Governance & Risk Management , Identity Governance & Administration

Okta CEO: Identity Governance Has 'The Markings of a Hit'

Big Enterprises Embrace Okta Identity Governance in Competitive Bake-Offs, CEO Says
Okta CEO: Identity Governance Has 'The Markings of a Hit'
Todd McKinnon, co-founder and CEO, Okta (Image: Okta)

Okta Identity Governance has enjoyed success in its first quarter of global availability as large enterprises and midmarket businesses look to unify access management and governance.

See Also: Shift From Perimeter-Based to Identity-Based Security

The San Francisco-based identity giant is surprised by the amount of traction its governance offering has gained with large, global organizations and in competitive bake-offs, says CEO Todd McKinnon. Okta's identity governance tool debuted globally in early December and has created a 30% to 50% upsell opportunity with workforce identity customers, which McKinnon expects to grow as the space matures (see: Okta Clears Up Customer Identity Confusion as SMB Sales Dip).

"It's early since it's only been generally available since December, but it's got all the markings of a hit. It's exceeded our expectations," McKinnon tells investors during an earnings conference call Wednesday. "We have a lot of work to do, but it's off to a really good start."

Okta in April 2021 revealed plans to bring access management, identity governance and privileged access together, with an expected launch date of early 2022. Then in August 2021, Okta quietly bought early-stage workplace operations platform atSpoke to leverage its access request workflow capability.

"We want to be the one-stop shop for identity."
– Todd McKinnon, co-founder and CEO, Okta

McKinnon in June 2022 touted good results for identity governance in Okta's early access program, and the company then made the tool generally available in North America for six months before launching it globally. Okta's move into identity governance brings the company into direct competition with SailPoint and Saviynt, and the company hopes to have a privileged access tool generally available by late 2023 (see: Okta CEO: Hack Didn't Have Quantifiable Impact on Business).

"We want to be the one-stop shop for identity," McKinnon says Wednesday. "We think identity is so strategic and so impactful, and there's such a value for customers to having an independent, neutral partner there that will give them choice with technology and not lock them in."

Unifying Access Management, Governance 'A Natural Thing'

On Wednesday, McKinnon called out identity governance wins with both Notion - a small, cloud-first productivity tool provider based in San Francisco - and NOV, a Fortune 1000, $7.24 billion energy manufacturing company based in Houston that had been using Okta's workforce identity cloud since 2020 and wanted a product that would satisfy its regulatory reporting obligations (see: Okta Exec Sagnik Nandy on Protecting the Extended Workforce).

"We thought our products would start more at the smaller companies and be bottoms up, and we've seen much more balanced enterprise success and midmarket success than we expected," McKinnon says.

McKinnon also thought Okta Identity Governance would appeal most to existing customers who hadn't bought any products around governance previously. While Okta has captured many greenfield identity governance opportunities, McKinnon says the company has also performed well in requests for proposal and has even convinced some clients to rip out their existing tool in favor of Okta's.

"Customers are tapping into the power of Okta's unified platform to improve their overall security posture and remove identity silos," McKinnon says. "This helps our customers gain better visibility across their identity stacks and implement a governance solution with a faster time to value and cost reductions."

From a technology standpoint, McKinnon sees governance as a natural extension of access management since the latter focuses on creating profiles and roles and giving users real-time access to resources once they log in. Tightly coupled with access management are governance reports documenting that the right people are going to the right places, with exception reporting and compliance reporting baked in.

"In the history of identity, the reason that governance grew up independently of access management is basically because there was no Okta," McKinnon says. "There was no independent and neutral leader of access management. So companies had to create these governance solutions in an unnatural way, which was off to the side. I think it's a natural thing to bring them together."

Okta Reaches Non-GAAP Profitability

Okta Quarter Ended Jan. 31 2023 Quarter Ended Jan. 31 2022 Change
Total Revenue $510M $383M 33.2%
Subscription Revenue $495M $369M 34.1%
Professional Services Revenue $15M $14M 7.1%
Net Loss $153M $241M 36.5%
Diluted Loss Per Share $0.95 $1.56 39.1%
Non-GAAP Earnings $52M -$29M N/A
Diluted Non-GAAP Earnings Per Share $0.30 -$0.18 N/A
Source: Okta

Okta's revenue of $510 million in the quarter ended Jan. 31 crushed Seeking Alpha's sales estimate of $489.6 million. And the company's non-GAAP earnings of $0.30 per share demolished Seeking Alpha's estimate of $0.09 per share.

For the full year, Okta's revenue surged to $1.86 billion, up 42.9% from $1.3 billion the year prior. Net loss improved to $815 million, or $5.16 per diluted share, 3.9% better than a net loss of $848 million, or $5.73 per diluted share, last year. On a non-GAAP basis, net loss softened to $7 million, or $0.04 per diluted share, 89.7% better than the net loss of $68 million, or $0.46 per diluted share, a year earlier.

The company's stock was up $10.44 - 14.61% - to $81.88 per share in after-hours trading Wednesday. That's the highest Okta's stock has traded since Aug. 31, 2022.

For the quarter ending April 30, Okta expects non-GAAP net income of $0.11 to $0.12 per share on revenue of between $509 million and $511 million, representing a year-over-year growth rate of 23%. Analysts had been expecting a non-GAAP net loss of $0.01 per share on sales of $498.3 million.

About the Author

Michael Novinson

Michael Novinson

Managing Editor, Business, ISMG

Novinson is responsible for covering the vendor and technology landscape. Prior to joining ISMG, he spent four and a half years covering all the major cybersecurity vendors at CRN, with a focus on their programs and offerings for IT service providers. He was recognized for his breaking news coverage of the August 2019 coordinated ransomware attack against local governments in Texas as well as for his continued reporting around the SolarWinds hack in late 2020 and early 2021.

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