The coronavirus pandemic, for all its human and economic tragedy, has spurred a once-in-a-generation opportunity for the technology industry, seized most visibly by the sector’s giants such as Apple Inc., Amazon.com Inc. and Microsoft Corp., and productivity players like Zoom Video Communications Inc. and Slack Technologies Inc.
A lesser-known beneficiary is Okta Inc., a decade-old cloud computing company based in San Francisco. Its software gives corporate customers a kind of border control for the internet, helping them authenticate the identity of their employees and customers as they connect remotely to a sprawling system of online applications.
The Covid-19 outbreak, which has cast most workers out from behind their corporate firewalls and into their home offices, has helped to further popularize Okta’s software. It allows companies to seamlessly manage their employees’ use of the internet and to protect the corporate data on their devices.
The stock has more than doubled since March, when lockdowns began, and has surged more than 10-fold since its initial public offering in 2017. The software maker has become an integral part of our new daily life, with its technology used by organizations as varied as Major League Baseball, Adobe Inc., FedEx Corp. and Seton Hall University. The boom has some investors betting that Okta and similar companies will accelerate their revenue through the crisis, even as it raises questions for executives about their good fortune at a time of suffering and massive job losses in the nation at large.
“It can be mentally and psychologically confusing for me to both read the news and then see customers asking for our service,” said Frederic Kerrest, Okta’s co-founder and chief operating officer. “Because the world is not in a good place, but, you know, we seem to be able to provide some solutions that people really need, which is great.”
From March through July, Okta’s main product, called Identity Cloud, was used almost 16 billion times to access an app or website. The multi-factor authentication service saw usage nearly triple in the period compared with a year earlier, and it hit a single-day peak of 145 million unique logins, the company said.
Wall Street has bought into the story. The stock has soared 106% since March 12 when U.S. President Donald Trump imposed travel restrictions on Europeans. Now Okta must live up to the lofty expectations that come with a company valued at $27 billion. The shares slipped late Thursday after quarterly results reminded Wall Street that the company may not be able to accelerate sales growth forever.
“We’re still being prudent about the rest of the year and the macroeconomic consequences ahead of us,” Chief Executive Officer Todd McKinnon said in an interview. “Headwinds to the business will be a little stronger in the second half.”
The company has also lost money for most of its existence. However, investors are often willing to look far into the future when assessing cloud-based subscription businesses such as Okta. These companies spend heavily on sales and marketing to win as many customers as quickly as possible. Once the user base is large enough, distributing extra versions of the software online costs very little, and a highly profitable business can emerge -- one example being Salesforce.com Inc.
Okta must lure as many paying customers as it can during this rare work-from-home boom, and then keep hold of them as the world slowly returns to some semblance of normalcy. Its work with FedEx suggests that this is possible.
The logistics giant first partnered with Okta about a year ago, and now has more than 85,000 workers using the software maker’s service to access the FedEx virtual private network. Warehouse employees were given additional iPads to access apps with Okta, so they didn’t have to share devices and could maintain social-distancing rules, said Gene Sun, FedEx’s chief information security officer. Many of the company’s customer-service workers have Okta on their phones for the first time in order to securely pull up customer information while working remotely.