CrowdStrike IT outage: a global meltdown
Millions were affected by the CrowdStrike IT outage recently, which grounded flights and took the news off the air. Was this just a hiccup or a warning of much worse to come?
Millions of people across the globe were affected recently by possibly the most widespread IT outage ever seen.
Starting in Australia, and spreading across the world, companies and organisations experienced problems with PCs, servers and other IT equipment running Microsoft Windows – with many seeing the “blue screen of death”, indicating that Windows had failed to load.
Flights were grounded, NHS surgeries were crippled and media outlets were knocked off air. The issue, which affected 8.5 million computers worldwide, also caused hours of outages for various banks, money managers and stock exchanges, including problems at Bank of America and JPMorgan Chase.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
It was a “salutary moment”, said Sam Leith in The Spectator, and a reminder that “for all our technical advances, for all the vast complex architecture of the modern world, we’re never more than a fat-finger error away from a global pratfall”.
How did the CrowdStrike IT outage happen?
The meltdown was caused by an update made by the US cybersecurity firm CrowdStrike to its premium platform, a cloud-based software product called Falcon. Although many people won’t have heard of it before the Friday when it happened, CrowdStrike is a highly successful and well-regarded business, with $3.1 billion of revenues last fiscal year, whose software is widely deployed to protect business-critical IT infrastructure at some of the world’s largest companies.
The Nasdaq-listed firm was founded in 2011 and is based in Austin, Texas. It uses cloud-based software to sell services to businesses worldwide, including (according to its website) 538 of the Fortune 1,000 companies. Early that Friday morning, when CrowdStrike sent out an update to Falcon – which is intended to protect other computer systems and software such as Microsoft’s Windows products – it instead caused a malfunction that disabled those systems. With catastrophic results.
What went wrong?
CrowdStrike has not yet fully explained how the disaster happened. The software update it pushed out was supposed to teach its clients’ systems how to spot a particular type of cyberattack that had already been “observed in the wild”, said Alex Hern in The Guardian.
But, instead, it had a faulty piece of code that “triggered a logic error that resulted in an operating system crash”, according to the company. That didn’t just affect PCs using Windows systems, but also servers and other systems, as overwhelming requests from users, devices, services and businesses caused problems with other Microsoft products.
Ultimately, it seems almost certain that human error at CrowdStrike was to blame. But even so, there’s a more structural question here, about why CrowdStrike was pushing its update to all computers on its network at the same time, and why that update hadn’t been properly tested.
What lessons can we learn?
The scale of the disruption raises obvious questions about the over-reliance on dominant suppliers in critical infrastructure. Ironically, this is something that at least one CrowdStrike executive has drawn attention to. Drew Bagley, a CrowdStrike vice-president, warned of organisations where the “IT stack may include just a single provider for operating system, cloud, productivity, email, chat, collaboration, video conferencing, browser, identity, generative AI and increasingly security as well.”
This means that the building materials, the supply chain and even the building inspector are all the same”. Above all, the CrowdStrike chaos illustrates just how “fragile our networked world has become”, given a global IT system that prizes efficiency over stability, says The Observer. On this occasion, fixing the issue turned out to be relatively straightforward, although time-consuming and tedious.
So, that’s good news?
Good news, unless it lulls us into a false sense that this was just a “hiccup”, rather than a potential “dry run for something much worse”. As the global economy becomes more digitalised and interconnected, the threat from crashes, hacks and data breaches will only grow.
So the outage should serve as a wake-up call for a world and global economy that is becoming increasingly vulnerable to supply shocks, says Diane Swonk, chief economist at KPMG. That also “makes for a world that’s more susceptible to bouts of inflation”, as witnessed during the pandemic.
Part of the issue comes down to overly concentrated market shares in the business-to-business software sector, says Karen Kwok on Breakingviews. CrowdStrike, which claims to be the most widely used seller of endpoint security, had 19% of the market in the second quarter of 2023, according to research firm Canalys. Meanwhile, just three companies – Google, Amazon and Microsoft – account for two-thirds of the cloud-provider market.
What should be done?
First, business and governments need to understand their exposure in order to build resilience, says the Financial Times.
Second, once vulnerabilities are mapped, organisations “need to build redundancy into their operations” – that is, prepare second systems and contingency plans that ensure continuity of critical operations in the event of crisis. This could include diversifying their IT infrastructure by having more than one cybersecurity, operating system or cloud provider.
Third, there needs to be closer collaboration between government and business to share information on breaches, vulnerabilities and stress tests. There are “single points of failure” lurking within our globalised and highly networked economies.
The CrowdStrike episode is a critical reminder that “building resilience into our physical and digital economic systems is essential, and should not be postponed. This will come at a cost, but will bring the benefit of insuring against even costlier threats”.
This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.
Sign up to Money Morning
Our team, led by award winning editors, is dedicated to delivering you the top news, analysis, and guides to help you manage your money, grow your investments and build wealth.
Simon Wilson’s first career was in book publishing, as an economics editor at Routledge, and as a publisher of non-fiction at Random House, specialising in popular business and management books. While there, he published Customers.com, a bestselling classic of the early days of e-commerce, and The Money or Your Life: Reuniting Work and Joy, an inspirational book that helped inspire its publisher towards a post-corporate, portfolio life.
Since 2001, he has been a writer for MoneyWeek, a financial copywriter, and a long-time contributing editor at The Week. Simon also works as an actor and corporate trainer; current and past clients include investment banks, the Bank of England, the UK government, several Magic Circle law firms and all of the Big Four accountancy firms. He has a degree in languages (German and Spanish) and social and political sciences from the University of Cambridge.
-
Investors pull money from UK equities as government warns of “painful” Budget
The government’s post-election honeymoon period has been short-lived, and investors are shying away from UK equities as a result
By Katie Williams Published
-
Top global fintech companies to invest in
One British fintech hogs the headlines, but there are two top performers in the US. We explain where you should put your money
By David C. Stevenson Published
-
Modi’s reforms set Indian stocks on fire
Indian stocks pass a new milestone, but global fund managers are holding back. Are there signs of overheating?
By Alex Rankine Published
-
How to improve economic output using the supply-side approach
Boosting potential economic output through public investment is crucial, says David C. Stevenson
By David C. Stevenson Published
-
Is China following Japan's economy and stock market?
China is dealing with deflation and an unappealing stock market. Is it following in the footsteps of Japan?
By Alex Rankine Published
-
Will Mpox be the new Covid?
Not if Mpox can be contained, says the World Health Organisation. But will it be?
By Simon Wilson Published
-
Mexico passes controversial judicial reform – will it hurt investors?
What will Mexico's new reform mean for investors and the country's economy?
By Alex Rankine Published
-
Has the world conquered inflation?
The Central Bank has tackled inflation around the world – but what was the pay-off?
By Alex Rankine Published
-
Why are tourists a problem around the world?
Tourists are good for the economy, but not always for residents, says Alex Rankine
By Alex Rankine Published
-
Ukraine invades Russia – what are the political implications?
Ukraine's surprise invasion into Kursk could change the course of the war politically
By Stuart Watkins Published