Okta, Inc. (OKTA) Presents at The Truist Securities Technology, Internet & Services Brokers Conference (Transcript)

Okta, Inc. (NASDAQ:OKTA) The Truist Securities Technology, Internet & Services Conference March 9, 2021 10:30 AM ET

Company Representatives

Freddy Kerrest - Executive Vice Chairman, COO, Co-Founder

Dave Gennarelli - Investor Relations

Conference Call Participants

Joel Fishbein - Truist Securities

Joel Fishbein

Good morning everyone. My name is Joel Fishbein from Truist Securities. I want to welcome you to the Truist Tech Conference 2021. Before we begin, I need to read the following disclaimer. This call is arranged by Truist Securities Research for use by Institutional Investors and issuer clients as defined by FINRA. If you are not an Institutional Investor or an issuer, please disconnect at this time. For required disclosures, please see our website at TruistSecurities.com or our equity research library.

On today's call we have Frederic – Freddy Kerrest, Executive Vice Chairman, COO and Co-Founder of Okta and Dave Gennarelli who runs Investor Relations there. Many of you are familiar with both.

Freddy is the Executive Vice Chairman and obviously the Co-Founder. He is response for date-to-day operations. He's got a long history of being in the tech world. He started – one of his main places he's worked with salesforce.com and helped them grow that business pretty significantly. He serves as a mentor at the MIT Trust Center for Entrepreneurship and the Stanford StartX Accelerator program. And Freddy, thanks for joining us and we're honored to have you here today and talk to you about Okta.

Freddy Kerrest

Well, I’m thrilled to be here. Thank you very much. I really appreciate it.

Question-and-Answer Session

Q - Joel Fishbein

You're coming off of a great quarter, just to highlight a couple of the fourth quarter financials. Total RPO grew 49%, revenue was up 40%, subscription revenue grew 42%. We generated $32 million free cash flow. You're not just – now you’re putting the pennies to the bottom line. You added 170 customers with an ACV of greater than 100-K and nearly half of these additions were new customers.

So you guys I think are firing on all cylinders, not to say that you also did that very interesting acquisition which we'll get to in a little bit. But you know, talk about the market dynamic, what's going on? Obviously people know digital transformation is a back driver; COVID’s been potentially an accelerator to the business, what's really going on?

And I'm really interested Freddy from the legacy perspective. There’s a lot of legacy providers out there and a lot of companies have invested a lot in Identity. For example, the company I currently work with probably has 20 different identity vendors you know. Each application has their own identity solution, so talk to me about the backdrop or talk to us about the backdrop and what's going on?

Freddy Kerrest

Yeah, wow! That's a lot of questions all-in-one, I'll see what I can do. Thanks a lot for having me Joel. I’m really excited to be here. It's a pleasure.

Look, as you said coming off Q4, very strong financial results. We are very happy about that. You know for FY ‘21 the year that we just ended with our revenue $835 million and 43% year-over-year, subscription revenue grew 44% year-over-year. We now have RPO that grew 49% year-over-year to $1.8 billion. So certainly the business like you said is firing on all cylinders.

For those who are not intimately familiar with our business, we've been doing this for 12 years. From time-to-time I need to remember that not everyone spends every waking second of their life focused on Okta like I do.

So our business is our focused like you said on Enterprise Identity Management. There's two core components to the business. The first one is workforce identity and access management. So that's traditional enterprise identity management, helping employees better manage for their or companies better manage identity access for their employees, their contractors, their consultants. It’s a big business. When we went public four years ago, it was about an $18 billion TAM, I think it's about $30 billion now. That's about 75% of our revenue. So it's a really nice business growing, you know 40%-plus year-over-year.

And the dynamics in that business are everyone's just moving in one hybrid cloud. Everyone’s trying to adopt all these modern technology solutions and obviously large organizations like Truist have a lot of legacy on premise infrastructure. You've been around for a few years. You have some IBM, some CAs, some Oracle, some RSA and as we know what enterprise IT likes to do is buy new things and glue them on the front. So we just think about how we can better enable organizations of all shapes and sizes to adopt these modern, you know cloud and hybrid IT solutions, and integrate them into what they're doing.

The second part of the business is customer identity and access management and that’s you know it's down from zero. We estimated – we didn't really have a TAM size of it when we went public four years ago. Today we think it’s about $25 billion of TAM, that's about 25% of our business organically today, growing you know 50%, 60%, 70% year-over-year depending on the quarter and depending on the size of customers coming in. So again, a really nice business where we are just really getting started.

