The catastrophic results of software failures | David Tzemach

Updated: Nov 30, 2020

To understand the impact of software bugs and how they can lead to catastrophic results such as loss of life, damaged business reputation and the loss of billions, we’ll review three of the biggest and most devastating historical events caused by software errors:

The Patriot missile failure (1991)

In February of 1991 during the Gulf war, a U.S. Patriot missile defense system was deployed to intercept enemy missiles launched against American forces in Saudi Arabia. On one day, one of the missiles launched by the enemy succeeded in breaching the patriot defense system and achieved a direct hit on an American barracks.

A government report indicated that a software error led to an inaccurate tracking calculation which kept increasing while the system was online.

On the day of the incident, the Patriot defense system had been continuously working for a duration of more than a hundred hours, making the inaccuracy of the calculation serious enough to cause the system to fail to detect the incoming attack. As a result of this system failure, 28 American soldiers were killed and hundreds more were injured.

EDS Child Support System

In 2004, EDS introduced a complex and sophisticated IT system to the UK's child support agency. At the same time, the department for work and Pensions (DWP) decided to refactor their own software systems. Because of these changes, the two parts of the system which were supposed to integrate and work as one unit now became completely incompatible, leading to many errors and a dysfunctional system.

Because of this system failure, there was an overpay for about two million people, an underpay another seven hundred thousand and more than £5 billion in uncollected child support payments. In addition to the above, it was estimated that almost a quarter of a million cases, and thousands of new cases, got "stuck" in the system, and cost the UK taxpayers hundreds of millions of pounds.

The $440 million software error at Knight Capital

This is most likely one of the biggest and fastest losses in American history. In this case, a software bug triggered a $440 million loss in just 45 minutes. The firm's shares lost an estimated 75% in two days after faulty software flooded the stock market with unplanned trades. The event started on August 1st, 2012, when a new software update was implemented in the firm’s production environment. At around 9:00, the NY stock exchange opened for trading, after just 45 minutes, the firm’s servers had executed 4 million trades.

Ultimately, some shares on the NYSE shot up by over 300% leading to trading algorithms from other firms to understand that something is wrong and to exploit the bug in the Knight Capital's systems.

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