The CrowdStrike outage underscored the need for consolidation in the cybersecurity market, and the tech company will likely help lead it, an analyst said Friday. CrowdStrike stock was up in morning trades.
The July crisis which was caused by a faulty update sent to customers disrupted networks worldwide. The meltdown, which sent shares of CrowdStrike into tailspin, also underlined the need for consolidation in the cybersecurity industry, BMO Capital Markets analyst Keith Bachman said in a client note.
"Despite the July outage, we think security spend will continue to consolidate to established market leaders, since there are benefits to having fewer products," Bachman, who attended CrowdStrike's user group and analyst event, wrote.
Many business customers and large organizations deploy security tools from different vendors which could make them vulnerable to serious network problems, including attacks. "An organization that has many different security products leaves gaps between solutions that bad actors can exploit," Bachman said.
Staffing also becomes a problem, he added. "Security staff remain in short supply, and fewer solutions require fewer people to manage."
CrowdStrike: Worries About 'Frankenstein Approach'
Bachman said this "Frankenstein approach to security can make security environments less safe."
The push for consolidation is essentially based on a "fear of Frankenstein." And despite the July crisis, CrowdStrike is in a strong position to lead the push for fewer vendors, Bachman argued.
"While we think the recent outage may make cross-selling more challenging for CrowdStrike in the next few quarters, we nevertheless think consolidation will be a tailwind for leading security vendors, including CrowdStrike."
This view is based on feedback from cybersecurity customers and channel partners who say CrowdStrike "continues to have the best security in markets served."
"While CrowdStrike's brand was damaged due to the outage caused by a process issue, the underlying tech is still well regarded."
CrowdStrike Stock
CrowdStrike stock rallied 3.7% to 287.63 on Friday, hitting a two-month high. Shares have retaking their 50-day line but are still below the 200-day moving average.
