Criterion: McDonald’s data breach with the lot highlights the hazards of AI

Listed IT consultancy Atturra says the burgeoning data of AI is creating challenges for organisations, including the growing risk of data breaches.

When it comes to AI, mishandling underlying data can have 'burger with the lot' implications. Pic via Getty

• Listed IT consultant Atturra says AI projects are failing because organisations have not mastered Data Handling 101

• A global data breach potentially exposing the details of  McDonald's applicants highlights the growing risks 

• Investors risk entering the AI ‘hype cycle’ and overpaying for popular exposures

The CEO of IT consultancy Atturra (ASX:ATA) , CEO Stephen Kowal argues for a back-to-basics approach of properly curating  – and understanding – the burgeoning data created by AI.

“I guarantee that if you go to any company they won’t know where their data is stored,” Kowal says.

“The biggest challenge for them is understanding their data and how secure it is and how to control it.”

As if on cue, reports this week emerged of McDonald's suffering a global data breach that potentially saw the details of millions of applicants exposed.

McDonald's blamed its third party IT supplier.

The root of the problem was the company's McHire platform and its Olivia chatbot. Researchers accessed the "chat interaction records" of seven applicants using the password – and you guessed it – 123456.

Speaking generally,  Kowal likens the AI rush to building a mansion on foundations of sand if data handling procedures are lacking in the first place.

AI heightens data breach risks

The biggest listed IT consultancy and data integrator, Atturra assists organisations to get their data in order.

In that sense, the company is the AI equivalent of the saucepan vendors on the goldfields.

“We’ll sell the picks and shovels and can dig for the gold," Kowal says.

He says as the volume of stored data increase, data breaches are inevitable.

“But if our data is secure and encrypted and backed, up the breach is more like a flat tyre on a car, rather than a blimp that explodes with one pop."

Kowal has plenty of war stories of organisations experiencing the Hindenburg effect, beyond high-profile cases such as Optus and Medibank Private (ASX:MPL).

The trouble is, organisations often  “discover more than want discovered” – a “natural disincentive” for them to get to them the bottom of what data they hold.

"A lot of them are between a rock and a hard place," he says. "If you go and find everything there are rules requiring you to disclose stuff .

"So are you better off finding it or not? It's a really interesting dilemma."

Shaped by acquisitions

With a $300 million market cap, Atturra resulted from the 2015 combination of ad hoc businesses.

“We were all things to all people, so we focused on selected areas and data integration was one of those." Kowal says.

Atturra’s client base is biased to local government, schools, utilities and defence.

The company also boasts a rota of about 70 local manufacturers,  including boot maker RM Williams and brewer Bundaberg.

Atturra has been shaped by acquisitions, such as the 2019 pick-up of local government specialist Galaxy 42

The company reported revenue of $141 million for the December half, up 27% and a $4.2 million net profit, up 55%.

Atturra also held cash of $98 million and is undertaking a share buyback.

Kowal claims “no direct peer of our size and scale” on the ASX.

Who are we to argue?

Augmented reality is the new reality

The local bourse doesn’t have the equivalent of  Nasdaq chip maker Nvidia, which this week became the world's first US$4 trillion company.

But investors have piled into local data centre plays such as the $8.7 billion market cap NextDC (ASX:NXT) and $2 billion connectivity intermediary Megaport (ASX:MP1)

Arguably they are overloved.

A low-key alternative is the $67 million market cap Vection Technologies (ASX:VR1), which delves into the alternative universe of augmented reality.

It’s about more than funky avatars: in late June Vection signed a $4.4 million deal with a top ten global defence contractor, to deliver “mission-critical infrastructure and AI-enabled analytics”.

The deal takes revenue to date from the client to $10 million. There's also a potential $21 million in further work over the next five years.

This month Vection also signed a $4 million deal with Italian telco, Omniacom Group.

Vection says “heightened geopolitical tensions are accelerating demand for AI-powered monitoring solutions that protect national perimeters through rapid big-data analysis.”

Who are we to argue (again)?

This story does not constitute financial product advice. You should consider obtaining independent advice before making any financial decision.

Originally published as Criterion: McDonald’s data breach with the lot highlights the hazards of AI