You know digital transformation, most over used term in the world, but what it really means is just everyone’s got to find a better way to interact with their customers, partners, vendors, suppliers. Certainly we saw the acceleration in e-commerce. You know commerce is in a percentage of – e-commerce is a percentage of commerce in North America. I think from 2010 to January 2020 it went from like 6% to 16% and then it went from 16% to 27% in the first nine months of last year alone, obviously in the pandemic.

So people are really focused on how they're going to provide a much better online purchasing and customer experience and then how they are going to integrate that into multi-channel, so that when you come into the store you have that exact same experience as you did online and that's a huge excel from the business. The challenge is obviously that everyone’s got a shortage of developers. No one has all the developers they need, and you know we're trying to make it easier and easier for people to just take identity off the shelf and put it inside their applications.

Look, when we started the business 12 years ago, if you told me that today you know Todd and I would still be running it with 3,000 employees, 10,000 customers and you know $1 billion revenue run rate business growing 40%, I would have taken it in a heartbeat. Certainly in the last three or four years as a public company, it’s been very exciting, but when I kind of look at where I am today and what's going to happen next three, five, 10 years, I think it's going to be way more interesting, and I kind of feel like it's a quite small business now compared to what it's going to be, which is kind of funny.

Finally, you mentioned Auth0. We are very excited about that. Obviously we announced a definitive agreement to acquire them at our earnings last week; that's just going to be a great addition. Auth0 is a fantastic company, also focused on customizing access management like us, but we have a very top-to-down approach to how we go into the market. Our SAC [ph] and infrastructure is really focused on you know heavy duty compliance. Things like FedRAMP Moderate today going to IL4 and FedRAMP High, so that we can really address a lot of the DoD and the government opportunities.

It’s hit the compliance, so that everyone in healthcare and dealing with patient information is very comfortable putting their information in our service. Whereas if you look at Auth0, an awesome platform they built. The two founders Eugenio and Matiass are phenomenal people. We’ve known them for a long time. I was looking back at my records, people are like, oh! You just did this deal over the weekend. No, the first picture I have of Eugenio and Todd having dinner was in 2015.

So we've been working on this for literally six years. It's a great organization. They've done a great job of being really a developer's up motion, the same way people talk about Twilio's easy for developers with messaging and Stripes easy for developers of payments. I think Auth0 is number one when it comes to developers for identity and that's going to be a huge opportunity in the future, so yeah, we are very excited about it. Just about doubles the size of that business for us. They are growth accretive, growing faster than we are, so yeah it's going to be, it's going to be a lot of fun.

Obviously you have to get though you know the DOJ and all the rest of it to close the deal successfully in Q2, but very optimistic about that, and I think it's going to be a huge boon for customers. It’s just going to accelerate where we can really help all these organizations do, as they are trying to modernize all the infrastructure, so.

Joel Fishbein

Okay, well I got lots of follow-ups, thanks for that. So the first thing is, one of the - I think the biggest misconceptions about Okta is that you're only doing cloud applications, right. There’s all these legacy applications or whatever. Can you talk about – and the second questions is sort of tied to that, but let's talk about that first, right. So there’s all these legacy applications and – they didn’t know Okta, the authentication identity play for cloud application. Tell us why that’s not really the case and maybe you can give us a couple of use cases that really explains that.

Freddy Kerrest

No, that is the case actually Joel, we just do the cloud – I’m kidding, okay. So look, I think that you know what, people – yes, so absolutely happy to talk about that. Obviously that is a misconception. I need to do a better job of explaining it to the world.

So you know when people think about enterprise software today, there's so many headlines about cloud, this cloud, that cloud, cloud, cloud, cloud, everyone thinks it's like okay, we're all done. You know the cloud’s here, here we go. Just looking at the data on what's happened between in the last decade, Enterprise IT has gone from about 3.2 to almost $4 trillion of annual spend, enterprise software is gone from $220 billion to about $500 billion of spend, so that’s 2x over that time, which is pretty good.

Enterprise cloud has gone from like $7 billion to about $120 billion, so that’s like 12x. That's phenomenal growth, but then just look at the – just look at the ratios, right. Enterprise cloud is still only 20%, 25% of all enterprise IT spend today first of all, and it's 3% of all enterprise – sorry, it's all – it's about 20% of all enterprise software spend today and it's about 3% of enterprise IT spend. So that means that $0.80 of every dollar that enterprise is going to spend this year on software is still going to be spent on-premises software; downloading, managing, maintaining, upgrading, installing legacy software.

