Okta, Inc. (OKTA) Earnings Call Transcript & Summary

Okay. Here we go. Hey, everybody. Welcome to the financial analyst Q&A breakout session. I'm Dave Gennarelli and Head of Investor Relations here at Okta. I hope you all had a chance to tune in to the showcase event, which concluded a short while ago. So with me in today's meeting, we have Todd McKinnon, our Chief Executive Officer and Co-Founder; Frederic Kerrest, our Executive Vice Chairman, COO and Co-Founder; and Bill Losch, our Chief Financial Officer. Also joining is Diya Jolly, our Chief Product Officer. So before we start taking questions, I'll cover a couple of ground rules. You should all know the first rule of Zoom that if you're not talking, please mute yourself. I also ask that you show your name and your firm name in your Zoom box. So to do this, you click on the participants at the bottom of the screen, hover over your name. Click on more and then select rename, so just put your name and your firm name. And then to indicate that you have a question, use the Raise Hand function in the tool and wait to be called on, and then you can unmute yourself and ask your question.

So with that, I will open it up and looks like the first question is going to come from Jonathan Ho at William Blair. Jonathan, go ahead and unmute yourself.

You hear me okay?

Here we go.

Great. Good to see you all, and thank you for joining this session. I just wanted to start out with some of the discussion around digital transformation and one of the things we wanted to understand a little bit better is maybe what you're seeing in terms of the trends there. Clearly, it's ramping up. But how important are things like no-code and automation as you start to think about the enhancements that you're making to your solutions? And how do you sort of monetize those in a world that's maybe shifting to more DevOps, developer, decision makers?

I think that the -- it's really interesting. I think you're seeing a major secular trend. I think everyone understands us and talks about this, but then I also think you're seeing an acceleration because of COVID. We've seen the acceleration -- the first COVID acceleration we saw was from remote work, and I think you're seeing kind of the second echo of all the shutdowns we had earlier in the year, but that echo being really a thrust toward companies figuring out their digital transformation strategy. So that's -- we're seeing that in the business. It's pretty exciting. Those projects for Okta -- with Okta customers, those projects take a little bit longer to come to fruition because they're -- that they build something. So it's not as immediate as the impact as if someone buys Okta for remote work when they have to really tactically get something done. You saw in the keynote we talked folks like from T-Mobile and McGraw-Hill talked about remote work. That was very immediate, but then some of the digital transformation projects take longer. And another important part for our success helping facilitate digital transformation is the fact that we can make it easier, just by the fact that they're using our directory or our single sign-on, or our own multifactor, they don't have to use developers for that, -- then for that -- for those -- for building that part of their applications, which is a huge deal. And I think in that marketplace for us, the biggest opportunity we have in the short term and in the medium term is just to make sure we clearly communicate to the market that they don't have to build it themselves. They can't use a solution like Okta. It's much better, it's much more secure. And then you layer on top of that, what we did with customer identity workflows where we kind of branch out from the basic functionality of directory and single sign-on. And now you can start to automate more of the customer process around those APIs, you get out of the box, it's pretty compelling in terms of decreasing the requirements that the customers have to use their developers on that part of the implementation. So it's a win-win for both of us there.

Great. Okay. Our next question is from Shaul at Oppenheimer. Shaul, go ahead and unmute yourself.

Thank you, everybody. Pleased to see everybody is doing fine. I actually had a question about the recent announcement with kind of Susan taking or joining on board from Splunk. Many of us have known her. So we do know her from her days at Splunk. And I think everything that she has brought along with her to the table. Not that anything is like seems to be meeting in any sorts of way, some amendment as it relates to your sales force at that time. I think it could have been said with respect to Splunk. She brought some more order. I think kind of messaging about the product, the product portfolio as a whole. What's the current thinking, Todd, with respect to how she is going to be kind of merged and meshed into the overall management team and kind of plans going forward in that respect?

Well, the main thing is I'm -- my thinking is I'm really, really lucky to get her. I mean, if you look at -- so I worked hard on the search for a few -- a couple of months since we announced Charles was retiring. The way Charles has been amazing. He's been great to work with. I really value what he's done. And beyond that, I just value his transition. He's giving me time to transition and gave me time to do a really thorough search. So I talked to dozens of candidates. And there's not many people in the world that have the balance of just experience at scale, and then you add that to the requirement to have experience at scale with cloud. And then you add that to the equation where you have to have experience at scale and with cloud and with selling to IT and security. You're starting to get the Venn diagram of overlapping people is very small, and she's luckily running the heart of that. And she has experience selling platforms. That's when I worked with her most directly at Salesforce when I was there and she was there, she was running the platform sales team. So I'm really lucky to get her. And you put all that together with her ability to build great teams, foster a great culture, be really customer-centric about her approach to things. And combine her experience, and this is something you have to kind of know a person pretty well to know they can do this. But combined her ability to take her experience with her ability to think through things from first principles and know why Okta is probably not exactly like Splunk or exactly like Salesforce. That's a unique ability. Charles had that and Susan has that as well. So we're very lucky.

Great. We'll take the next question from Hamza at Morgan Stanley.

How is it going?

Good.

So I wanted to ask a little bit about customer identity workflows and particularly how you think that changes the sales notion for Okta in that? Do you think this now expands out of the security department away from the CISO and to reach broader CIO level type conversation?

