.5 million affected devices were back online. The company apologized once again for the disruption.
Compensation and Accountability
Despite the apology, CrowdStrike has not indicated whether it intends to compensate affected customers. When asked by CNN about potential compensation, the company’s response did not address the question. Experts predict demands for remuneration and possible lawsuits.
“If you’re a lawyer for CrowdStrike, you’re probably not going to enjoy the rest of your summer,” said Dan Ives, a tech analyst at Wedbush Securities.
Cost of the Outage
Experts agree that it is too early to provide a precise estimate of the costs associated with Friday’s outage. However, these costs could easily surpass $1 billion, according to Patrick Anderson, CEO of Anderson Economic Group, a Michigan research firm specializing in economic impact assessments of events like strikes and business disruptions. His firm estimates that a recent hack of CDK Global, a software provider for US car dealerships, reached the $1 billion mark. While that outage lasted much longer — about three weeks — it was limited to one industry.
“This outage is affecting far more consumers and businesses, causing disruptions ranging from inconvenience to serious operational issues, resulting in out-of-pocket costs that are hard to recover,” Anderson said. He added that the costs could be particularly significant for airlines due to lost revenue from canceled flights and additional labor and fuel expenses for delayed flights.
Customer Retention
It remains unclear how many customers CrowdStrike might lose due to the outage. Ives from Wedbush Securities estimates that less than 5% of customers might switch to other providers.
“They’re such an entrenched player, moving away from CrowdStrike would be a gamble,” he said.
Switching providers can be difficult and costly for many customers. However, the real damage to CrowdStrike could be reputational, making it challenging to attract new clients.
“Today, CrowdStrike becomes a household name, but not in a good way, and this will take time to settle down,” Ives said.
Company Response
CrowdStrike CEO George Kurtz stated in an interview on CNBC Friday morning that the company is focused on resolving the ongoing issues and that he believes most customers have been understanding.
“My goal right now is to make sure every customer is back up and running,” he said. “I think many customers understand it’s a complex environment, and staying one step ahead of the bad guys requires these content updates.”
Even if customers are understanding, it is likely that CrowdStrike’s competitors will use Friday’s events to try to lure them away.
“It’s a very competitive business. There will be salespeople from other companies jumping in and saying, ‘This has never happened to us,’” said Eric O’Neill, a cybersecurity expert and former FBI counterintelligence operative. “They’re an excellent company doing important work. I hope they survive this. If they don’t, the only winners will be the cybercriminals.”
US-based cybersecurity company CrowdStrike is among the most popular cybersecurity providers in the world, with nearly 30,000 subscribers globally.
The firm was a software company preferred by investors, due to its growth and high margin.
CrowdStrike’s stock price has doubled over the past year, but fell more than 11% on Friday after the IT outage disrupted operations across several industries.
