Okta (OKTA)
Strengthening Moat
Okta has a strong moat within workforce identity, and a greenfield, blue ocean opportunity in the nascent customer identity market. It was the first cloud-native IAM (Identity & Access management) vendor, able to seamlessly onboard new customers, provide orgs with easy IT administration, and deliver unlimited scalability. These factors have led to Okta quickly accumulating 16,000 customers, data from which has been harvested to produce one of the most advanced security engines around.
Okta's risk-based security engine is ideal for Zero Trust implementations. Zero Trust adds significant latency to network traffic, and therefore a continuous risk engine like Okta's can enforce Zero Trust principles without degrading user experience via excessive authentications. It is this advantage that will help Okta sustain its moat within workforce identity and be central to many Zero Trust implementations. Okta receives multi-petabytes of data on a daily basis, further enriching its security engine and making its IAM increasingly more powerful versus alternative solutions.
Growth Opportunities & Auth0 Integration Troubles
Within workforce identity Okta has more growthy opportunities in PAM (Privileged Access management) and IGA (Identity Governance & Administration). These are markets are currently dominated by legacy incumbents, and over time we expect Okta to outperform them with its cloud-native alternatives. According to research reports, these markets have a TAM of about $15bn, offering Okta a good runway of growth. The caveat, however, is that legacy PAM and IGA are sticky, and hence it may take Okta a while longer to gain traction and win meaningful market share.
The higher growth opportunities for Okta come from customer identity. In May 2021, Okta paid $6.5bn in stock for CIAM (Customer Identity & Access Management) leader, Auth0. At the time of the acquisition, opinions were mixed - some said it was bold and visionary, others said it was reckless and value-destroying. Over one year later, there is no doubt more in the latter camp of thought, as there have been sales integration issues hurting growth.
However, if Okta can resolve the integration problems - which seem far from insurmountable - then they have a lucrative opportunity ahead in CIAM. Customer identity is becoming central to enhancing customer experience initiatives - a focus prioritised at many orgs since the pandemic. Therefore, one can consider CIAM becoming increasingly strategic as orgs aim to deliver better online experiences with seamless identity verification.
Auth0: Leader in Customer Identity
Auth0 is really popular with developers because it provides easy to use SDKs (Software Development Kits) for incorporating authentication and authorisation functionality, which is often challenging to do from the ground up. A major synergy yet to be realised is infusing Okta's security engine with Auth0's developer-focused CIAM platform. The combination provides developers with an easy to use platform for factoring in frictionless authentications, and high security standards backed by an advanced continual and context-aware security engine.
The imagination space for customer identity is huge - biometrics, digital identity wallets, cross-entity reusable identity verification, to name a few avenues of innovation. If Okta can apply their top-down GTM capabilities with Auth0's bottom-up developer-focused GTM, then there is a long runway of durable growth available, indeed.
For institutional investors, on request, we can do tailored research or memos into any specific aspect of Okta. For all types of investors, here are individual reports either solely focused on Okta or including Okta to some degree.
For institutional inquiries please email [email protected] for more information.
Reports
Okta: Defining an Industry (June 2021)
Some Thoughts on Blockchain (April 2022)
Major Tech Trends (July 2022)
Okta Update (September 2022)
Tailored research requests - price negotiable