Yes, absolutely. So we're very excited, obviously, about the opportunity to continue to expand the way we're doing life cycle management. And as you talked about workflows, we have very successfully, I think, over the past number of years, transitioned from not only having CIOs are being hired so the Chief Security Officer as well. What we're trying to do is just make it easier for people to adopt best-of-breed technology. And we've been doing that very well on the workforce side. We're very excited about what we just announced on the customer identity and access management side. And the idea, going back to the first question is, from Jonathan, how do you allow -- we've always been good with developers. We're going to continue to invest there. I think there's a huge opportunity. Developer dot.com is going very, very well, a lot more libraries and relationships and all those kinds of things that we're trying to do very well. But you also want to start to empower more and more the business lines should to go ahead and do their own work. And I think one of the things that we've seen, in particular, as we've seen this acceleration that happened during the COVID-19 pandemic is more and more business lines are saying, I need to figure out a way to go digital, I need to figure out a way to get something out to my customers, my suppliers, my vendors very, very quickly. And I don't have time to stand in line behind the giant IT team because this isn't the line of business. So what we've really focused on here is allowing people with either low-code or no-code to create these end-to-end powerful workflows on the customer identity and access management side. And I think that, that's going to play very well. And so it's going to allow us, obviously, an opportunity not only to continue our relationships that we currently have, but also find new ways to help our customers who in need end-to-end workflows in this best-of-breed environment they're trying to build.

Yes. And I'll follow-up there with a specific example to what Freddy is saying. Think about a very classic example that at that sales goods would have run into, right? You buy -- you get into an app like an Albertsons, and you end up buying some foods and vegetables and you end up buying a breed of yogurt. The marketing department now might actually want to know that information and send you a coupon for something else. Workflows allows the developer to get out of the floor, and it gives the marketing team the ability to actually be able to do this, right? Because they don't know code. They want to just be able to stitch self together. So what we're doing is, we're actually using workflows to get the -- to lower the burden on the developers and actually give the par and the flexibility into the hands of the people that need to control the end-to-end customer experience.

So let's go to Gregg Moskowitz at Mizuho. Gregg?

Okay. I actually had a follow-up on that point, either for Todd or Diya or Freddy. So on customer identity workflows, what I'm wondering is how pervasively you think this could be embraced by the nontechnical workforce over time. How do you see that evolving over the next few years?

I think it's powerful. I think there'll always be -- I think the customers that are really innovating in digital transformations are going to have developers involved. So the way I see it as the no-code or the low-code is really the extension points for the kind of rounding around the edges and lessening the developer requirements but not removing them entirely. So that's how I see it. But that being said, you can get a lot of value by that last mile, so to speak, of customization and personalization to the exact requirements of the solution you're implementing. So it's necessary but not sufficient for the whole solution. That's how I see it.

Next question from Walter Pritchard at Citi.

Todd, question in for Diya on privacy. You started talking about this more. You made a venture investment, I think, in the space with Accuvant. You had the OneTrust news today. I mean this feels like an attribute that's very much like device and like you sort of have to have a bigger play here, especially on the science side over time. How do you think about the decision around having this -- having a more robust capability around privacy in-house versus partnering with OneTrust is a large company, there's really nobody else out there that's big. But just curious how you're thinking about that side?

You're right. It's an important part of the solution for customers. But the way I see it is that the big challenge or the opportunity in customer identity is we talk a lot about having a robust scalable platform. We talk a lot about having that platform be extensible and customizable and accessible by developers. That's very important. But the other -- probably as big, if not bigger, is that the customer, digital transformation and customer identity inside of that, we need to make that as big a part of the solution as possible. So we need to broaden the functional footprint of that offering. So we have a chance to really define what it means to be customer identity. And I think now it's defined pretty narrowly. It's defined as directory and single sign-on, and we have the opportunity to broaden that. And so the -- what we need to figure out is what's the right way to broaden that. Privacy is one thing that seems like a viable place to go, but there's many others as well. And so our strategy has been flexible platform investments, partners, have an open ecosystem. And so if you flip that around from a customer side, the benefit for them is there's an emerging category. There's a lot of momentum around it. They can have the foundational part be Okta and as the rest of the category kind of coalesces around that foundational piece that is Okta, we'll kind of ensure that there'll be future proof from every other change that might happen around that, whether it's privacy and consent as that evolves because there's regulatory input there, other parts of the absolute vision. That's why you see us doing -- taking an approach like we've done a lot of other places, which is this platform approach, integrate to everything, do its best for the customer. And as the market unfolds, they'll be future proof because they chose to go with Okta.

All right. Next question, Rob Owens at Piper.

Great. If you think about customer acquisition, how much is led at this point by the consumer identity side, how is that transition now with everything that's going on in this work-from-home environment and digital transformation? I'm curious when you're winning there, why are you winning? What becomes the decision factor for customers?

Yes, that's a great question, Rob. Well, I think the -- first of all, the customer identity and access management business is doing very, very well. It's about 24% of our business, now growing by about 72% year-over-year. So you're really starting to see the acceleration. And I think it's highlighted in the customer success that we're seeing. So I think what's happened over the last couple of years is as customers got more and more comfortable with our workforce capabilities, they started saying, "Hey, there's all these other things we want to do around customer identity and access management." We're comfortable with Okta as a company, as a platform, as a set of products, the security, the scalability, the reliability, help us out here, give us more. And so that kind of timed in well with our thoughts around opening up the platform, making that more modular so that people could really start to use the different components they want in different orders in which they want. And I think what you've seen is, sure, at the beginning of the COVID-19 pandemic in the first part of this year, there was a quick switch to workforce. I think people are trying to get their workforce enabled very quickly as they move to remote work. I think a good example that we put in one of the earnings, go live releases with FedEx, trying to get 85,000 employees to go live with 250 applications over a weekend, right? That's the kind of immediate action they needed to take but what's happening now is people are really realizing, you look at the e-commerce numbers as a percentage of commerce in North America, how fast that's grown from 16% to 27% over the first half of this year. That alone means everyone has to really rethink the way they're going to interact with all these digital experiences for all their customers, whether that's B2B, B2C, B2B2C right down the distribution chain. So we are seeing a lot more interest from large organizations saying, "Hey, I really need to rethink this. This is a great opportunity." If I'm a CIO or a CTO or a CISO, who's been in my company a long time around the industry a long time, they realize it is a technology leapfrog moment where they can really take a step forward with these big initiatives that are going to be very well supported from the board level on down, and we're seeing that across the business. Finally, I would just say that now the feet we're so feature complete with a very strong and robust customer identity and access management offering. I mean, you can see we're now adding advanced life cycle workflows into customer identity and access management and we are really able to land anywhere in any side of the company with customer identity and access management, which given us at least another part sell and upsell opportunity for our sales force, which I think is playing very well so.

