Okta IPO Will Measure Growth of Identity-as a-Service Market

Okta, one of the largest identity-as-a-service (IDaaS) providers, is finally going public. The company, rumored for years to have its eyes on an initial public offering (IPO), this week registered plans with the Securities and Exchange Commission (SEC) to offer Class A common stock to be traded on the Nasdaq market.

The move is the latest sign that the company is undeterred by claims from Microsoft that organizations no longer need third-party IDaaS offerings (such as the Okta Identity Cloud) if they use Azure Active Directory Premium and the rest of its Enterprise Mobility and Security (EMS) services. Despite such claims, Okta and its customers point to the larger array of integrations offered with its cloud-based SSO service. Okta says it now offers 5,000 connectors to legacy and software-as-a-service (SaaS) applications.

Okta's S-1 filing reveals its revenues have soared in recent years. During its last fiscal year, revenues grew 109% from $41 million to $85.9 million. Looking at the first nine months of calendar year 2015 and 2016, Okta said revenues have grown from $58.8 million to $111.5 million, respectively. Despite the revenue growth, however, Okta posted steep losses -- $59.1 million in FY 2015, $76.3 million in FY 2016 and $54.9 million and $65.3 million for the first nine months of calendar years 2015 and 2016, respectively.

However, the company also touted its base of 2,900 enterprise customers including 20th Century Fox, Adobe, Engie, Flex, Github, LinkedIn, MassMutual, MGM Resorts, Pitney Bowes and Twilio, and key partnerships with Amazon Web Services, Box, Google Cloud, Microsoft, NetSuite, SAP, ServiceNow and Workday.

Indeed, many organizations are looking at third-party IDaaS options, said Forrester Research analyst Merritt Maxim in a blog post commenting on Okta's IPO. "Over the past 18 months, Forrester has had a steadily increasing number of IDaaS-related inquiries from enterprise clients looking to deliver identity and access management (IAM) capabilities to their employees via a SaaS subscription model," Maxim noted. "Okta's revenue growth aligns with the strong growth in demand we see from our clients."

While Okta's cloud-based single sign-on platform is among the most widely used IDaaS offerings, the company has added complementary services including a new mobility management tool and last week's acquisition of API management provider Stormpath.  

"The need for a unified identity across every app, service and device is exploding as every company transforms their business with digital services," said Okta CEO Todd McKinnon, in a post announcing the Stormpath deal. "Additionally, developers are becoming major buying centers and decision makers within organizations. And with no signs of that trend slowing, the need for secure application integration is growing."

Okta also faces some formidable competitors. In addition to Microsoft, VMware now offers its namesake VMware Identity Manager, offered with its Workspace One and AirWatch suites, and MobileIron, a leading supplier of enterprise mobility management (EMM) services, also recently added a single sign-on tool to its offering. Then there's a slew of other rival providers including Centrify, One Login, Ping, Quest and Sailpoint, among others.

While Okta and Microsoft are partners, the two companies are also in a heated battle. In an interview last year, McKinnon argued Okta is winning a lot of enterprise IDaaS deals from Microsoft. "They're losing and they don't like losing," McKinnon told me at the time. We beat them eight out of 10 times, deal-for-deal, and that's even with them bundling in their products in their Enterprise Agreements for a pretty low price."

Microsoft argues it now has 41,000 customers using its EMS service. And, ironically, a key pillar of Okta's increased revenues have come on growth of Microsoft Office 365 subscriptions, which automatically result in the uptick of Azure AD accounts.

Posted by Jeffrey Schwartz on 03/15/2017 at 1:12 PM