Okta: Helping Companies Maintain Visibility Despite Cloud Cover

1/27/11Follow @wroush

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Microsoft Outlook, Google Apps, Zoho, Dropbox, Box.net, Salesforce, Netsuite, SugarCRM, Oracle, Concur, Constant Contact, Zuora, ADP, Citrix, WebEx, and Xactly.

Once a company is using Okta, it’s an easy matter to authenticate new employees so that they have access to particular services, or to “de-provision” departing employees to prevent access. And with Okta as gateway, companies are able to track their employees’ usage of cloud-based apps—and use the information to control costs (for example, by buying fewer seat licenses for cloud apps that employees aren’t actually using).

Ben Horowitz of Andreessen Horowitz, who attended the journalists’ dinner, looked back to earlier transitions in business computing—from hierarchical data retrieval to relational databases, and from mainframes to PCs and client-server networks—-and argued that the consequences of the shift to cloud computing will be just as profound.

“The reason we’re so excited about Okta is that one of the first things that happens [in the cloud era] is that customers can all of a sudden buy more applications,” Horowitz said. “The bottleneck in the old days to buying new applications wasn’t cost but how long it would take you to deploy and train and do upgrades. So nobody was running more than 10 or 15 applications. Now the only constraint is money, and the applications are so much better and more useful that even little companies are running 20 or 30 of them, and big companies are running hundreds.”

The problem now, Horowitz said, is “how do you coordinate it if somebody wants to change their password across 40 or 50 systems. Or if somebody leaves the company. Or how do you know if anybody is using the licenses you bought them. These questions weren’t important questions before, but they’re really important questions now.”

Before starting Okta, McKinnon and co-founder Frederic Kerrest, now Okta’s president, were both executives at Salesforce, the company whose success with Software-as-a-Service offerings arguably spawned the entire cloud computing revolution. Kerrest had a variety of sales and business development roles at the company from 2002 to 2007. (He departed to attend MIT’s Sloan School of Management, where he was managing director of the MIT $100K Entrepreneurship Competition.) McKinnon, meanwhile, was head of engineering, user interface design, and localization at Salesforce from 2003 to 2009.

In addition to Andreessen Horowitz, Okta counts Mike Maple’s Floodgate Fund and Ron Conway’s SV Angel fund as investors, along with LiveOps CEO Maynard Webb, MIT professor Ed Roberts, Hubspot founder Dharmesh Shah, and others. Horowitz said Okta was the very first investment he made at Andreessen Horowitz, and the first board he joined. “I couldn’t be more excited about being associated with the company,” he said.

Okta said in its announcement today that early customers include AMAG Pharmaceuticals, Enterasys, FusionStorm, LiveOps, and Pandora. A spokesperson said the company planned to push a new release of the Okta service today with an “overhauled look and feel.” And for the first time, the company publicly shared its pricing scheme: $12 per user per month for unlimited usage.

The name Okta, in case you’re interested, comes from a term used by pilots and meteorologists to describe the extent of cloud cover in eighths. A sky half-covered in clouds would be “four oktas.” Also, Kerrest told me, it was one of the last four-letter URLs still available when the company was registering a domain name.

In the long run, Kerrest says, Okta aims to become more than just a provider of centralized authentication for its customers’ cloud services. The more services it can integrate with, and the more data it can gather about which cloud applications its customers are using, the more strongly it will be positioned to advise new clients which cloud applications to sign up for, or perhaps even to broker the deals. In the really long run, Okta could even evolve into something resembling a cloud operating system—the platform all other cloud applications feel they must be compatible with in order to tap its installed base.

Of course, with great power comes great responsibility: you don’t want the provider of single sign-on for your company’s 50 critical cloud applications to go down, even for an hour. But McKinnon and Kerrest say they’re ready for that challenge. Okta is a company to watch—even if they don’t know how to handle a PR launch.

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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