So people are like, oh! How is it possible? The clouds have maturity, here we go. It’s like now we're in the – I mean I don't even like baseball, I think it's really boring. But I think we are in like the first or second inning of a baseball game when it comes to cloud transformation.

Now, I don't think that everyone’s going to put everything in the public cloud. Look, Truist is never going to put their proprietary trading system in the public cloud, because its core to your business, but all the contact stuff, all the stuff around collaboration, email and financials and HR. Things that are not sustainable, competitive differentiators on how well you run your business, they should not be run by Truist. They should be run by organizations that do this at scale.

And so when you think, when you roll the clock forward, you know in a few years from now, there’s going to be half a dozen enterprise clouds. There's going to be one on collaboration for emails, going to be one around CRM, our friends at salesforces, there is going to be around HR and financials, the workday, there’s going to be one for IT Establish Service.

Now just give me one that’s around identity and we're on our way to building that. But like you said, just look at the data. If we don't focus and enable our large enterprise organizations to use all our on-prem infrastructure, like we're only able to address 20% of the problem and as you said, you have some money on-prem identity management systems today that wouldn’t be helpful.

So yeah, like you said you know, three or four years ago we go to talk to my favorite customers and they would say Frederic, I love you, but the impression is it's just for cloud and when I turn around to my organizational, they’ll be like, yeah the Okta thing will be fine for the cloud, but it’s not going to help on-prem.

So a few years ago we built a product that has done very well, it's called Okta Access Gateway and we GA-ed it I think two years ago and now all of our large enterprise customers are using it. If you go down the list, American Express and FedEx and Nike and John Deere and Soul 66 and whoever else you want.

And what it is? It's a very simple appliance that people can put into their infrastructure. It is a – It’s a great modern version of getting rid of all that CA SiteMinder and ping identity legacy infrastructure that people have. And it allows you to do – you know I'll get a little techie on you, I know you are a techie at heart. It allows you to do web authentication, web access management and Headers Based Authentication.

So you'll hear about WAM, it’s a WAM replacement and it allows you to basically connect all of your on-prem infrastructure like you said to all the clouds stuff, so that you can take advantage of all the on-prem infrastructure investments you made, the custom code that you developed and still use the brains of the Okta service that are sitting in the public cloud. That product has gone very well. It's easy to deploy; it’s easy to get up and running. There’s hundreds of installments now in the largest organizations in the world. So it's really kind of started to take away that perception, but like you said, we have more work to do.

But look, over time naturally these things are just going to migrate more and more to the cloud, and as people book more things in the cloud, they get more comfortable putting Identity in the cloud. By the way, you know every time we have one of these unfortunate periodic security events, well first of all the global pandemic certainly accelerated that. People realized they can't get into their data centers. They can't physically go see the software, number one. Number two, like their VPNs were falling to their knees, because they were set up to do 10% or 20% of the work force and instantly they sent 80% work force home in a lot of situations, so that's number.

And then number two, unfortunately you have a lot of these sad, periodic security events. We had solar winds happening in November, December. Just last week basically everyone with an on-prem exchange – everyone who is left with an on-prem exchange server has now decided they need to figure out how to go to office 365 as quickly as possible. And if you've got all your email on countering and core collaboration information in the cloud, you know it’s time to put all of our core identity there, so that's naturally going to go.

But look, we're very pragmatic. Workforce identity management is a $30 billion year spend and our business is not even $1 billion yet. So we can sit here and wave the success flag all day long; we are 2.5% penetrated. Maybe I should jack all of our reps quotas again just when I get off this call, its making me feel that way, so.

But what I do is look; we don't go in there with some approach. I talked yesterday morning for the first time to the CIO of Fortune 30 customer of ours. We had traditionally worked with the Chief Security Officer, the Chief Technology Officer and his organization and I think they are starting to spend enough money that he said you know what; I want to get on the phone and talk to Frederic. So I talked to him yesterday for like 30 minutes and I said to him, I said look, my business is not about showing up here and telling you that it’s going to be some rip and replace, forklift upgrade program on Oracle and IBM.

You're going to pay me $25 million and I’m going to show you no value for two years, that's not the plan. The plan is, the reason we are having this conversation is because over the last couple of years I started helping your different groups with like some core strategic initiatives they have. Sometimes it's around workforce, so Enterprise IT; sometimes it's about modernizing your digital experience for your customers, which is revenue, right. Its customer facing, revenue facing, top line focused.

