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‘Companies need to use more cloud computing:’ Okta CEO

Yahoo Finance’s Alexis Christoforous and Todd McKinnon, Okta CEO, discuss the impact of COVID-19 on growth.

Video Transcript

ALEXIS CHRISTOFOROUS: Okta knocked it out of the park once again with its earnings report this week. The identity management software company beat on both the top and bottom lines. And its outlook? Well, it's pretty rosy, despite a global pandemic. Joining us now is Okta's co-founder and CEO, Todd McKinnon.

Good to see you again, Todd. You know, I got to tell you, you'd think that this pandemic would be a tremendous headwind to your business. Yet, you continue to beat on earnings. Your stock is up better than 100% year to date. How are you pulling out these results?

TODD MCKINNON: We're very fortunate that our business is being driven by three long-term secular, macro trends. The first one is companies need to use more cloud computing. All the modern solutions, all the solutions that make employees productive are cloud based, and companies need to move there. And they also need to get in tighter contact with their customers by delivering better online experiences, better websites, better mobile apps, whole new product lines that can be delivered over the internet. And then they need to do that all securely. So these three macro trends are powering our business.

And you know, COVID is tough. It's tough for the world. Definitely, it's a headwind, to some degree, for us. But we're able to drive-- surf on these macro trends we've been surfing on for many years and hopefully keep focused on making customer successful and keep driving the business forward.

ALEXIS CHRISTOFOROUS: You know, Todd, I know you also announced that Okta's products are going to be available on the Amazon Web Services marketplace. What kind of an impact do you see that having on overall results going forward?

TODD MCKINNON: If you think about it from a customer perspective, there's all kinds of technology for them to choose from. There's thousands of different applications. There's different devices, different networks, different ways to build up their technology stack and tremendous pressure to do it.

And so I think the world, from a customer perspective, is really going to be about five or six major clouds in the future. They're going to have thousands of different pieces of technology, but they're going to have five or six major clouds. And one of those is going to be an infrastructure cloud, and Amazon is by far the leader in that market, the infrastructure cloud.

So we're very fortunate to work closely with Amazon to accomplish two things. First of all, we've integrated with them in a product called Control Tower, which helps customers manage their multiple-- their deployments at Amazon. So it's great for customers. It gives them that identity management and security tie-in to that product.

And then secondarily, we're on-- now on their Amazon Marketplace, which means that large enterprise customers around the world can use their Amazon budget to buy Okta. So they can buy it through Amazon, which is great for Amazon. It's great for us. And most importantly, it's great for customers because they want an identity management service that works very well with their infrastructure, and we're working with Amazon to provide that.

ALEXIS CHRISTOFOROUS: You know, we're seeing that businesses are spending less on office expenses, simply because they're not in the office. They're not traveling, so business travel is way down. So are businesses then using the money they're saving in those areas and spending on things like products that your company offers? And do you see that continuing, even post the pandemic?

TODD MCKINNON: Every organization knows that immediately, they have to be successfully working remotely, right? That's the obvious one. They have to make employees successful anywhere. And that really brings forward the realization that the security architecture and the technical architecture has to be different than it was in the past. It can't be tied to the office. You can't be relying on the server closet in your office or the firewall in your office. It has to be flexible and cloud based and remote. So that's the first driver for Okta.

The second driver is maybe a little bit more long term, which is every company now, they've kind of known they had to get online and have a great website and have a great mobile app and offer their products online or their support online. But now, it's very, very tangible that they have to do it now. They can't-- if you're a hardware store and no one can come to your hardware store, you have to have an online service for ordering so they can pick it up curbside, right? And so that's leading to investment and customer-facing websites and mobile apps, and identity is at the core of that.

You have to log into that service. You want a good experience. You don't want your password to expire. You don't want to forget the password. You don't want to, you know, be annoyed that they can't remember your account information. And that's identity. And so these two trends, remote work and every company having to get online with great web and mobile experiences, lead to identity, and that leads to our success.

ALEXIS CHRISTOFOROUS: I've got to talk consolidation in the space because we saw it big time this week with the Salesforce-Slack deal. Do you think that that's just a harbinger of things to come in 2021? Are we going to see more consolidation in the space, do you think?

TODD MCKINNON: I think it's a great deal. I think it's a great deal for Salesforce. It gives Salesforce a lot of really good options with how to combine Slack with their company. One option is they can have it just be the front end to Salesforce and have a great modern user experience for all of the Salesforce products and platforms. That's amazing.

And the second option is they-- with this combination, they have a-- I talked about those five or six primary clouds earlier. They have a legitimate shot to challenge Microsoft for the collaboration cloud. One of these clouds is going to be around collaboration. The winner there might be Zoom. They're very strong. Microsoft is, obviously, very strong in collaboration, and now Salesforce and Slack could be the king of collaboration. So I think it's interesting, in terms of who's going to emerge as the winner there.

What we're focused on is making sure that the identity cloud is one of those major clouds. And we think it should be because whether it's infrastructure or whether it's collaboration, customers want choice. They don't want to be beholden to one provider for anything, and they want choice and flexibility. And that's what we're positioning ourselves to be is that arbiter of choice. We want to do what's best for the company, not what's best for any one particular platform or one particular application.

ALEXIS CHRISTOFOROUS: What do you make of the takeover price, $27.7 billion? It's 26 times forward sales. Did-- was it worth overpaying for Salesforce, do you think?

TODD MCKINNON: I think that a lot of times, these deals are strategic. And with the kind of optionality you get at Salesforce and the uniqueness of the product of Slack and the-- how great of a company that is, I think it's easy to look for the long term and not be so concerned with what the specific multiple is in a given time frame or what the specific amount is. This is a strategic deal, and I think both of those companies are going to come together and do something amazing.

ALEXIS CHRISTOFOROUS: Of course, there was speculation right away, could Okta be a buyout target or perhaps be the acquirer. Is that something that you would entertain? And do you think that that might unlock even more value for your shareholders?

TODD MCKINNON: Well, we're certainly into providing shareholder value. That-- we're very into that. I mean, customer value and shareholder value and employees-- those are our-- three of the most important constituencies for us.

The thing about Okta is that we have this unique value proposition when we're neutral. And being neutral gives the customer choice. It gives the customer a choice to choose the best technology for their business. You know, imagine someone at Microsoft building a great feature to connect a customer to Amazon Web Services, right? That would not probably go over very well at Microsoft.

So by focusing on all the services and all the platforms, we give customers choice, and that's incredibly valuable. And that's, I think, the most value we can build for shareholders and for Okta is remaining there, is maintaining that neutrality and that independence and always being driven by what's best for customers.

ALEXIS CHRISTOFOROUS: Hey, Todd, before we let you go, I know that you're a big bike enthusiast there. You're a workout addict. When you look ahead to 2021, any New Year's resolutions yet for you?

TODD MCKINNON: Oh, you know, I've-- yeah, I am passionate about working out. One of the things I really like to do is-- you know, COVID-19 and the pandemic, it's tough. It's tough on the employees. It's tough on people. And you know, we're trying to do our best to stay motivated and stay active and move it around and keep our drive as high as ever. And so I want more of the employees to move around and exercise. I've been trying to share some of my workouts on social media to inspire the employees to keep moving and stay fit, and hopefully we can accomplish that.

ALEXIS CHRISTOFOROUS: Yeah, I enjoy seeing your social media and the tips you're offering, good stuff. Todd McKinnon, co-founder and CEO of Okta, be well.

TODD MCKINNON: Thanks for having me on, Alexis. It's always nice to be here.