Tag: OKTA

Okta’s Latest (OKTA)

January 23, 2023 / poffringa

Okta has undergone a lot of change over the last two years. In 2020, the company was considered the leading independent provider of IAM (Identity and Access Management) services, enjoying great brand recognition and rapid growth. They had achieved strong penetration in the workforce identity space and were tracking to extend their reach into customer identity. Okta had labelled their product category as the Identity Cloud and attributed an estimated TAM of $55B (which they have further increased to $80B). They were well positioned to consolidate this new market segment around solutions to manage identity for both enterprise organizations and application developers.

In March 2021, Okta announced the acquisition of competitor Auth0. I found this a bit surprising, as I had assumed Okta could expand into the application identity space organically, as an extension of the Identity Cloud. Rather than building the customer identity capability internally, Okta leadership decided to acquire it for $6.5B in OKTA stock. To be fair, Okta’s product opportunity in customer identity was nascent and needed to establish appeal with developers. Acquiring Auth0 provided immediate access to a superior product offering and a community of developers. More importantly, the acquisition potentially short-circuited a competitive threat. Other larger platforms (like Salesforce and Oracle) were rumored to be looking at acquiring an identity solution as well. Okta was simply preempting their move.

Auth0 will operate as an independent business unit inside of Okta, and both platforms will be supported, invested in, and integrated over time — becoming more compelling together. As a result, organizations will have greater choice in selecting the identity solution for their unique needs. Okta and Auth0’s comprehensive, complementary identity platforms are robust enough to serve the world’s largest organizations and flexible enough to address every identity use case, regardless of the audience or user.
Okta Press release, march 2021

Following the acquisition, the Okta leadership team decided to keep the two platforms separate, with the intention to integrate them over time. This translated into separate organizations, which operated independently for more than a year. Combining the sales teams began in 2022, but experienced challenges, culminating in the announcement of Q2 FY2023 results in August 2022. As it became clear that the whole acquisition and integration process had been poorly managed, the market began losing confidence in Okta leadership. This blame has increasingly fallen on Okta CEO and co-founder Todd McKinnon.

Independent Software Providers and the Cloud Vendors

July 26, 2020 / poffringa

Early in the evolution of cloud computing infrastructure, the cloud providers were rapidly expanding their offerings. For a while, it seemed they would leave no room for independent providers in a land grab to address every segment of software infrastructure. As the landscape has matured and enterprises increasingly implement a multi-cloud strategy, it has become clear that independent providers can not only co-exist, but thrive, in this environment. Examples are Datadog for observability, Twilio for communications, MongoDB for databases and Fastly for CDN.

This blog post examines the history of cloud service providers and the evolution of their offerings. As cloud vendors have defined broad categories of software services, they have left openings for nimble, focused independent software vendors to leverage the same cloud infrastructure to deliver substantially better product offerings in some segments. From this, we can draw observations about why they are succeeding and what they need to continue doing. Investors occasionally raise competitive concerns for independent software providers that cloud vendors will choose at some point to crush them. I posit that threat has passed in many categories. This post seeks to help investors understand what has changed and how to reason about the risks going forward for their favorite independent software company investments.

Okta (OKTA) Stock Q1 FY2021 Earnings Results Review

June 3, 2020 / poffringa

Okta released their Q1 (April end) FY2021 earnings report on May 28. They delivered a significant beat on both revenue and earnings for Q1 and slightly raised estimates for Q2 and remainder of the year. Management applied some conservatism to the forward estimates, in anticipation of possible customer spending slowdown in Q2 and Q3. Following the results, most analysts increased price targets and maintained buy ratings. Commentary on the earnings call was upbeat. In this post, I review Okta’s earnings results and the evolution of their platform offering. I also examine recent activity from competitors and the broader opportunity in the evolving identity space. As a refresher, please see my previous analysis of Okta for a full explanation of their products, addressable market and competitive positioning.

Okta (OKTA) Stock Analysis

May 1, 2020 / poffringa

Okta is the leading independent provider of identity services. While their roots have been in controlling employee access to enterprise applications, Okta has recently doubled their TAM by providing identity management for consumer apps. Almost every modern digital application requires its users to verify their identity. Facilitating this process has become a necessary software building block. Okta supports this capability with a suite of robust platform services, which developers can consume through well-documented APIs. Okta’s packaged software products are built on top of these platform services, driving a continuous feedback loop. Okta’s product offerings target an enormous addressable market, the combination of both workforce and customer identity. Strong secular trends in enterprise employee mobility, cloud migration and digital transformation are driving this market and Okta occupies the pole position. The company is led by two co-founders with deep SaaS domain experience. To help investors better understand the opportunity, I will dig into Okta’s technology underpinnings, financials, product portfolio, addressable market and competitive landscape. This will provide an investment framework which investors can use to monitor Okta’s progress going forward.

Considering Platform Plays

April 12, 2020 / poffringa

Over the last couple of months, I have noticed several prominent software companies announcing new platform offerings. This goes beyond a marketing tactic, as most are backing the move with substantial new capabilities and tooling to add “programmability”. These extensions are meant to appeal to solution builders, in addition to their existing product users. While the companies will still offer packaged products, they are opening up their underlying software services for outside developers to build their own custom applications. The rationalization is an expectation that this will drive incremental revenue from usage fees, as developers launch brand new businesses or internal teams at enterprises tackle adjacent use cases. Also, some leading SaaS companies haven’t rolled out full platform offerings, but might benefit from it. In this post, I will examine what makes for a productive platform play, several recent examples of this trend and how it might apply to other point solution providers. The platform potential of a software company is an important consideration for investors. If executed successfully, it can substantially magnify the long term growth opportunity for a company’s stock.

Insights from Sumo Logic’s Continuous Intelligence Report

December 23, 2019 / poffringa

Sumo Logic recently published their Continuous Intelligence Report, which details trends in application architecture, deployment processes and management tools in the cloud, based on observations across their 2,000 customers. By reviewing the data in this report, we can glean several insights for software stack company investments.