So you got to get it out the door quickly, otherwise your competitor's going to do it and we've done enough of these projects with your team and everyone is so excited about it that now you want to talk to me and that's how we go about our business.

Now I've earned the right with this particular CIO to say okay, let's talk about what the plan is over the next 24 to 36 months to turn the lights off on all your on-prem infrastructure, for Oracle, for IBM, for CA. Slowly, but surely we're going to get through that and at the end of the day, these guys are going to be paying us $5 million, $10 million a year, which they probably should be paying now. So I should again, probably put a new rep on it.

But the point is, there's just a lot of these opportunities and you know it's going to be slow and steady. It's going to – sorry, slow and steady growing 43% year-over-year in the pandemic, that's what I mean by slow and steady over the next you know decade and it’s going to be a great opportunity. So yeah, we are very excited about it, we are very pragmatic people. We don't have this approach where it’s like cloud, cloud, cloud.

If people would tell some Fortune 200 CIO that the world is all cloud, they laugh at you and they throw you out the door. So you have to be able to manage in these hybrid infrastructure environments, and I think we're starting to do that better and better. Based on your question, I still got a lot of work to do to convince people to reality, so.

Joel Fishbein

Well you answered about 10 of my questions going forward, anyway. But…

Freddy Kerrest

I try and do that. We want to cut these interviews short, right. [Cross Talk]

Joel Fishbein

The most interesting thing is, it's funny that you’re referring to yourself as Frederic. I guess you use that name when you are talking to Fortune 500 customers and never really…

Freddy Kerrest

Freddy to my friends Joel. They are not all my friends like you man. You know they got to earn that right.

Joel Fishbein

This is Frederic coming in to the meeting today. Anyway no, so you hit on the other topic that I think that – and I think your brushing alongside it, but I want to dig a little bit deeper into this. You know let’s just say you guys have put out publicly, the market's $55 billion, I tend to agree with you. You know if you add up you know the CAs, the IBM's and all these solutions out there or whatever. Let’s just even cut that in half, just for the sake of argument.

Freddy Kerrest

Sure.

Joel Fishbein

Right, you're still 4% penetrated, and I think that one of the things that I get back you know is oh! But they've already had their run. They've already had that. Their – you know they've already – you know it's all the goods they’ve had and you already talked, so you talked a little bit about some of these things. Give us a couple of use cases. You don’t have to name the customer. Like, where people have gone all-in on Okta and then what that's done from a revenue perspective in terms of you know x-dollars for you know one solution and then an all-in solution you know in terms of how big that opportunity is?

A - Freddy Kerrest

Yes, sure, absolutely. I'm happy to do that. Well I mean the first thing is, like I said, if you had given me the stats of where the company is today, I would have taken it in a heartbeat. Look this three – you know we have 10,000 customers, which is awesome. Its 3x the base of IPO. We just last quarter added a record 170 customers paying us over $100,000 a year ACV, nearly half of those were new customers. Now we've got almost 2,000 customers that are paying us $100,000 or more a year. That's about 80% of the total ACV. So you know we're starting to get there.

You know for last year we added 2,000 customers, but it's still just 10,000 customers. This opportunity is an opportunity that addresses every organization of any size, public or private, government or private industry, everywhere in the world. I mean that is hundreds, and thousands of accounts. I'm almost embarrassed to say, we only have 10,000 customers now, first of all.

So every company should have an opportunity to take advantage of modern technology and move their business forward using Okta. I don’t know how many account to that; 500,000, 1 million. So when we talk about account penetration and where we're going, it's like there is so much opportunity. The business is only – it’s still only 16% outside North America. As a half French guy I'm embarrassed by that. I'm glad that the French team did well last year or I really would have problems.

But like talk about Auth0 again, they are 40% international. That along again allows us to like kind of keep pushing that envelope. We haven't talked about our new leadership, which I'm sure you have questions about. Susan St. Ledger, our new President of Go-to-market that just started last month. I've known Susan forever, she's awesome. I've been trying to recruit her for five years.

One of the things she's amazing at – she's amazing in many things. One of the things is, she has the international purview. She understands what large account penetration looks like. She's going to transform our name to in global accounts programs. She's going to make sure that we're actually doing great business throughout Asia, including Japan, throughout Europe, including Southern Europe. Just so many other opportunities that we haven't even started to take advantage of when it comes to Logo's and new accounts, like you know first of all, so that's the first thing.

