Bots, it turns out, and more specifically bot-makers, are pretty good at putting together coordinated attacks that decipher the CAPTCHA characters and -- presto! -- get access to the targeted service, create accounts on that service (Hotmail, for instance) and use that address to dispatch waves of spam.
The current bot approach is troubling not just for its ability to overcome CAPTCHA defenses, but also because communications between the bot and a central server are encrypted, raising the attack sophistication stakes another level. The server does the deciphering, the bot receives and then enters the deciphered characters.
CAPTCHA bypasses are nothing new, of course, nor is there a lot CAPTCHA makers can do, other than continue to refine and reinvent their defenses. (Don't know about you, but for my tastes the trend toward making CAPTCHA images more and more vague, fuzzy and distorted has gone about as far as it can go -- I've seen some that machines might be able to figure out, but that were beyond my ability to decipher and enter.)
Identity verification -- simple verification that you're a real person -- keeps hitting these walls, as recent news of a facial recognition technology hack shows.
The point of all this for small and midsize businesses -- unless you're in the CAPTCHA business -- is simple: the bad guys are smart, automated, sophisticated, but for botnets to work they must first get access to vulnerable machines. Sealing your defenses against compromise may not solve the CAPTCHA conundrum -- not sure anything can -- but it ensures that you and your company's computers won't, at lest, be part of the problem.