And following up on that, a couple of years ago, at Oktane, you talked about the network effect on the enterprise side. Is there that opportunity on the consumer side? Or is it just more of a one-off type of sales situation?

I think...

Yes, I think...

Go ahead, Freddy.

I think there's certainly going to be more and more of those opportunities, right? As customers get more and more comfortable with all of these different customer identity and access management interfaces that they're going to use, we certainly have a great opportunity to help these customers interact more seamlessly with all these. So over time, I definitely think you're going to start to see that acceleration. We have certain specific examples where we've got 2 or 3 customers in large enterprise that work together that actually end up being customer identity and access management customers today. And their customers, their end customer is benefiting from all those viral network effects. But I think the exciting part here from my perspective is that it's very early and the opportunity is great ahead, and we're just getting started with these large enterprises, and we really have to get out there and get dissemination to really get that flying. I think that's a big opportunity for us.

Yes. I'll just add, Rob, I'll add to that, that a couple of very concrete network effects around the customer identity. One is the integrations. So if you think about OneTrust or you think about fraud detection or bot detection, these are integrations that are being built on our platform that -- because we have the customers. We have the customers using this foundation. And then that helps other customers learn about the solution and helps them get value of the solution, so it pulls more customers into the solution, which means the next wave of vendors are going to be more likely to build our APIs and our platform. And that's -- to Walter's question earlier, filling out that full canvas of the possible things that a customer would need around our solution is very compelling to customers. That's one example. The other example is threat insights, our capability that does basically detects fraudulent IP addresses and protects all of our customers from those fraudulent IP addresses. That works for customer identity as well. So there's some bot net attacking workforce customers, we detect that, we'll protect that, all of our customers. Now if they're using us for customer identity from that as well. So those are a couple of concrete examples on how having one stack, one platform benefits both sides of the business.

Let's go to Gray Powell at BTIG.

Okay. Great. Can you hear me okay?

Loud and clear, Gray.

All right. So yes, maybe on some of the newer product initiatives. I mean, how quickly do you think you can get a foothold in the identity governance and privileged account management space become more disruptive there? And then how much of that opportunity do you think is greenfield versus replacing an existing solution?

So if you watch the -- today, you saw that we had a bunch of announcements around our advanced server access. So that's -- when you say governance, I'll just assume you're talking about that. Are you talking about governance? Are you talking about something else?

Governance I was referring to life cycle management. And then privileged account management. Yes, the ASA product, yes.

Yes. It's actually the same. It's kind of the dynamics in both of those, the ASA market and the life cycle management market are interesting, and they're similar in that. Our solution is really focused on this cloud-centric modern environment. And we partner with companies like SailPoint and CyberArk that focus more on the traditional environment, legacy environment. And you're going to see us continue to do both of those things in parallel, build for the new world while partnering really for the old world. And that's going to be a consistent strategy. The first -- and it's based on 2 beliefs. One belief is that it's what customers need. These customers have complex legacy environments, especially like the large enterprise, every one of them has a legacy implementation of SAP, legacy implementation of Oracle financials, and they need IGA and the traditional sense to sit next to that application. We're not going to build that. We're going to partner with SailPoint for that. And on the privileged access management side, we're not going to build ASA to go after a legacy solution that's an Oracle database and sitting in the rack in their own data center. We're going to partner with CyberArk for that. So that's what customers want, and that's what we're providing, and that's what we're working hard and being great partners to address that. But at the same time, the future, I think, is more things in the cloud, more workloads in the cloud, especially on the privileged access side. These are -- it's a very different architecture. It's dynamic. You spin up servers all the time, which is back to the announcements around event server access, you're seeing a lot of innovation in that product suite. You're seeing working with modern infrastructure management tools like Terraform from HashiCorp, as we mentioned. You're seeing us making real progress on practically integrating it to all of the cloud providers, whether that's Amazon or Google or Microsoft. So that companies that are building these modern solutions in the cloud for their digital transformations can -- will fit right in with their tools, and will let them get some level of insulation from the detailed security policy management of those clouds and give them more flexibility and more choice across those infrastructure clouds. So that's important to us as well. So that's how we look at the market, we're pretty -- in the long term, these 2 foundations of our approach, listening to customers and doing what customers want and also betting on the future, I think, is the right strategy. It's proven successful in the past, and I'm very confident it will prove successful in the future.

Got it. Got it. Okay. And then just maybe just sort of a follow-up. I mean if I look at customer identity, you guys have had a lot of success there. Just using very round numbers, I think that's close to a $200 million annualized run rate today. Like Freddy just said, it's growing 70%. Could ASA or life cycle management, could we kind of think of it scaling like that over the next 3 or 4 years? Not trying to pin you to an exact number, but I'm just trying to like engage like how big new products would be?