Second thing is, if I even look at you know – everyone is always like, well, aren't you fully penetrated inside your account. Can you tell me, is there anything else you can sell? Yeah, there is a ton more we can sell. I wish we were a fully penetrated business. It’ll be like five times the size. People will be like oh! So they are 20% penetrated. I don’t know what the exact number is. The point is, we could multiply the business by some factor right now, by having all of our existing customers use all of our products today.

So there are so many expansion vectors when it comes to workforce that are upselling themselves to new versions of the product, right. We’ve got things like single sign-on that we've got an advanced version; multifactor authentication, we have an advanced version. We’ve got these new products like advanced server access, our new workflows product. Last year it was selling like hot cakes. I mean it beat all of our internal records. We talked about Okta Access Gateway. Our advance service access products, it’s starting to get us into the pan market. So, I mean these are just expansions within that workforce category.

In CIAM we are just getting started. We talk about the numbers, we’re even less penetrated there; it’s 1% or 2% or 3%. Fine, cut the TAM in three, we're still 7% penetrated. I mean it doesn't matter and these numbers are all growing 20% year-over-year. So we're talking about giant markets that are growing fast, where the competition is IBM, CA and Oracle, really? And on the CIAM side it’s build-your-own. So the better I can do by providing solutions “out of the box,” that customers can use to implement inside their services, the better off we're all going to be and that's what our job is.

So yeah, you want to talk about specific deployments? I mean we can talk about some very successful customers that we've been fortunate to work with for years. I mean I think that one of the things I'm very proud of is that you know when we started doing our first public earnings, we started the first couple of times and now we do it every time, putting out these press releases about customer go-lives. It's not just about selling new software. It's about customers getting live and happy and successful with our solutions.

A great example is last year, May earnings call right, right in the throes of the beginning of the pandemic, people don't know what's going on, we put out our go-live with FedEx and Gene Sun, the CISO there, he’s a great guy. I talked to him in like February and I said, hey Gene, we started – FedEx already is a customer – I think the summer before, so summer of ’19. So I was the execute sponsor and I went down to Memphis, Tennessee. I worked on the FedEx account a whole bunch, stayed very close to them.

I called Gene in like late January, early February and I said, ‘how's it going for a planned deployment in May or June?’ He said, oh! It’s going great. No problem, everything's on track. Yes, sure enough he called me in early March and he’s like, new plan. We need to go-live with 85,000 employees on 250 apps in three weeks from now. I was like – or next week or two weeks from now. I said, ‘yeah Gene, okay cool. Like you know Okta can do that. Is FedEx up for it?’ He's like, absolutely! I was a like, great!

So we did that and then I called him back and you know I was in close touch with him throughout March and April. I said okay, looks like things are up and running. How's it going? He was like, that was amazing. So I said look, can you do me a favor? Can we put out a press release in May at my earnings, saying that you had to put 85,000 employees live on 250 apps and you had to do it in like two weeks and it was a good experience. He was like, absolutely! Because it’s one thing for me to sit here and tell you how amazing we are.

My wife’s a doctor. She always tells me look, its one thing for her to tell patients how great she is. It's a lot better when the patient tells the other patient what a great doctors she is. Customers hate it when I use that analogy. I'm like you're not a patient, take it easy, but you understand the point.

Joel Fishbein

No I actually had a point too. So FedEx…

Freddy Kerrest

Hang on, hang on, I was going to give you an example. [Cross Talk]

Q - Joel Fishbein

I just want to know, is FedEx all the way in on Okta?

Freddy Kerrest

They are – right now we are the enterprise at any standard for FedEx across their workforce. So they are going from 85,000, they’ve expanded out to a couple hundred thousand I think. I was talking to Gene two weeks ago, if I got my numbers right, I think they have about 500,000 employees all in. So we're talking about the expansion across that and we are just now opening the conversations with them around customer identity access management, because it's now time for FedEx.com refresh and this is a customer who already pays us millions and millions of dollars a year.

So there's a lot of opportunity inside these large organizations. You know, I mean that's – I don't know what the percent penetrated is, but it's not big. Like there's so much more we could do with them.

You know there's a ton of these good examples. Another good one is NTT DATA, right. NTT DATA is a huge customer of ours. They started with a bunch of different groups. NTT is a conglomeration of something like 200 different companies under one umbrella, so they've got all these different complicated identity and access management combinations, where it's like sometimes they'll be able to use a centralized version and sometimes they won’t. They want to set up their own enterprise identity standard internally, so that they can actually manage identities across the entire lifespan, so that's something we work very closely with them.

