The fad of relying on external software vendors is now in question. When many Fortune 500 companies faced an outage in their Microsoft (MSFT) systems, it disrupted critical services. The system outage caused flight cancellations. It also had an impact on hospitals and banks.
Schwab (SCHW) customers could not trade stocks last Friday.
CrowdStrike (CRWD) pushed out an update that caused a Microsoft Windows BSOD, or blue screen of death. The IT department could quickly fix the crash by getting root access and deleting the CrowdStrike update file. However, this is a tedious task, especially for servers that are encrypted and require a security key.
The human error from the unexpected global outage is a turning point. It will raise awareness of the perils of centralizing critical functions on the Internet cloud. More importantly, corporations will question their reliance on third-party software for their software service needs.
Customers will not likely have a strong legal case to sue CrowdStrike. The firm is protected from terms of use. Instead, customers may consider other security services like ZScaler (ZS) or Palo Alto Networks (PANW).
Your Takeaway
The outage caused by a cybersecurity firm meant to avoid such scenarios is a negative development for the tech sector. Executives may extend their questions on the value of AI-related projects. That would pull tech stock valuations lower.
