OKTA COO in-dept interview

Here is an extensive TMF interview with OKTA founder/COO Frederic Kerrest. A lot to absorb and digest here. It will be worth a couple views/reads to absorb a lot of the information.




Here are a few snips from the interview. I’ve captured <10% of the information being shared.


I talk to large organizations’ CxOs every single day about where they are. Some of them are in good situations, some of them are in less good situations. Just seeing what we can do to help out there.

SaaS Growth

my co founder and I were at Salesforce.com prior to starting Okta. I started there 18 years ago and Todd started the year after.

at the time Salesforce was the biggest provider of software as a service, their revenues were south of $1 billion. And all of the cloud enterprise software was less than $10 billion.

Moat/Network Effect

I think the biggest thing around the moat is independence and neutrality, right? So if you roll back the clock 15 years ago, enterprises or the government were, they worked with one specific stack. You were an Oracle shop or an IBM shop or a Microsoft shop or an SAP shop, and you bought all your stuff from them. And what’s happened obviously with the proliferation of mobile operating systems, and obviously now the cloud infrastructure, is proliferation of enterprise technologies. If you look at the Okta integration network, our central catalog, it has over 6,500 different pieces of technology.

So we have our own two-factor, but we also connect to, I think, 17 different two-factor authentication systems out there. Because we have one and we think it works pretty well, but we’re all about independence and neutrality and helping our customers use whatever technology is best for them. We don’t have an agenda that we’re pushing. And I think that is a big thing that really resonates with CxOs, because if you look at some of the other providers, Microsoft in particular, right? They have a whole suite that they’re trying to push of their own applications, whereas we’re really trying to say, hey, you can bring the Office 365 thing in.
By the way, we’re the best integration for Office 365, but we’re also the best for AWS and for GCP.
And that ties into the network effects, because we have more customers, 8,000 enterprises and government agencies who are using the service now at scale. As they start to use more and more of it, think about if you’re the next software-as-a-service [SaaS] vendor who comes up, and you go and you try and talk to, I don’t know, let’s pick one – Zurich Insurance. And you say, hey Zurich, I want to sell you a piece of software. And Zurich says, that’s great. We use Okta. You have to pre-integrate it to Okta. So they go out and they call us, and we’ve got a bunch of APIs [application programming interfaces] and make it very easy for them. If you’re that small company, you don’t have a ton of resources. You’re not going to connect to Okta and the second-best player, and the third-best player, and the fourth-best player.
So instantly now that guy or that gal is tying their company into Okta, which means the next company who shows up and says, “Oh, I want to use that piece of software”: Boom. It’s tied in, and that’s the kind of network effect you get around the companies.

8,000 Current Customers

Now how we get to 8,000 is: … First of all, 85% revenue from North America, which means 15% from the rest of the world. Obviously, a huge opportunity to grow there. We look at the Global 2000, we have about 20% of the Global 2000 [that] are customers of ours of any size and scale at this point. First of all, that 20%, they could consume a lot more Okta services today. And second of all, there’s an 80% to go.

Enterprise vs Consumer (Zoom parallel)

We’re obviously born and bred as an enterprise software company. We focus on helping businesses. It’s kind of in our DNA. It’s what Todd and I and the rest of the management leadership team grew up doing. So we’re very good at that motion. We get this question a lot. It’s something we’re thinking about. We don’t have any solutions today, but we are keeping that in mind of how we can help consumers. It’s a completely different ballgame. There’s very few companies that actually get enterprise and consumer right at the same time. So we’re trying to… Even organizations much larger than ours, who have many more resources.


Well, I mean it’s, it’s actually pretty straightforward. So in the workforce identity and access management stuff, so the employees and contractors and consultants’ side of the world, which by the way we think is about a $30 billion a year total addressable market. The main competitor there is Microsoft. They’re the legacy incumbent. They came up with Active Directory. They think of it as their birthright to do all these things. But as we’ve discussed, they don’t have the independence, they don’t have the neutrality, and they’re not focused on it. Right? Their No. 1 business is Office 365, and moving that franchise to the cloud. And if they get that right, that’s great.

On the customer identity management side, it’s actually very different. It’s a build versus buy story, because look, we’ve all had logins to Amazon.com for 20 years. So putting up a simple page with a username and a password is not that complicated. But now when you talk about, hey, I might want to have a second factor and email address, second email address, I might want to verify, or I might want to register a phone to do one-time SMS, or I have to think about security in a different way, and I have to be agile.
And by the way, there’s a shortage of hundreds of thousands of developers in the world today, and that number is growing. It’s not getting smaller. So if you think about these large organizations in traditional industries, they might have all the best intentions in the world, but they have to move fast, and they’ve got to move fast to digitize their customer experience, and they have to do it at the same time when they have less and less developer resources. It’s just an accelerant for people thinking more and more about customer identity and access management. And that’s the big competition we see, is just people trying to build it themselves.

Revenue Growth Rates

we think there’s an opportunity to grow the company at north of 30% for each of the five years. We’re two years into it. So going into fiscal year [20]24, we’ve made that very clear. We’ve talked to Wall Street about it. There is no reason we can’t do that…all of our internal metrics indicate we’ll be north of 30% for each of the years too: No. 1. No. 2, as I said, we want to grow it as responsible, mature adults. I could grow that number through the roof, but I’d obviously increase costs considerably too.

Something that’s not in this that you won’t find in the filings, but I know that you guys are much smarter than just looking at 10-Ks: the Rule of 40, which is one of the rules that’s kind of used unofficially on Wall Street, both buy-side and sell-side, but obviously also specifically in our industry. And it’s kind of, you add growth rate plus free cash flow margin, and you want to be north of 40%.

So what that means is you’re going to have that growth rate, but you don’t want to do it at such a rate that it’s really costing you free cash flow margin. And if you can stay above the Rule of 40, you’re in pretty good shape. It turns out we’ve actually been above the Rule of 50 for quite some time now. And if we really wanted to grow the company and the only goal was to grow 50% this year, we could do it. I would just spend a lot more money doing it.
Also, we said that we’d be cash flow positive, free cash flow positive last year, which we were, as well as operating-costs positive last year, which we were as well as operating cash flow positive, and we’re going to continue to do that. So what you’re seeing is this growth and almost $600 million of revenue; it’s not a tiny business anymore. So we’re starting to do it at some modicum of scale. We’re still growing the company at 40%; we’re above that Rule of 50. We’re kicking off cash. And again, we’re playing the long game. I mean, I think these markets that we’re in, there’s tens of billions of dollars of addressable market. So we’re trying to figure out how do we grow, while also kind of keeping those good confines around what we’re doing.


We actually have an innovation as one of our five core values as a company. So we are always listening to customers. We’re listening to what they say. But I was on, actually, the Zoom this morning with one of our customers at a Fortune 100 company, CIO [the chief information officer]. And the CIO is saying, “Hey,” you know, he’s a new CIO, but he’s used us in the past, but he’s new to this organization. He’s saying, “Hey, I know we’re using Okta, but we’re using it in a bunch of ways that it feels like those are just the ways that we do business. I want to think about not having the software drive my business, because these business processes were built into how the software works. I want to do it the other way around. I want the innovation that’s coming out of a place like Okta to help me drive my business forward.”


Currently we calculate it at about $55 billion, which is $30 billion for the workforce identity management, and $25 billion for the customer identity and access management.