And so now what you see is NTT DATA has now – you know this is a trusted global innovator across the world. They started with us in 2018 deploying Okta’s workforce identity products to provide access. I think it was like 130,000 employees. Then they said, ‘okay, we need to create our own modern identity solution to unify all of our customers.’ They then deployed the Okta identity engine and our workflows product that I just talked about. So now they can automate processes for all the JML, joiner, mover, leavers.

When employees join a company, they move, then they leave, to make sure that the right people have access to the right applications at the right time and then as they change jobs, those applications change, reducing the time, reducing costs associated with all these manual processes, I mean they have now standardized on it.

You talk to Steve Williams, the Chief Security Officer at NTT DATA and I'll tell you. He's like look, this has become the enterprise wide standard for us across all of our properties around the world when they buy a new organization or they spin one off. It's very easy to do that, because they are using the flexible M&A framework we have built inside the applications.

So you've got all sorts of use cases I could walk you through in terms of large organizations that are thinking about how they are going to do these standardizations. T-Mobile is another great one we can talk about, Hitachi, so yeah, I mean there's a lot of really good examples of this.

Q - Joel Fishbein

Alright, well thank you for that. So lots of – you acquired probably what are the crown jewels in the identity space. There's a few others that are out there from a public perspective. You know you've gone through a lot of you know the market. I just want to touch on quickly, the barriers to entry and the competitive differentiator you know that makes – is going to make this really hard. Obviously there’s going to be other competitors in this space, but what's going to make this really hard for them to become anywhere close to the dominant position that you guys have already established in this space, you know alongside of Microsoft right, so.

Freddy Kerrest

Yes, sure. So I mean there's a few buckets of competitors. The first one is – well, let's talk about first of all Microsoft, you brought them up.

So Microsoft has this historical perspective where they should be the ones in charge, because they created Active Directory, which was the legacy identity infrastructure when everyone had on-prem, for walls to the firewall and a VPN token to get into your building, number one.

Number two, when Microsoft ran the operating systems on your laptops and you know there was no such thing as a mobile phone, then everything was Microsoft. It made a lot of sense and they also ran your exchange server, so it was – and your printer servers and everything else. So you know that environment 20 years ago was absolutely theirs to win.

What's happened obviously is there's been a lot of change, right. No one is – I talk to zero CIO's these days who are in these homogeneous environments they were in 15 years ago, whether they were an IBM shop or an Oracle shop or an SAP shop or a CA shop, that doesn't exist anymore. Everyone is looking for this best-of-breed infrastructure there, looking to adopt the best cloud solutions for sales and collaboration and finance and HR and all these other things, so that's the first thing.

So we do compete with Microsoft. Largely we'd see them in the S&B, sometimes they show up in the mid-market, but no one in large enterprise is going to standardize on E5 licenses. I mean what's Microsoft’s horse to ride? Their horse-to-ride is Office, right, and they need to make sure that the office solution works in the cloud and works well. I mean I use it, but we are the number one provider for Office 365 as an identity provider, as rated by Microsoft enterprise customers on the Microsoft websites.

So even for their number one email collaboration suite, which they're pushing everyone to, we are the preferred identity vendor and that's true across everything else. Of course Microsoft’s not going to spend any time connecting you to your aid of U.S. stuff and your Google stuff and your IBM stuff and your sales force stuff, because that's who they compete with.

So I think that the independence and neutrality plays out very well there and it proves itself in the market. We've done very well; we continue to do very well. People have told me since 2012 that Microsoft’s going to beat us, so maybe this will be the year, we'll see, but so far so good.

And you know we continue – we’re paranoid people, we pay very close attention, but you know we have 3,000 people and all we do is identity and we're very focused on it and this is going to be your 5,000, 10,000 person company, you know not too long from now and it's going to continue to rip and there's a lot of options for us to help and we are only focused on identity. We have 7,000 pieces of technology that are pre-integrated into our infrastructure and those are the kinds of solutions of partners that you know forward thinking IT leaders want for the future.

So Microsoft is the company that we always think about and we always focus on. We've done very well; we continue to do very well. I think we're out innovating them, we're out executing them, but yeah, we are very focused on them. And you know when I walk into accounts with reps, I said you’re going to talk about Microsoft and they are like, ‘eh, I'm not sure. I’m worried about it.’ What are you worried about? Bring it out front and center, let’s have the conversation. Let's talk to the executive about what their approach is, so that's gone very well.

