What We Learned From the Global Tech Outage Caused by CrowdStrike
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Selcuk Acar / Anadolu / Getty Images Times Square digital billboards in New York, New York, show a Windows error message after a CrowdStrike update caused a global outage.
Key TakeawaysAfter a CrowdStrike update caused a global tech outage Friday, analysts said the event could have lasting implications for the company and the big tech industry.Jefferies analysts said that the outage could affect CrowdStrike's financials due to expenses associated with remedying the issues and damage its reputation.Citi analysts said the scale of disruptions caused by the outage may also push regulators to examine the big tech ecosystem.
After a CrowdStrike (CRWD) update caused an outage affecting businesses and governments across the world Friday, analysts said there could be lasting implications for the company and the big tech industry.A defective update by the cybersecurity company disrupted Microsoft (MSFT) platforms, impacting organizations ranging from airlines to the London Stock Exchange. The news sent CrowdStrike shares tumbling Friday, while Microsoft shares were little changed.Outage Could Hit CrowdStrike's Bottom Line and Reputation, But Microsoft May Come Out UnscathedThe outage could negatively affect CrowdStrike through expenses associated with remedying the situation and damage to its reputation.Jefferies analysts said that while it's too early to know the exact implications of the outage on the company's financials, the timing is not working in CrowdStrike's favor. The outage happened in the last two weeks of the quarter when the analysts said "a large portion of business is done," raising the likelihood it could weigh down results.The analysts said that there could be an "expense burden" for the cybersecurity company as it works to appease impacted customers, which will likely mean "credits, discounting or additional free products" affecting margins.While the analysts highlighted that it's important that the outage was not related to a security issue and that CrowdStrike was transparent with its immediate response, they did say the incident could cause reputational damage that might deter customers and lead CrowdStrike to miss out on potential deals.While Microsoft was tied to the outage through disruptions to its systems, Jefferies analysts said the impact of the tech giant will likely be "minimal."Microsoft is "working closely with CrowdStrike and across the industry to provide customers technical guidance and support to safely bring their systems back online," CEO Satya Nadella said in an X post Friday.Scale of Disruptions Could Draw Regulatory ScrutinyThe scale of the outage also underlined the danger of consolidation within the tech industry where a few big players have a massive influence on the market, analysts said, and suggested it could draw attention from regulators to examine vulnerabilities in the ecosystem."Given the scope of the outage and scale of economic disruption, we expect fresh, louder debates on the limits of vendor consolidation (systemic risk) both across the IT stack and especially cybersecurity," Citi analysts said.The analysts noted the "outage will garner more political/regulatory attention" as "software vendors have clearly become so large and so interconnected where events like these are plainly showcasing their influence on the greater economic system." Read the original article on Investopedia.
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