Yes. I love hearing you say that. I remember when I would have just dreamed for an entire Okta business to be $200 million. That would have been awesome, I mean, back in the day. I do think it has that opportunity. I think that the -- it's earlier, right? So it's forecasting, there's always, whenever it's earlier, there's risk of forecasting that. The one thing I would add there is it's -- when you talk about managing identity for infrastructure, there's more than just servers. And it's -- there's containers, there's functions, there's emerging things. So we're focused like in -- just like on the customer identity side, we're focused on making sure that the solution over time is a complete solution for customers. We like starting with servers, of course, just like in customer identity, we like starting with basic directory and single sign-on and then broadening out from there. So you'll see us follow the same playbook, and we're very optimistic about that market over time.

And just a point of clarification. Attendees can ask questions as well. You can use the Raise Hand tool in Zoom. So if you have a question, if you're an attendee, we'll get to you as well. Next, we'll go to Andy Nowinski from DAD Co.

All right. I just had a question on your partnership announcement on Salesforce today. So in the example with the customer CarMax, it seems like it was more of a customer identity use case. Do you view that partnership as more of a driver of the -- of customer identity? And then can you also comment on the go-to-market elements of that partnership and how Salesforce may bring you into deals for Work.com?

Yes, absolutely. Thanks for the question. Sorry, it's Freddy. Yes. I think so first of all, the partnership with Salesforce.com and their Work.com initiative, we're very excited about that. It is more today first step, focus on the workforce, right? What they're trying to do with Work.com has enabled a lot of customers to get up and running quickly in these remote environments and managing all these different aspects of it. And so we've had very good integration to Salesforce.com for a long time and thousands of joint customers. What's different here is, first of all, we're the preferred identity vendor, the only identity vendor for Work.com. So it's very seamlessly integrated end-to-end. So from your HR system, you can automatically, as an IT administrator, assign all the right users with all the right permissions inside the right applications inside Work.com, which is very important, obviously. There are already strap for resources and now they're trying to do it in a very constrained environment where there might be PII or other impacts. So they want to be very, very careful about that. Secondly, it enables the end user who's using all the Work.com infrastructure to get up and running very quickly. Team of facts that everything they need. So that's a great part of that. So it is part of our new advanced -- part of the advanced life cycle management SKU, but it is on the workforce side of things, first of all. Secondly, your question about the opportunity for us. Well, obviously, first of all, we're very pleased with the customer base that we've built over the last decade. But obviously, there's a long way to go and a huge opportunity ahead. Salesforce has a lot more customers than we do. So as their account executives are talking to their customers about the opportunity to work into Work.com and start using a lot of those features and functions obviously, the end-to-end automated workflow is going to be a big part of that. If you can just put a new employee inside Workday, have that triggered through Okta, all the way down into the Work.com infrastructure. And then provision with the right users automatically. That's a huge step. So they're just going to be referring this business, which is a great opportunity for us and an opportunity for us to either land net new customers or if they're an existing customer of ours, it's an opportunity for us to talk to them about advanced life cycle management, which is an additional SKU that they can purchase to get all this functionality. In the longer term, I think there's a lot of different things we can do with Salesforce, which is exciting. Certainly, there are a lot of things around customer identity and access management. We already have a lot of customers that are using us as their central identity hub for all sorts of different salesforce.com products they might be using for customer facing properties, so they might have one specific doctor infrastructure, one specific patient infrastructure, one specific supplier infrastructure if they're a health care company. And Okta is in the middle actually helping us solidify all those salesforce.com front ends today. So that's already there. But I think there's a lot more that we can do. I think it's a great first step, and it's a great first opportunity for us to do some really deep products development and integrations together, but I just see this being a big opportunity in the times ahead, and we're very excited about it.

Super.

Yes.

Yes, I would just add real quickly, Andy. This is a big area of focus for us going forward for the next year, just these strategic partnerships with the major clouds. We've reached a level of prominence where they really want to partner with us. And we're looking as a strategic focus to figure out how we can continue to strike these partnerships in a way that really drive our business and really add value for customers. And probably most importantly, really make it clear that there's a choice between different clouds, and we help facilitate that. So that's a big area of focus for us.

Let's another partnership you brought up, I think, with HashiCorp as well, they're certainly best-of-breed in that cloud infrastructure space, but you're bringing best-of-breed identity security to their platform. So it seems pretty obvious that you're certainly enhancing their platform with your partnership? Do you see -- how much of a revenue opportunity you see coming back to Okta from that?

Well, I think it's a great partnership. But just in terms of market presence and scale, when I say a strategic priority, I'm talking about the big folks, right, the Googles, the Microsofts, the Amazons, the Salesforces. But all of our partnerships are important and critical. And I think HashiCorp has done a good job defining this kind of operating system across cloud world. And so there's a lot of synergy there with us and them.

All right. Let's go to Sterling Auty at JPMorgan.

So on the points of threat detection and integrations and partners. Just kind of curious your thoughts around CrowdStrike's acquisition of Preempt Security and the kind of data that they can bring to the Okta platform? And where do you see that kind of balance between what you think Okta needs to basically provide or capture from your own technology versus what you rely on from strategic partners like CrowdStrike?

That's a good question. We have a very close partnership with CrowdStrike. We talked about this at Oktane. Basically, the way we look at this is we have a bunch of different signals. We rolled out our devices SDK that we talked about, that collect signals from within the devices. Different applications, EDR vendors collect different types of signals than we do, we connect to the OS, and we say as OS GL broken, we collect different things like typing speed, things like that. And they collect a bunch of behavioral data, et cetera. So the way we look at this is when you look at threat detection, which depends on AI and ML, the more signals you can bring together the better with Preempt Security, I think our partnership is only going to get stronger. And what we'll be able to do is put the 2 solutions together to have an even higher level of efficacy on our threat insights than before. Does that answer your question?