The other competitors are IBM, Oracle, CA, RSA, but we're not competing against them in renewals, right. We are competing against their maintenance streams and slowly but surely we're going to eat that business over the next five, 10 years, so it's going to go very well, so that's fine. And then when it comes to – and that's largely – these things are largely by the way on the workforce side and I should break out the business.

You know there's some other point solutions. There’s you know – there are other adjacencies next to identity that we will be getting into things like governance at IGA, governance attestation. Things like privilege access management. You're going to see us really start to make moves in there. Today we have good partnerships with the Legacy vendors.

You know SailPoint is on-premises, CyberArk is on-premises. They’ll be fine in this legacy environment where people don’t want to modernize and they don’t want to move to the cloud and they want to stay inside their data centers. But you know I think that’s becoming the strict minority at this point. So we have good partnerships with them where it makes sense and Phillips 66 still uses SailPoint and we’ll integrate to it, but for all the modern solutions that’s goes very well.

On the customer identity access management side, the competitive dynamics are completely different. I mean this hasn’t been – you know workforce has been budgeted line items for 30 years. I mean you could call any CIO and say, ‘hey, how much he's paying identity access management?’ They can go find a [inaudible] line items and say, I was paying $2 million. I mean it was very clear.

The challenge on the customer identify access management side, as Jeff Lawson said in his new book ‘Ask Your Developer’ and he says it’s not build versus buy, it's build versus die. I mean, that's a little bit self-serving, because obviously he want everyone to use the Twilio service and he wants everyone to really push their developers’ front and center. But developers are, I mean they are – they have taken a primary seat when it comes to IT infrastructure today, and the same is true on the customer identity access management.

So our competition is basically people who've been building their own in the past and so you know, we just have to do a better job of explaining to them, how they can very easily use the Okta service, you know once we get the transaction across the line for Auth0, once they will be able to use the Auth0 and Okta services combined, to bring all these solutions to market. And remember, it's in the line of revenue. They got to do it quickly and they got to do it well. It’s got to be secured. No one wants to be on the front page Wall Street journal for all the wrong reasons, right.

So I think these are, they are big opportunities. Look, when you have markets that are tens of billions of dollars, other people are going to pay attention, as the well they should. I think they're right, I think they're great markets, But we’re going to continue to focus, we’re going to continue to innovate. You know we are fortunate we have this leadership position because of all the success we've had with our customers, but it's encumbered upon us to keep executing, keep focusing, keep innovating for them and working closely with them to make them successful, so...

Joel Fishbein

That's great. So there’s five minutes. I have a bunch more questions I'm going to try to get in quick.

Freddy Kerrest

Try and talk faster.

Joel Fishbein

Alright, Okta Integration Network is one of the things that I think is a very big competitive differentiator for you guys, that's the way that I at least view it. Is that the right view and tell me why?

Freddy Kerrest

Yeah, absolutely! So I mean historically right in identity management people have had to build all their own connectors, and then manage them, maintain them, upgrade them. The big difference in what we did and when we started this business 10 years ago, I want to say 12 years ago and I want to say don’t do that.

You know it's an identity management, it's a bad industry, it's littered with failed deployments and one of the big problems was the technology approach. Now we were able to view it as a cloud service, which means we had the centralized catalog as you mentioned in the Okta Integration Network, which connects today 7,000 pieces of technology.

So if you are a new customer, you don't have to build the integration of all the networks, you don't have to build the integration to F5 or any of the 17 BPM providers. We have it built in. We upgrade it, we manage it, we maintain it for you and it's no code, drag and drop, push and pull. You’ll see exactly how it works whether the same is true with workflows now, so you can start to do all these triggers and events, which allows really the IT infrastructure people in your company to take a step up and provide much more business value adds to the business, not just keeping the lights blinking on a server. We do that for people now and that is a huge advantage as you said.

Joel Fishbein

Alright so, Auth0. We touched on it a little bit. They were rumored to be getting ready to go public. They obviously have done extremely well. I know that management team there well and I think they're – like you said, like very complimentary or whatever and accelerate your entry or – I'm sorry, your further expansion in this SAM market.

The questions there is, obviously you paid a good price for it, a healthy price for it. Do you have any overlap in terms of you know customers and then the second thing was in terms of the price paid. Were there any other competitive vendors in this space? I mean I know you guys went back and said you’ve had a long history with them. I remember Todd bring this up, you know them up to me a while, so love to just...

