Behind a massive IT failure that grounded flights, upended markets and disrupted corporations around the world is one cybersecurity company: CrowdStrike Holdings.
Known as a dominant supplier of software that protects businesses from ransomware attacks, CrowdStrike was thrust into the spotlight on Friday as it struggled to fix a faulty patch that led to cascading, system-wide failures, paralysing the operations of clients ranging from banks to global retail giants to health-care systems on Friday.
Wall Street’s reaction to CrowdStrike’s monumental gaffe was swift. Its shares tanked as much as 15% in New York trading on Friday, wiping out almost US$8 billion ($10.76 billion) of its market value. The company is still worth nearly US$80 billion.
CrowdStrike was founded by former executives of antivirus pioneer McAfee Inc. and launched in 2012. It has grown into the leading maker of a relatively new type of security software that’s considered among the best defenses against ransomware and other hacking threats.
It controls about 18% of the US$8.6 billion global market for so-called “modern” endpoint protection software, just ahead of archrival Microsoft, according to market research firm IDC.
The company’s growth has bucked the broader trend in cybersecurity, with the firm reporting blockbuster earnings in its most recent quarter. Chief executive officer George Kurtz used the opportunity to take potshots at its bigger rival, commenting in May: “There’s a widespread crisis of confidence among security and IT teams within the Microsoft security customer base.”
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The type of software CrowdStrike supplies is separate and distinct from older, more limited types of security software. Traditional antivirus software was useful in the early days of computing and the internet for their ability to hunt for signs of known malware, but it has fallen out of favor as attacks have become more sophisticated.
Now, products known as “endpoint detection and response” software that CrowdStrike develops do far more, continually scanning machines for any signs of suspicious activities and automating a response.
But to do this, these programs have to be given access to inspect the very core of the computers’ operating systems for security defects. This access gives them the ability to disrupt the very systems they are trying to protect. And it is how Microsoft’s Windows systems came into play in Friday’s outage.
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Representatives of Austin, Texas-based CrowdStrike confirmed online reports that a glitchy update was responsible for disabling potentially millions of corporate and government Windows computers around the world and causing the dreaded “blue screen of death”.
The company pegged the incident to “a defect found in a single content update for Windows hosts”, in a statement on Friday and said the outage wasn’t down to a cyberattack or security breach.
Anyone using a Mac or Linux machine isn’t impacted, the company said, adding that “a fix has been deployed”.
To add to the confusion, an apparently separate incident involving Microsoft’s Azure cloud services also caused disruption on Friday. In a status update, Microsoft said it had fixed the underlying issue but that users would continue to experience “residual impact”.
While cybersecurity professionals say CrowdStrike’s technology is a strong way to defend against ransomware, its cost — which in some cases can be more than US$50 per machine — means that most organizations don’t install it on all of their computers.
What that means, however, is that the computers that have the software installed on them are among the most important to protect, and if they go down, key services can fall with them.
One important, outstanding question is whether CrowdStrike’s software fix can be rolled out automatically or manually.
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“It was a content bug, or update, that we sent out and we’ve identified, and that we’ve rolled back,” Kurtz said in an interview with CNBC on Friday. He apologised to affected customers, and said some systems would take a few hours to come back online while others would take longer.
“There could be some manual steps involved, and we’re looking at ways to be able to automate those manual steps,” he added.
In practice, affected entities — from banks to bourses to shipping ports — might take days to fully come back online, according to Alan Woodward, professor of cybersecurity at the University of Surrey.
“You’ll have men in white vans going around to try manually fix this problem even when they put out a fix,” Woodward said in an earlier interview with Bloomberg News. “To use the laptops, they’ll have to manually intervene — that is a big job.”
There’s also the question of how the bad rollout happened to begin with.
“CrowdStrike is meant to keep these machines safe,” Woodward said. “This is the sort of thing ransomware would do, but imagine ransomware simultaneously hitting the biggest organisations in the world — container ports in the Baltics, hospitals, railway stations, they’ve all been hit at once because of this one little file.”
CrowdStrike’s customer base comprises large organisations that have a large number of remote machines to manage, he said. “The economic impact is going to be huge.”
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CrowdStrike has been a top pick of The Edge Singapore's in-house analyst Thiveyen Kathirrasan since 2021. As at July 19, its stock price has risen some 277% over the past five years.
Read more about this Nasdaq-listed company:
- From 2021: CrowdStrike Holdings: Growing niche
- From 2022: CrowdStrike Holdings: This is one winner we are keeping
- From 2023: CrowdStrike Holdings: Keeping the faith
- From 2023: CrowdStrike Holdings: Best-performing counter with consistently improving numbers
- From 2024: CrowdStrike Holdings: Keeping faith with this winner