Yes, it does.

I believe we have a question from Michael Turits at KeyBanc.

So no questions, I think, so far on Access Gateway. So any chance you could give us an update on the on-premise business and how competition is going there? And to what extent you can quantify the traction you've been getting in on-prem?

Yes. Michael, how are you? Nice to see you.

Hey, Freddy.

That's a great background.

I was going the same, actually.

I'm actually there right now. I'm really enjoying.

Okay. I'm just going to keep staying your background is calling me down right now. I can feel my blood pressure going down. Yes, happy to talk about Access Gateway. For those of you who are maybe a little less similar than Michael, obviously, the -- for a number of years prior to us releasing Okta Access Gateway, which came last year, it's about 18 months ago now. As we start working with larger and larger enterprises, that would say, hey, we love everything you can do, and it seems like there's a huge opportunity here, but I need you to give me something that will help link in all of my legacy on-prem infrastructure something that does web access management and higher based authentication. So that's where Okta Access Gateway came in. We released it in the first half of 2019. And then it went GA, it has done very well over the last year. So it has beat all the targets that we had for the product itself. We now have it deployed in dozens and dozens of large organizations very successfully. We're continuing to enhance the product. There's a lot of great things that customers are asking for, number one. Number two, the main reason that we bought the product was certainly the revenue, and people were asking, well, where is it, what's the revenue line? Look, the revenue is good revenue, but the real value for us with the ability to unlock the entire opportunity end-to-end inside these large enterprises. And so the related revenue, the revenue that it's allowed us to get now that we can be the wall-to-wall solution for Fortune 500 companies is much more interesting, and that is also going very, very well. We're going to continue to invest in that product. I think that product is going well. We're also thinking about how we could build the next-generation version of that product. They could be more cloud-native and help everyone really start to move more of their authentication brains out to the cloud, even for access on-premise structure. But yes, that product is doing very well. And all of our named account executives are always excited about it and asking about when the next set of features are coming. So it's going well.

We have a question from one of the attendees, Colin at Sterling Capital. I'm unmuting you now. Colin, can you go? Hey, Colin, we see you now. Go ahead.

I was just calling to ask a question. So your international business has grown, but at the same rate as your domestic business, despite it being a fraction of the size. Can you just tell us a little bit about any unique geo market challenges that govern the growth there and what you all are doing to execute against those?

Yes. I mean, Colin, we've been very pleased with our growth internationally. As you said, I mean, it's been significant growth in all geos, really. And what's great about it is we think that we're just beginning in the opportunity there. We are investing, focusing on our go-to-market investments, focusing on developing our partner channels, and we see a lot of opportunity of the geos. Across the whole spectrum, but certainly like with Global 2000 because a large share of the Global 2000 companies are outside the U.S. So the growth has been very strong. We've been very pleased with it. Obviously, the growth in U.S. has been extremely strong also but we feel really bullish about our opportunities internationally, and we're going to continue to invest to capitalize on those opportunities.

Okay. And then just as a quick follow-up. When we're talking about the workforce use case, can you talk about when you have the opportunity to supplant share from the incumbent Microsoft, what elements are typically on the top of the list for customers that are making that switch? I'm assuming typical cases of independence establishing a multi-cloud presence, things that Azure, just by nature, can't inherently offer. But can you just update us on what customers have top of mind when making a shift like that?

Yes, absolutely. Happy to talk about that, Colin. I think what -- every day, there are fewer and fewer CSOs that with the Global 2000 or the Global 10000 that are thinking about how they want to be more and more locked into a single provider. Said another way, independent neutrality and best-of-breed are what everyone is looking for in the future, more so every day as we go on. And I think that our ability to offer a solution where we don't have a set of products in a suite that we're trying to push where identity is an adjunct, right? Identity is becoming a primary cloud, and we are the #1 vendor, and that is what we focus on. So people have Microsoft, but they're also using AWS, they're also using Salesforce, they're also using Google and everything else out there, and we have the best connection both today and going forward for all of the technologies that folks are using, but also what they're going to use in the future. You heard Todd talk a little bit earlier about future proofing. I mean that's something that's very important. Ask people where they are on their trajectory of modernizing and digitizing their infrastructure, whether it's on the workforce side or the customer side, they always know that they're going to want to do more. Even if they're just starting, there's going to be future applications. Even if they're pretty far down that lane, they know that there's going to be new technologies and new innovation around the corner that they're going to want to use. And so that's a very big opportunity for us. And frankly, that's one of the big drivers of the great growth and success that we've had. I would just say that we worked very well with Microsoft. So customer -- a lot of our large customers have Microsoft. I think we're integrated into active directory in tens of thousands of instances around the world. We're the #1 provider of identity for Office 365 as ranked by Microsoft customers on the Microsoft website. So if you go look at some of the big deployments that we have at organizations like ING, where they try to roll out 150,000 employees on Office 365 and can't do it tied into Azure, whereas we were able to get them up in a quarter or 2. That's because we built the entire service from the ground up as a scale, reliability, resiliency and the ability to integrate seamlessly for all this infrastructure. So there are certainly -- if you're a very small company, you have 20, 50 employees, and you're really focused on the Microsoft stack. And the Microsoft products are going to work fine for you. And as they yield, they can kind of cobble together, but the very same reason that we couldn't build this product at Salesforce many, many years ago and left to build it independently is because all the large cloud vendors are going to have an identity product that ties their products together very well, but the real opportunity here. And what customers are ultimately looking for in their success is tying in all the technology they're using today from all the different vendors as well as what's going to come down the road. And I think that's something where we're really excelling.

