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Identity is fundamental to all communications and business transactions. The traditional methods of managing and securing identity were developed decades ago for different IT and business environments. Identity has become more challenging as organizations seek to move to the cloud rapidly, increasingly adopt SaaS applications, react to the proliferation of mobile devices, and rely on development teams to build applications to engage with customers and partners.
The acceleration of digital transformations, cloud modernization, an evolving security threat landscape, and changing consumer expectations to simple, secure digital experiences are driving a shift in how organizations manage consumer identities on the internet. Organizations are building secure consumer-facing applications and are turning to identity to optimize seamless and private user experiences.
Given the growth trends in the number of applications, cloud adoption, and the movement to remote workforces, identity is becoming the most critical layer of an organization’s security. As organizations shift from network-based security models to a Zero Trust security model focusing on adaptive and context-aware controls, identity has become the most reliable way to manage user access and protect digital assets.
Okta provides organizations with the scale, efficiency, and security they need to build customer-facing applications. Okta’s approach to identity allows Okta’s customers to simplify and efficiently scale their security infrastructures across internal IT systems and external customer-facing applications. In this strategy story, we analyzed the business model of Okta and understood what does Okta do and how does it work.
What does Okta do? How does Okta work?
Okta, founded in 2009, is the leading independent identity provider. Okta’s mission is to bring simple and secure digital access to people and organizations everywhere. The Okta Identity Cloud is powered by Okta’s category-defining platform that enables Okta’s customers to securely connect the right people to the right technologies and services at the right time. Okta employs a Software-as-a-Service (“SaaS”) business model.
The Okta Identity Cloud helps organizations harness the power of the cloud, mobile, and web technologies by securing users and connecting them with their applications and technology. Okta Identity Cloud provides organizations an integrated approach to managing and securing every identity.
Organizations use Okta to securely access a wide range of cloud, mobile, and web applications, on-premises servers, application program interfaces (“APIs”), IT infrastructure providers, and services from a multitude of devices. Developers leverage Okta’s platform to securely and efficiently embed identity into the software they build, allowing them to focus on their core mission.
Employees and contractors sign into the Okta Identity Cloud to seamlessly and securely access the applications they need to do their most important work. Organizations also use Okta’s platform to collaborate with their partners and provide customers with more modern and secure experiences in the cloud and via mobile devices.
The Okta Identity Cloud
The Okta Identity Cloud is an independent and neutral cloud-based identity solution that allows Okta’s customers to integrate with nearly any application, service, or cloud that they choose through Okta’s secure, reliable, and scalable platform and cloud infrastructure.
Okta’s platform is designed to connect users to the technology they choose securely. We prioritize the compatibility of the Okta Identity Cloud with public clouds, on-premises infrastructures, and hybrid clouds. Okta’s customers use the Okta Identity Cloud to secure their workforces, create solutions that make their partner networks more collaborative, and provide seamless and secure experiences for their customers or end users.
Workforce Identity Cloud
In workforce identity use cases, the Okta Identity Cloud simplifies the way an organization’s employees, contractors, and partners connect to its applications and data from any device while increasing efficiency and keeping IT environments secure.
Okta enables organizations to provide their workforces with immediate and secure access to every application they need from any device they use without requiring multiple credentials, which significantly enhances user connectivity and productivity. Okta offers its customers an additional security layer through Okta’s Adaptive Multi-Factor Authentication product.
Customer Identity Cloud
In customer identity use cases, the Okta Identity Cloud enables organizations to transform their own customers’ experiences by empowering development teams to rapidly and securely build a customer-facing cloud, mobile or web applications.
Okta enables an organization’s product team to layer Okta’s powerful identity platform into its cloud, web, and mobile applications. This makes it easier for them to authenticate, manage, scale, and secure their connections, enabling rapid time to market for the business. Organizations are able to centrally manage policy and API-level access across all their applications, leading to more seamless customer experiences that are personalized, engaging, and secure.
In order to enable customers and partners to address a wide range of identity use cases, Okta has built a set of modular components called Okta Platform Services, which can be combined to build new features and tailored experiences faster.
Okta Platform Services are available in Okta packaged products through APIs and software development kits (“SDKs”). Okta Platform Services can be used across the workforce and customer identity cases. Okta Platform Services include Okta’s Identity Engine, Workflows, Devices, Integrations, and Insights.
What is the business model of Okta?
Grow Faster: Okta enables its customers to increase revenue, move faster and do more in the rapidly evolving cloud environment. By building on Okta’s secure, standards-based identity platform, developers and engineering teams can release products faster and focus on creating features that will differentiate their products.
