Okta: Helping Companies Maintain Visibility Despite Cloud Cover

1/27/11Follow @wroush

If you’re an active Internet user, you probably have enough trouble keeping track of the usernames and passwords you use for a couple dozen Web-based services: Gmail, Facebook, Twitter, LinkedIn, Amazon, iTunes, Flickr, and the like. Now imagine that you’re an IT administrator at a big company with hundreds or thousands of employees, each of whom spends an increasing portion of his or her day connected to mission-critical cloud services like Google Apps, Salesforce.com, Webex, Zoho, or Eventbrite. Suddenly the password management problem balloons out of proportion—not to mention other management issues like tracking seat licenses and disconnecting employees’ online accounts when they leave the company.

A San Francisco startup called Okta has been talking up its solution to this burgeoning problem this week, and today the company published an announcement about the “launch” of its own technology, a cloud-based service for managing access to other cloud-based services. I use the quote marks because Okta has been around since 2008, and isn’t actually unveiling anything new; the Okta service that’s available today is the same service that was available yesterday. If you want my honest opinion, I think the company still has a bit to learn about public relations—you can’t issue a press release, reveal the names of a few customers, and call it a launch.

But PR tactics aside, the folks at Okta have put their fingers on an important problem, and they’re building up a technological lead that puts them in position to profit handsomely as the cloud-computing revolution rolls forward. Indeed, handsomely enough that they’ve attracted $10 million in funding from Andreessen Horowitz, the venture firm founded by Netscape and Loudcloud alumni Marc Andreessen and Ben Horowitz. So despite the non-news nature of today’s news, I’ll take a few paragraphs to tell you about Okta. (Meaning their campaign was effective after all, I guess.)

Imagine piling all of a big organization’s corporate software onto a see-saw where the fulcrum is the firewall—the line separating the company’s on-premise hardware and internal networks from the larger Internet. For decades, all the weight was on the on-premise side, from e-mail management software such as Outlook Exchange to enterprise resource planning software like SAP. But gradually, starting the in the early 2000s, business users began signing up to use software that sits on the other side of the see-saw: applications like Salesforce.com and WebEx and GoToMeeting that live “in the cloud,” meaning they run on remote servers owned by third parties and are accessed by subscription or even by the hour.

So the balance began to shift. And Okta’s thesis is that much sooner than most businesses think, the seesaw is going to tip all the way in the direction of the cloud, never to tip back again.

“It’s not controversial that this is happening, but what is unappreciated is how is how dramatic the shift is going to be,” Okta CEO and co-founder Todd McKinnon said at a dinner for journalists in San Francisco Tuesday evening. “We fundamentally believe that the center of gravity of corporate IT is shifting outside the firewall. In that world, how do you do basic things like making sure that people can log in? We are trying to empower companies to make that shift effectively.”

To handle the login problem, Okta provides a single sign-on service so that employees don’t have to remember or enter separate usernames and passwords for each cloud service they use. Okta integrates with hundreds of business and consumer cloud applications, including 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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