Yes. I agree with all that. I would just add that if you think about when we -- in the majority of time, we do very well competitively against Microsoft. And when we do well, it's when we clearly define that identity, strategic and important and can't be done as part of another platform. We don't do as well when the customer perceives it as just something that's part of e-mail, right? If they perceive it as just something tactical as part of e-mail, we don't do as well. So one of the big reasons that customer identity is important beyond just the fact it's a huge market. And that things like advanced server access is so important beyond just the fact that it could be a huge market is that when you can come to market with 3 very broad use cases, workforce, customer and then server just being the third one. It's very clear right up front that this is not something that's part of your e-mail. This is a whole platform. It's independent. And it supports all these different use cases and really deserves to be treated like a first-class primary thing in your environment. So beyond just the markets that are addressed by those solutions that's the strategic reason why those are so important.

Okay. Next up, we have a question from Mandeep Singh from Bloomberg.

Great. So since you're talking about partner shares quite a bit, can you talk specifically about the alliance that you formed with CrowdStrike, Proofpoint and Netskope? And why specifically did you choose those vendors? And how it changes your sales motion?

Yes, absolutely happy to do that, Mandeep. So as you mentioned, a couple of quarters ago, we announced a very good partnership with a number of the other best-of-breed security providers that are out there in the market. I guess, actually a very good continuation on the conversation we've been having frankly today about the importance of best-of-breed and how you really have a lot of very strong companies that are being built to help customers with specific parts of what they're trying to do in this modern environment as they go digital, as they think about hybrid infrastructure as security becomes paramount. So the partnership that you're referring to, we've actually always had very good integration with all those companies. And so today, if you're a customer of ours, you can use our product, you can use CrowdStrike's product. But if you use them together, you actually get more value out of both because they can communicate seamlessly across each other, they can send signals back and forth so that if CrowdStrike is -- if their platform is seeing something, they can inform the Okta platform, which allows IT ultimately and security to make better decision inside their environments. So those integrations have been there for quite some time. What's new is we have upgraded those integrations. We've made them work through the 4 products very, very well. And what you're finding is that customers more and more want solution. They're not trying to buy products. They're trying to solve problems. And when they're trying to solve problems, a lot of times identity will be a part of that. The solution from CrowdStrike might, Proofpoint e-mail, right? If you think about e-mail, that's a huge attack vector. In fact, Proofpoint has its new product called Very Attacked People, which are a real focus inside organizations, where they're trying to -- whether they're doing phishing attacks or otherwise get into a couple of key accounts that they can compromise. That all have critical data in there. It could be someone in the C-suite, could be someone else. If you can tie that information, for example, back to our identity platform, instantly, you can have better information and better signal on both sides. Both who's allowed to authenticate. But also, for example, if you see that someone's in this Very Attacked category, you might want to enhance the security controls around them on the identity perspective. Only allow them, for example, to log into a device that the company-owned or maybe on a network where you are, otherwise, they have to 2-factor. So there are all sorts of different activities and actions that you can take a lot of them automatically, which is one less thing for IT and security to think about to integrate all these products very well together. It's gone very well. Our relationships are continuing. We're continuing to build out the integration with different products, very good collaboration between our sales forces as well. So it's something that we're very happy with the results to date, and I can really foresee that in the times ahead, you're going to see more and deeper of these very important integrations and partnerships that Todd mentioned that we're going to be focused on so.

I also think it's interesting. If you look at it. Yes. I just -- I'll just add one more thing. The -- we've always had great response from the market and customers with our partnerships with the call them the app layer or like Box and Slack and Zoom, that's always been very positively received and had a good impact on our business. This partnership is even, I think, more well received. There's even more energy around customers thinking about how we work together with Netskope and Proofpoint and CrowdStrike. So that was pretty interesting to me. I think that tells you how the market is thinking about us are not only just an enabler of applications and access, but also a key part of the security stack, which I thought was pretty interesting as we observed the reaction to that partnership.

And one quick follow-up. So can you talk specifically about the VPN use cases where Okta maybe involved in, let's say, changing how people are remoting with VPN or Citrix displacements, anything like that?

I think I'll address your question broadly and then you can tell me if answered, if it answers. We -- basically, we can replace your VPN, obviously, if you need that or if your applications are behind a VPN, if they're on-premise and you need them to be behind a VPN, we basically can provide the layer on top of that as well. So I don't see it as a big difference either way. Was that the extent of your question?

Yes. And just how is Okta involved in those sort of implementations. Can you hear me?

Yes. I mean the implementation looks very similar to we integrate directly with your VPN, right? Like so we will integrate with your VPN layer, we -- it looks like us integrating with any other part of your infrastructure, integrated on multiple parts of your infrastructure. It's not super different from that perspective. You can single sign-on from Okta, get authorized by a VPN and access an app behind the VPN.

Yes. I think that the journey customers go on is they're -- most of the time, they're migrating from an on-premise world. So the first step is they put in the IDP, the Okta identity provider as their IDP. And then they use that to log into their VPN. And then over time, as more of the applications that are behind that VPN move off into cloud services or running in Amazon or other places, they're fast solutions. Then one by one, they have the identity cloud in place, they can connect the identity cloud directly to those services coming off from behind the VPN and the migration can be complete. So it's like a lot of other things on our platform. It's very flexible. And that meets customer where they are and lets them evolve over time.

Next, we're going to go to Alex Henderson from Needham.

