Every time an individual logs in to OpenAI’s ChatGPT, Okta makes bank through Auth0—-its authentication and authorisation platform that runs on the cloud.
Okta is an Identity and Access management firm that offers customer identity and access management(CIAM) to OpenAI. IAM software facilitates appropriate resource access for internal users, streamlining operational processes, reducing costs, and bolstering security. Conversely, CIAM manages external consumer identities for IT services, with a focus on user experience, accessibility, and retention on public websites.
During an interview with AIM, Ben Goodman, Okta’s Senior Vice President and General Manager for Asia Pacific and Japan, discussed their partnership with OpenAI and their efforts to replace passwords and further bolster security.
He said, “The concept of not having a password, the concept of not being able to access the system without biometrics or whatever your factor is, rapidly increases security and minimises how many people get access to a system.”
He emphasised that the combination of Phishing Resistance Multi-Factor Authentication + password + biometric has significantly reduced the ransomware attacks and attackers from access.” He added the effectiveness of combining multiple layers of authentication, including biometrics, to enhance security and deter unauthorized access, leading to a notable reduction in ransomware attacks and intrusions.
Partnership With OpenAI
Goodman also discussed Okta’s partnership with OpenAI. He highlighted that the insights gained from safeguarding OpenAI’s operations contribute to enhancing security measures for all other clients. This collaborative learning approach is particularly valuable because OpenAI faces a substantial volume of threats, which, in turn, fortifies security protocols for other companies. This dynamic, Goodman noted, is both fascinating and promising in terms of cybersecurity advancement.
In a recent interview, Okta CEO Todd McKinnon was posed with a question about OpenAI choosing Okta. Responding to it McKinnon offered a straightforward explanation, delving into the pivotal role that developer experience played in this partnership.
He outlined the context of OpenAI’s choice, stating that it occurred in the early stages of product development. At that point, OpenAI’s developers were in the process of creating what would eventually become GPT. In this crucial phase, they were seeking an identity solution that could seamlessly integrate into their work, facilitating their focus on the groundbreaking technology they were crafting.
McKinnon highlighted the central factor that swayed OpenAI’s decision – Okta’s exceptional developer experience. He emphasised that Okta’s Identity Cloud boasted a remarkably simple API that precisely met the developers’ requirements. Importantly, it refrained from complicating matters by adding unnecessary features or complexities. Instead, it streamlined the development process, allowing OpenAI’s developers to concentrate on harnessing their innovative capabilities.
Okta’s India Calling
Okta recently announced the establishment of a new office in Bengaluru, India. The company aims to tap into the nation’s growing demand for digital identity solutions and cybersecurity measures.
A recent report by Avendus Capital supports this notion, projecting an 18% increase in India’s cybersecurity spending between 2020 and 2025. The report also highlights the shift towards cloud-based solutions and the adoption of zero-trust architecture, and that’s the space Okta is looking to capture
Co-founder, Todd McKinnon, expressed excitement about entering the Indian market and providing industry-leading identity services to innovative businesses and government agencies. With the digital identity market gaining momentum due to heightened concerns over cyber fraud and authentication, Okta sees a significant opportunity in India.
Goodman emphasised India’s reputation for technological innovation and entrepreneurship. He opined that establishing a dedicated presence in the country positions Okta to better serve Indian clients, stimulate local innovation, and contribute to the continued growth of India’s technology and cybersecurity landscape.
Not just that, Goodman told AIM that the move also aligns with their European operations and that the country is rich in terms of skillset
“The time zone support in terms of European operations and the general skillset taught through academies high academic makes it a very attractive destination,” he said.
Okta’s entry into the Indian market is not entirely new; the company’s Venture Capital arm, Okta Ventures, previously invested in Bureau ID, an AI-powered identity decisioning platform provider. Bureau ID’s notable clientele includes Bajaj Finserv, IIFL, Rapido, Kreditbee, Mahindra Finance, and SBM Bank.
Goodman also discussed Aadhar and its challenges and the idea of a potential partnership with the government of India emerged.
“Absolutely, we are looking to start a partnership. Aadhar’s got its challenges, (however), when you think about being a factor in multi-factor authentication, it could be Aadhar, it could be a facial biometric, voice biometric.”
The perspective shared was that while Aadhar does face specific challenges, it could serve as a component within a multi-factor authentication system. This could encompass other factors like facial and voice biometrics. The approach here is to use Aadhar as a factor but not the sole factor in authentication. By integrating it with other authentication methods, a more comprehensive and balanced approach can be achieved. This strategy aims to enhance the authentication process for critical services, while also mitigating potential friction that might arise. Ultimately, the envisioned partnership would involve leveraging various capabilities to enrich the Aadhar experience.
Competing With a Giant
Okta operates in the rapidly expanding global Identity and Access Management (IAM) market with a total addressable market of up to $80 billion.
This market is driven by the increased adoption of cloud-based applications and services, which require secure identity and access management solutions. Stricter regulations and security concerns also contribute to growth. Despite strong competition from Microsoft’s Azure Active Directory, Okta is a market leader alongside Azure AD.
In Q4 FY23, Okta demonstrated robust performance, with revenue growing 33% YoY and a solid free cash flow margin of 14.1%. The company’s profitability has improved, driven by strong customer growth and notable clients such as Sonos, Hewlett Packard Enterprise, and MassMutual. OpenAI, the developer of ChatGPT, benefitted from Okta’s Customer Identity Cloud, which offers self-service authentication solutions.
Looking forward, Okta anticipates further growth with revenue expected to rise by 23% YoY to $510 million for the next quarter. For the full fiscal year, a 17% revenue growth is projected, with $0.77 non-GAAP earnings per share and a non-GAAP % free cash flow margin of about 10%.
Okta could upsell its partnership with OpenAI and its additional products for increased revenue. And that’s what happened, Okta partnered with Sam Altman-led Worldcoin to revolutionise identity verification in Germany as it wants to be a part of the journey to replace passwords with WorldID.
According to Auth0’s pricing documentation and the initial reported number of 100M+ ChatGPT users, the cost would be possibly around $20 million for OpenIA and in revenue for Okta. However, with the increased ChatGPT user base, Okta is mining moolah.
Despite Okta’s market dominance, Microsoft’s Azure Active Directory poses a strong competitive challenge due to its integration into the Microsoft 365 ecosystem. Okta distinguishes itself through broader third-party protocol support and user management capabilities, though it’s susceptible to Microsoft’s AI-driven offerings integrated into its suite.
In terms of valuation, Okta appears attractively valued, especially considering its strong market position, historically low EV/Revenue ratio, and forward PE ratio of 34 for 2026. This valuation reflects the optimism surrounding the company’s earnings growth prospects.
Conclusively, Okta’s presence in the IAM market, partnership with Microsoft, strong financial performance, and favourable valuation suggest it’s a promising investment choice, despite facing competition and evolving market dynamics.