Increase Efficiency: The Okta Identity Cloud is fully compatible with on-premise infrastructures and public, private, and hybrid clouds. Okta empowers organizations to transition away from expensive on-premise infrastructure and adopt best-of-breed technologies by solving the key challenges posed by moving to the cloud.
Enhance Security and Compliance: Okta’s platform provides persistent, perimeter-less security with real-time visibility and compliance reporting. We enable organizations to determine exactly who gets access to what, from day one of onboarding, throughout the user lifecycle, including job changes or promotions, to off-boarding.
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Okta’s Network Effects
The Okta Identity Cloud benefits from powerful network effects, accelerating Okta’s value creation, providing sustainable competitive advantages, helping Okta to acquire additional customers, and providing more value to Okta’s current and prospective customers.
Product Network Effect: As new applications are added to Okta’s platform, they are immediately available to all of Okta’s customers through the Okta Application Network. As Okta adds more customers, Okta increases the number of applications in the Okta Application Network. As a result, Okta’s network is continuously growing and providing additional value to Okta’s current and prospective customers.
Ecosystem Network Effect: The Okta Identity Cloud includes identity and security APIs that can be used by Okta’s customers and by Okta’s system integrator and ISV partners, such as Accenture and ServiceNow, respectively. As Okta adds more customers, it increases the number of system integrators, expanding Okta’s partner ecosystem and allowing it to acquire new customers.
Data Network Effect: As the number of identities managed on Okta’s platform continues to grow, Okta gains increasingly valuable contextual data about Okta’s users. That data enables Okta to drive product innovation, new feature development, and enhanced security on Okta’s platform. As Okta’s customer base expands and additional data is generated, Okta captures new insights and further enhances Okta’s products, increasing Okta’s value proposition.
Universal Directory: Universal Directory provides a centralized, cloud-based system of record to store and secure user, application, and device profiles for an organization. Users and profiles stored in the directory can be used with Okta’s Single Sign-On product to manage passwords and authentication or can be used by developers to store and authenticate the users of their applications.
Single Sign-On: Single Sign-On enables users to access all their applications, whether in the cloud or on-premise, from any device, with a single entry of their user credentials. Single Sign-On also enables built-in reporting and analytics that provide real-time search functionalities across users, devices, applications, and the associated access and user activity.
Adaptive Multi-Factor Authentication: Adaptive Multi-Factor Authentication provides an additional layer of security for an organization’s cloud, mobile, and web applications and data. Adaptive Multi-Factor Authentication offers adaptive, risk-based authentication that leverages data intelligence from across the Okta network of thousands of organizations.
Lifecycle Management: Lifecycle Management enables IT organizations or developers to manage a user’s identity throughout its entire lifecycle. It automates IT processes and ensures user accounts are created and deactivated at the appropriate times, including the workflow and policies needed to power those processes.
API Access Management: API Access Management enables organizations to secure APIs as systems connect to each other. Access to these APIs is managed based on the user, allowing the organizations to centrally maintain one set of permissions for any employee, partner, or customer across every access point.
Access Gateway: Access Gateway enables organizations to extend the Okta Identity Cloud, which is a cloud-native platform, from the cloud to their existing on-premises applications, so that they can harness the benefits of Okta to manage all of their critical systems, whether in the cloud, on-premises or hybrid.
Advanced Server Access: Advanced Server Access offers continuous, contextual access management to secure cloud infrastructure. Organizations can continuously manage and secure access to on-premises Windows and Linux servers across leading Infrastructure-as-a-Service vendors, including Amazon Web Services, Google Cloud Platform, and Microsoft Azure.
As of January 31, 2022, Okta had over 15,000 customers, including over 3,100, with an annual contract value greater than $100,000. Okta’s customers span nearly all industry verticals. They range from small organizations with fewer than 100 employees to companies in the Fortune 50, with up to hundreds of thousands of employees, some of which use Okta’s platform to manage millions of their customers’ identities.
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Okta made $1.3 billion in FY22. Okta derives revenue from subscription fees (which include support fees) and professional services fees. Okta employs a Software-as-a-Service (“SaaS”) business model and generates revenue primarily by selling multi-year subscriptions to Okta’s cloud-based offerings.
Subscription Revenue: Okta primarily has a subscription based business model. Subscription revenue primarily consists of fees for accessing and using Okta’s cloud-based platform and related support. Subscription revenue is driven primarily by the number of customers, users per customer, and the products used. Subscriptions contributed 96% to Okta’s revenue in FY22.
Professional Services and Other: Professional services revenue includes fees from assisting customers in implementing and optimizing the use of Okta’s products. These services include application configuration, system integration, and training services. Professional Services and Other contributed 96% to Okta’s revenue in FY22.