It's great to get an opportunity to say hello to you guys. And I wanted to ask a strategic question relative to the platform becoming more and more integrated across the enterprise workforce and the consumer side. It seems to me, looking at the products that were announced today, along with some of the hooks characteristics and the automation that you've delivered to the broader enterprise. That these are starting to very much overlap. And to that extent, instead of thinking of you as 2 separate silos, consumer and enterprise, it's actually becoming quite clear to me that there's a lot of underlying overlap there. Can you talk about how much that extends and your agility with key customers? To what extent there's an overlap between the customers on the customer side and on the enterprise workflow side as we go forward because it seems like that's becoming a distinctive characteristic of your platform as the de facto standard.

Yes. We have -- so the 2 parts of our business, workforce being the majority of it, about a little over 75% and then customer identity being the balance. There are separate use cases in markets, but there -- it's -- we address them with the same underlying code base. There's not 2 code bases. It's one underlying platform and set a code and so forth. They're packaged in different products that you can consume or you can buy it differently based on use cases, but it is important to everyone understand that it's one unified platform. And I think that a lot of times, customers they -- from the way the implementation goes, they think of them as like 2 separate implementations. So they'll implement the workforce identity and then one group will manage that and a separate group will manage the customer identity. So they get the benefits of -- it's one trusted vendor, one vendor relationship, but they're kind of thought of as separately. But it still has a huge advantage because as we innovate, as you're seeing with this concept of platform services, as we innovate with workflows or we innovate with devices, both of these platform services are -- it's the same underlying IP that's driving benefits for both of those use cases, whether it's the workflow service being applied to. Originally, it was for life cycle management, so letting you control the employee onboarding/offboarding process. Now it's customer identity workflows, letting you really extend and customize the customer identity workflow or the customer registration process and so forth. And even today, you saw around advanced server access, where you can do with the workflow system, you can specify triggers and actions and so forth, which is very powerful. Even on the devices side, let's not lose sight of that either. So that was originally -- that's originally a workforce thing. It's going to be strong authentication. It's going to be fast pass with single sign-on, it's going to power that on the workforce side. But now you're seeing us expose that on the customer identity side, where it's now -- you can customize the look and feel that push, you can add to your consumer website and great password less experience so we're seeing that power over both. So there's a big advantage to having both sides of that puzzle addressed by one vendor, and you're seeing that benefit us in the marketplace.

To what extent could you say that within your customer base, what portion of it used both sides as opposed to being either on one side or on the other? Is it starting to see an increasing amount of overlap in cross-fertilization among your customers?

I don't exactly know the latest percentage in terms of mix of customers, but it's significant, right? And I think a big driver of the -- our net retention being so strong is this cross-selling into the installed base, different use cases. Starting with customer and then upselling workforce or starting with workforce and then upselling customers. So I think you're seeing it really help drive the business.

Super. Great job at driving the moat advantage.

Next, we'll go to Joshua Tilton at Berenberg.

Guys, can you hear me?

Loud and clear.

I just wanted to touch on that future-proofing comment. It seems as if you look at other identity vendors, they are amassing their own integration libraries. They're not as vast as the Okta integration network, but they're still meaningful. So if we think about it, in your view, is the 6,500-plus integrations as strong of a moat as it was last year? Or is the moat becoming more about this open and flexible platform?

In fact, you're asking me to pick my favorite kid, my favorite. What's my favorite child? I think they're both moats. I think that the -- the one thing I would -- the one color I would add on the breadth of the integration catalog. We've seen over the last few years, it's been as much about depth of that than it is about breadth. I think breadth is really important. I mean it's not even the total number of the accounts, right? What really counts is for a customer that we have all of them. Doesn't matter we have 6,500. It matters that for a given customer, we have all of the 450 or the 500 apps they use, right? So breadth does matter. But I would say depth is becoming very important as well. So Freddy mentioned earlier, the Very Attacked People integration with Proofpoint, right? That's an advanced deep integration that has unique value to our joint customers. And it's not implement on any other platform. So you can't get that with the competitors. And so that's -- and the reason why that gets built is because we have the most customers. And most customers attract the most integration and the most -- the strongest ecosystem. So that's what's benefiting us there. The flexibility, this concept of platform services and addressing customers' use cases and letting them customize it and so forth. And then having that -- those benefits accrue to both the customer identity and the workforce identity business are a moat as well. And I would say that they're all kind of related because the more flexible our platform is the more customers we can attract, the more customers we make successful because we address their use cases, the more integrations we're going to attract. And the more data we're going to process and capture. When you talk about a moat, think about like -- I mentioned it earlier, but think about threat insights, which is it's threat data, and you can't get that threat data if you don't have the usage. It doesn't matter how many integrations you have, you need the customers, you need the usage to get the data, and that gets more customers and drives more integrations and more benefits all around. So that's how I think about it, and we're laser-focused on. It's like good for us because they're competitive moats, but it's also good for the customers because it's addressing their use cases, giving them what they want, which is a neutral and independent and identity service that's connected to everything. And it gives them a better experience over time.

