In the wide world of companies that offer cybersecurity solutions, US-based CrowdStrike is considered the leader in the specific area of endpoint protection. This means protection of any device connected to an organization's network, from laptop computers to tablets to switches and digital printers.
In this arena, CrowdStrike’s main competitor is none other than Microsoft. CrowdStrike CEO George Kurtz even declared last year, at a Goldman Sachs conference, that Microsoft would always be a competitor, and that "you can never discount Microsoft Azure's capabilities."
Two other competitors of CrowdStrike are companies founded by Israeli entrepreneurs: Palo Alto Networks (Nir Zuk), and SentinelOne (Tomer Weingarten, Almog Cohen and Ehud Shamir), both which have development centers in Israel. Now, in the light of the welter of glitches at CrowdStrike, which are reportedly to do with software updates and not a security breach, the question arises whether the company’s credibility in the eyes of its customers has been severely damaged, and whether that will push them to replace their endpoint protection provider.
"We’re witnessing a very complicated event," a market source told "Globes", explaining that it could have continuing repercussions, including compensation to customers and possibly lawsuits.
"Endpoint protection is dominated by two players, Microsoft and CrowdStrike," the source said. "There are other companies that also provide endpoint protection, but not as their main product. The only company that perhaps focuses on this area is SentinelOne, so it can be presumed that they are celebrating there." In fact, SentinelOne’s share price rose by 7.85% on Friday, to give it a market cap of 6.8 billion, while Palo Alto's share price rose by 2.16%.
The competition between Microsoft and CrowdStrike came to the fore last year, when CrowdStrike released disappointing third quarter financials, which boosted Microsoft. The financials indicated a slowdown in revenue growth. Several analysts remarked at the time that the company’s results were impacted by Microsoft’s growing presence in cybersecurity.
Citigroup analyst Fatima Boolani estimated last year that Microsoft’s cybersecurity business was worth $20 billion annually, but that there was still a preference for companies like CrowdStrike on the part of customers. She stressed that from their point of view it was important to maintain separation between the security provider and the provider of the platform being protected.
CrowdStrike and Palo Alto Networks have similar sets of products. The difference between them, and it is especially important in view of the source of the current problem, mainly lies in the fact that, unlike those of Palo Alto, CrowdStrike’s products initially focused on endpoint protection, and over the years expanded to other areas, such as cloud security.
Despite the serious scope of the event, all those to whom "Globes" spoke estimated that, in the long run, it would not damage CrowdStrike substantially. "Replacing security products is very difficult, as is replacing the service provider," one source said. Another source added, "This is the first time that there has been an incident on this scale at CrowdStrike, and it should be remembered that there are glitches in the systems of the giants like Microsoft and Amazon. In the long run, if this kind of thing is not repeated, it’s insignificant."
CrowdStrike, he explained, will have to compensate its customers, and the customers will demand answers, and certainty that such an event won’t happen again and understanding of what happened. But, he said, "it’s not as though such a thing couldn’t happen at SentinelOne or at Palo Alto. If something like this happens once, it’s forgivable, but if it happens a third or fourth time, that could work in the competitors’ favor."
Published by Globes, Israel business news - en.globes.co.il - on July 21, 2024.
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