A - Freddy Kerrest

Yeah, I'll actually flip the questions. So first on the price, I mean we paid less than our forward multiple for a company that's growing faster than we are. If they are going to, they are on track to the north of $200 million in AR this year. As you said, they're getting ready to go public.

So it seems like a pretty good deal. The growth accretive day one for less than our own floored multiple and people have to realize, you know they're saying while you paid a lot, if this company had gotten public, everyone would be more than happy to value them at somewhere between us and you know whatever, Snowflake or whatever the latest one is.

So I think it's a fantastic opportunity for us in terms of like where we're going. It basically doubles the size of our CIAM business more last overnight. So it's going to be really, really good for customers, because now they are going to have all the added innovation.

Look, one of the challenges and I know because I used to be a private company, is when you are a public companies, larger organizations are much more comfortable doing business with you. I want to argue that there is going to be a ton of opportunity where companies are going to say, ‘great, now I can finally buy the Auth0 service. its part of the public company with audit financials and all the rest of it,’ so I think that's going to be great.

In terms of overlap, I mean there are – you know obviously there are, and I should just highlight, this is the other leading cloud platform we bought. It's not like we bought a bunch of legacy on-premise infrastructure. It’s not like we went out and bought ForgeRock and I now have to manage legacy on-prem infrastructure in addition to the cloud service.

We bought the other leading cloud service, so if you're a forward thinking C leader out there, you're like ‘oh wow! I want to buy a modern solution, one of the leading clouds.’ Great! Well, we've got him. So like you know what flavor do you want? So you got to remember that. Taking a step back, it’s like – it is a perfect symbiotic fit in terms of delivery mechanism, their approach to the market.

In terms of overlap, yeah I mean you know at a high level we're both in the CIAM market, but their service is very flexible, very they're very adaptable, love by developers. If you want to componentize it, you want to put very large consumer facing properties on it, very easy to get up and running. Ours is a little more designed to you know heavy industry regulation, security compliance, not that there is not, but it's just a little bit of a different philosophy going into it, so it's very complementary.

You know over time we are going to integrate, so you can have the best of both platforms. We're going to heavily – we are going to continue to heavily invest in both of them; the products, the platforms, the companies. They are going to run it as an independent unit inside Okta, who Eugenio is going to report directly to Todd, it's going to be great. It’s going to be a marriage made in heaven for customers and we’re thrilled about it, so.

Joel Fishbein

Alright, we are bouncing up against our time, but I got to ask this last question. Give me the benchmarks, the milestones, how we should think about Okta’s business ‘21 and beyond? What are the three things that we should look at, and don't – I'm not looking for like revenue or any of that stuff. I mean what are the benchmarks, what's the vision?

Freddy Kerrest

Well, the vision is how we're going to help organizations set the standard for identity on the internet. I mean that is a vision that’s going to take three, five, 10 years to even start going on. There is always workforce businesses, there’s all this customer business. The consumer challenges still too high, right. The problems that you and I have a home are still a nightmare. We got to figure out how to make that better. There is going to be a lot…

Joel Fishbein

Leave my kids out of this.

Freddy Kerrest

What? No, I wasn’t talking about you.

Joel Fishbein

No, I’m kidding, I’m kidding.

Freddy Kerrest

You kids are way more digitally advanced that I am, let me tell you. So it's really for the old people like me, we need to figure out a better solution.

Look, there's a lot to do with the government. I mean we need to be voting online. Why aren’t we voting online? People are like, I'm afraid of voting online, it’s going to be fraud. People are totally fine sending ten thousand dollars with a couple clicks of the button on their phone, but they're not comfortable voting online.

Census 2020 that the government put online was phenomenal. I did – I had the experience, it took five minutes. We did a poll – Americans loved it. So the more things like that we can put online and digitize and simplify identity for everyone, it'll work inside companies, it will work for consumers, it will work for customers. There’s just a huge opportunity there. I mean I don't know if the markets are $30 billion or $50 billion or $70 billion, it doesn’t matter. There’s a huge opportunity ahead and we're very excited about what the future's going to bring us, so.

Joel Fishbein

Alright, thank you so much Freddy and I will talk…

Freddy Kerrest

That’s it? You’re kicking me out?

Joel Fishbein

I’m kicking you out. I got Snowflake next in there and I’m going to tell them your comments, so.

Freddy Kerrest

You can tell them. Frank is a friend of mine. Tell him I’m coming for him. It’s great to see you. Thanks for having me. I really appreciate it.

Joel Fishbein

Alright. Take care.

Freddy Kerrest

Thanks, take care. See you soon.