Yes. And Josh, I would just add a couple of things. First of all, not all integrations are created equal. So as Todd said, you can have a catalog of integrations but it's about how deep you are, it's about how many of them will do end-to-end workflow, do all the provisioning, tie-in all your other infrastructure, number one. Number two, if you look at the set of the top public cloud companies to get today, whether it's ServiceNow or Workday or Box or Slack, they're all customers of ours. So they all use up our products internally, which means that when they go talk to their customers, they actually demo the product through Okta. So by the time we got there, they already know about us. And then they start to OEM our product right inside their products. So if you look at Atlassian or all these new generation of products, they realize how important identity is, and they're not going to go and integrate 2 or 3 identity products. They're only going to put the first one in there, number one. Number two, I would say that, that list, that catalog we're talking about, that's only public integrations. I mean those are public products. I'm sure that there's an order of magnitude, if not more, private integrations that our customers have built into our platform. And that's very valuable because when you can allow them to open up the platform, make it very modular and easy for them to integrate, you got to remember, large enterprise, they build hundreds or thousands of their own applications, and they want one place to go. They don't want one place to go for their public infrastructure and then 19 other places to go for their private infrastructure. And then finally, what I would say is, and what's really exciting is we're really starting to get lock in with these large enterprises. I mean, I can think of large financial services organizations that actually right into their contract, I will only buy this software as a service product if it's pre-integrated into Okta. And if you're a small company and you're trying to sell into that financial services company, you're only going to focus on integrating, as Todd said, to the one identity platform that matters. If you're trying to sell that customer, I got to integrate to Okta, I'm going to integrate to Okta, but I'm a small startup, I don't have the opportunity and the luxury in terms of people to integrate to the next identity provider. So you're really starting to just see this network identity flow go around and around. I think it's just going to increase lock in. It's going to be a huge opportunity for us, if it's not already, and I'm very excited about the position that we're in.

Just over 5 minutes left. We're going to go back to the buy side, Rodrigo Serna from Ashler Capital.

Yes. The benefits of customer identity adoption is really exciting. How should we think about the length of time it takes for large customers to adopt? Is that a big overhaul to have typical large retailers manage customer identity today? And if so, what are you guys doing to help enable that and make that process faster?

Yes, absolutely. Thanks for the question, Rodrigo. I think one of the great things, and you see it in the dollar-based net retention that has been 115% to 120% quarter after quarter for years now. I think it's now actually over 120% is that we spend a lot of time in making sure that our customers get up and running and successful. And when I go in and I talk to a brand-new CSO at a Fortune 500 organization, which I do multiple times a week now, the conversation is not hey, Mr./Mrs. CIO. I'm going to spend the next 18 months ripping and replacing and doing a forklift upgrade of all of your Oracle on-premise infrastructure, and you're going to pay me $20 million upfront, and maybe you'll see value in 2 years. That's not how we start. What we say is, look, we know you have a lot of infrastructure. You've been around for 50 or 100-plus years. You have all these mainframes. You have data centers, leave all the stuff alone. But I bet that you have brand-new projects that you need to do either on the workforce side, you need to roll out Office 365 to 50,000 employees over a weekend or on the customer identity and access management side, which, as you highlighted, you need to roll out a new mobile or web application in the next quarter to a brand new set of customers. That's a very important initiative for you. So let's do this. Give us the opportunity to work with you. You'll get to know about us, our company, our product, our platform, how we work, it will give you an opportunity to get more comfortable with us, and we'll come back to you in 1, maybe 2 quarters and show you all the value that we provided. And when we come back, time and time again, they say that was an amazing implementation. I've never seen infrastructure integration software to go in that easily, look, the services are up and running. And then we earn the right to talk to them, Rodrigo, about the rest of their infrastructure. And then we come up with the plan over the next 24, 36 months, we're going to turn the lights off on your CA, your Oracle, your IBM infrastructure where we're going to move over to the most important apps first, we're going to let the rest of them roll, and then we'll slowly, as time goes on, migrate them over. Those conversations go very, very well. In particular, in today's day and age where time to market and time to speed is super important. We talked earlier on this call about the increase in e-commerce as a percentage of commerce throughout the world over the last 9 months. People don't have time. They can't wait until next year to get their new service up and running. They need it up and running next month. And that's when you want to be able to take identity off-the-shelf and take our identity and access management infrastructure and just plug it right in your applications and get up and rolling. And the proof is in the pudding. It's easy for us to sit here and talk about how great we are. I would just say, go look at the customer references, time and time again, they come back and say this was great, and the stronger selling part for us is when we can point to other customer with a very similar use case. And they can talk about how things got up and running. And I think that's why you saw some of the testimonies you saw earlier today. Thanks, Rodrigo. Very important question.

Okay. We're going to take our last question. We'll go back to Michael Turits at KeyBanc.

Another question I asked something that was made me think about something asked about VPN integrations. I guess I'd like to just specify that a little bit more to your -- why Okta is better for ZTNA and SASE. I mean people like Zscaler have partnerships identity with several identity players. But what makes you guys better for those particular more sophisticated applications that could replace certain branch office architectures as well as VPN?

I think it's -- we're a little bit suffering from the confusion around all of these categories. If you want to do a web filtering or you want to do a VPN, we don't do that. I mean, we don't do an IPSec tunnel like Zscaler does or some of these other companies do. So I think what you're seeing is that we strongly believe that the future is identity centric. You have to know who the people are, you have to know what device they're logging in from. And then the application workflow or the application workload in the network is going to be heterogeneous, and you need to be flexible. And the future is not going to be backhauling traffic into your network, into your corporate network. Or at least if you do that, that's only going to be part of the solution. You're going to have to do that along with other things. So the way we see the world is get your identity in place, get your strong policy layer that can make decisions based on person identity, device -- or sorry, person or device or application. And then if you want to go off to something like a Zscaler for some of your applications because you have certain auto requirements or you need to go back to your legacy VPN, then we'll support you integrate to that, we'll hand the log into that, we'll hand the log into Zscaler for them to do their thing. But ultimately, the foundation of it all is identity. And for you to be successful, you have identity plus flexibility, and that's what we're -- that's kind of what we're selling out there.

Okay. That's right on the hour. We're going to leave it there. Thanks, everybody, for joining. That was a great turnout. If you missed any part of showcase, you can check out the replays back on the showcase platform as long as you're registered. If you have any follow-up questions, shoot off an e-mail to myself or Will or Jason, IR, and we'll get back to you as soon as possible. Thanks, everybody.

Thanks, guys.