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‘Companies have gotten a lot more comfortable doing serious business online’: Okta Co-Founder

Okta Co-Founder Frederic Kerrest joins Yahoo Finance’s Zack Guzman to discuss the company’s outlook on cloud security as Americans continue to work from home amid the coronavirus pandemic.

Video Transcript

ZACK GUZMAN: Welcome back to "The Ticker." As we've been chatting on the show over the last couple of months, even though volatility has been the name of the game here, there have been pockets of stocks that have continued to move higher and higher due to the way that we've seen the economy shift here, more people working from home. Cyber security stocks catching a boost in that. I want to highlight Okta shares here, up 78% year to date.

We've talked about the strength of a lot of these stocks and these companies in this new environment, but is there still room to run? I'll tell you who does think so. It's the co-founder and CEO of Okta, Freddie Kerrest joins us once again on the show. Also the host of the Zero to IPO podcast, one of my favorites. Want to highlight that as well.

But Freddie, it's good to be chatting with you again here, man. I mean, I just heard you talking about the growth year a couple of days ago, highlighting that even though you have enjoyed a pretty successful 2020 as more companies work in this at work from home environment, you still think there's a lot of room to run. Why don't you just start there and explain why that could be the case.

FREDERIC KERREST: Yeah, hi, Zack. How are you? Thanks a lot for having me. It's always good to be on your show. I always enjoy it.

So, you know, our organization, Okta, enables any organization anywhere around the world to connect to any technology. So it works for employees, companies like Nordstrom and FedEx logging on every day to access the tools and technologies they need. And organizations like MLB and JetBlue, they use Okta to engage with their customers online with customer identity.

And so when you think about what's going on right now, especially with the COVID-19 global pandemic, everyone's being forced very quickly to work in this remote environment, which is something that Okta enables. At the same time, you know, digital transformation, one of the most overused terms in the industry, what it basically means is people need to find better ways to interact with their customers, their partners, their vendors. You see the numbers going up as e-commerce as a percentage of commerce in North America basically doubling over the last nine months compared to what happened over the last decade. And Okta helps our customers do that as well.

So we're sitting behind these two trends that I think are making companies, employees, customers much more successful using all these remote tools. And that's obviously been fortunate for our business.

ZACK GUZMAN: Yeah, it seems like you're highlighting or focusing a lot more on that customer identification side. You've obviously always worked pretty closely on-- we use Okta, full disclosure-- and maybe the workforce identification side as well. But when you think about the doubling of e-commerce here since January, and how big that space continues to grow. Talk to me about the opportunity of focusing in on helping your clients maybe learn more and confirm that their customer is indeed who they say they are.

FREDERIC KERREST: Yeah, absolutely. Well, customer identity and access management's been around for a long time. Think about how long you and I have had amazon.com accounts at home, where we're going and shopping online, e-commerce, 20 years for sure. What's happened over the last five years really is companies have gotten a lot more comfortable doing serious business online. Not just with end consumers like you and me, but with other businesses, with supply chains.

And not only that, think about your experience now logging into a bank site. You need to make sure you are who you say you are. You need to have multi-factor verification, which is two factor authentication, SMS on your phone. You need to have maybe a second email address in case that first email address password gets reset or some like. It starts to be very complicated number one.

Number two, every company, you know, there's an often overused phrase, which Marc Andreessen put out in 2011 in a Wall Street Journal article that said software is eating the world. I don't know if that's exactly the case, but certainly there's an increase in software and technology throughout every industry. So if you think about an organization like John Deere, a tractor manufacturer in the Midwest, they're thinking about how they can put more software and more technology inside their tractors. At the same time, they still need to make their user interfaces much better, their web sites, their mobile apps, but they only have a limited number of developers. So the easier we can make it to take identity off the shelf and help companies of all shapes and sizes around the world improve the user experience they have for their customers, the better off everyone's going to be.

ZACK GUZMAN: Yeah, the one thing too, I mean, we've talked about this last time you came on the show, but it is one of those key elements that I think becomes incredibly hard to forecast. I would not want to be in your shoes trying to do that. But you think about this shift to work from home and why, I guess, you know, a lot of cybersecurity companies here have enjoyed the rally in 2020. But you got a few companies out there, mainly a lot of names on Wall Street, imploring their employees to come back to the office. Firms saying you can't have good culture in this work from home environment.

And then you got guys like, you know, Tim Cook and Apple saying it's worked great for them. And I assume it's worked well for you too. So when you try and put those things together and say, look, this is what demand's going to be like in the back half of 2020 as well as into 2021. I mean, how sure are you that maybe that-- that demand boost will stay there moving forward.

FREDERIC KERREST: Yeah, look, I think that's a very good point. I think you're seeing all sorts of people trying to figure it out. I think there's also some of the big Wall Street banks, as you said, are asking everyone to come back to work. We are fortunate at Okta our employees can all work remotely. We've actually been doing that for a number of years. So just like you, we can get into that mode pretty quickly.

Look, I'm not so concerned about what's going to happen this quarter, next quarter, the quarter after. Like you said, it's hard to kind of forecast that. We look at the big trends, right? We've been public for three and a half years. We're planning for the next three, five, 10 years.

If you think about what happens in enterprise identity and access management, these markets that we're in Workforce. So for the employees and customers identity management, there's tens of billions of dollars being spent every year on legacy software in these places. And that's without even all of this software growth that we just talked about.

So when I look at my business, look, as an entrepreneur, we've gone from zero to 2,700 employees, 9,000 customers, $200 million quarter last quarter. Those are all great numbers growing into 40% plus. I'm very excited about all that. But if I look at it overall, it kind of seems like we're a quaint small business compared to what we can be. So I don't know exactly what's going to happen next quarter or the quarter after.

We do have the benefit of being a subscription business, which obviously means there's a lot of predictability, which Wall Street likes. So I have a pretty good idea what's going to happen. But when you think about the three, five, 10, the long term opportunity, that's what gets me really excited and where I think we can really help a lot of organizations in the times ahead.

ZACK GUZMAN: I mean, in terms of what you're doing with Okta for good, I'd be remiss if I didn't mention one thing here on National Voter Registration Day. And what you guys are doing in Okta is kind of help that working with vote.gov to help people register and have that be known. I mean, talk to me about that real quick before we let you go about why that initiative is so important.

FREDERIC KERREST: Yeah, absolutely, so thank you very much for bringing that up. I'm very excited about that, especially today, right, on such an important day with National Voter Registration Day in the US. So we're doing three things.

First of all, we're rolling out the vote.gov app for all of our employees and all of our customers. Can easily add it on, which enables anyone, an employee, a customer very quickly to go public website, vote.gov, which helps people find voter registration information, every state, download all the documents, everything they need number one. Number two, we're inviting all of our employees to volunteer on and leading up to election day. So we give all of our employees three days every year volunteer time off, whatever they want to do. And we're encouraging them to do that for election day, volunteering at the polls, calling, texting, eligible voters, reading up on how to make an impact.

And then finally, what you mentioned, which is Okta for Good. So we created a fund inside Okta for Good, which is our social impact group, making it easy to donate to non-profits that are supporting voting rights. All right, voting is a critical part of healthy democracy for all Americans. Voting has been inaccessible due to systemic policies, disproportionately affecting people of color, people who are poor, young people.

So the Okta for Good team I commended. They did a great job. They set up a fund within our system, so that you can easily donate to non-profit organizations that are supporting voting rights.

ZACK GUZMAN: Now, I mean it's a very important thing to highlight in here on today. It doesn't get any more important. I mean, this what the day is all about.

Freddie Kerrest, appreciate you coming back on. Good luck with everything. It's been a very interesting year to watch.