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Okta trying to 'appeal to every buyer in an enterprise' for identity platforms: CEO

Okta Co-Founder and CEO Todd McKinnon sits down with Yahoo Finance's Brian Sozzi at Goldman Sachs' Communacopia & Technology Conference to discuss growth in identity technology, the company's acquisition of Auth0, and industry challenges.

Video Transcript

SEANA SMITH: We are watching the tech sector amid this broad market sell-off, with the NASDAQ off just over 4.5%. Technology sector, the worst performer of the day. And this comes as our coverage of the Goldman Sachs Technology Conference continues. Brian Sozzi joins us now live from San Francisco and he is joined by Okta CEO Todd McKinnon. Hey, Sozz.

BRIAN SOZZI: Hey, Seana. Thanks so much. Todd, always nice to get some time with you. Tough day for the markets-- holy cow. Out of the gate really just weak. What do you make of this market backdrop? And what gets it to stop?

TODD MCKINNON: Well, I think at Okta, we really try to stay focused on the long-term vision. And that's to establish identity as one of the most important technical platforms for every organization in the world. And markets go up, and markets go down, and it's important to communicate to investors our tactics of what we're doing, but, more importantly, the long-term vision and strategy for the company. So that's really what we try to stay focused on.

BRIAN SOZZI: What has been your feedback so far from the investors you met? I understand you had a really-- you've had a pretty busy slate here so far.

TODD MCKINNON: Yeah, it's been really amazing to come see people in person, interact with them, and talk about, primarily, the long-term strategy, which is we're changing the category of identity, which has traditionally been more of a tactical, departmental sale to, we're turning it into this enterprise wide strategic initiative across every buying center in our customers, whether it's chief digital officers, chief marketing officers.

We want to help them reach new customers, help them grow their businesses, whether it's the chief information officer, help them be more secure, more reliable, and help the security officer do the same. So we're trying to appeal to every buyer in an enterprise and establish that primary platform for identity.

BRIAN SOZZI: One of the biggest buzz words I've heard from a lot of folks here is push-out-- as in, deals are getting pushed out to next year. Are you seeing the same thing?

TODD MCKINNON: We saw a little bit of it in our latest quarter we reported a couple of weeks ago. But I think it's really moderate right now and it's something we're watching. I think the bigger thing we're working on is, how do we tactically execute toward this long-term strategy? And for us, that's all about successfully integrating a strategic acquisition we made a year and a half ago called Auth0.

And that really gets us into this buying center of the chief digital officer and the chief marketing officer and helps us really establish this broad platform that addresses all of the identity use cases across an entire enterprise.

BRIAN SOZZI: You pulled no punches on that last earnings call, Todd-- said, look, we are having some challenges integrating these sales forces. Where are you at in that process?

TODD MCKINNON: We're making a lot of progress. We did discuss this in detail. And I think the feedback from investors has been positive and constructive in this dialogue. I think the first thing we did is we talked about the positives from the quarter, which is record number of million dollar-plus deals. Customer success-- we have over 122% net revenue retention in our customer base, which means the customer base is healthy.

But we are seeing some headwinds in terms of integrating the sales teams, and, more importantly, being better and crisper about clarifying our message to the market about why this is such a strategic investment for them to make. And as we do that more effectively in some of these measures we're taking-- putting into place take effect, I think we're going to see a lot of success going forward.

BRIAN SOZZI: Are you still as upbeat about the acquisition as you were when you made it?

TODD MCKINNON: It sounds strange at this time, but even more so. I think we've seen many, many proof points about how customers are seeing the combination as this real strategic provider of identity across all these use cases, not to mention the technical innovations that are happening on both Auth0, and in Okta, and the joint company coming together. The technical innovations are very exciting. And I think the momentum is there to be had.

BRIAN SOZZI: How are you going to-- how is the sales team's going to market differently compared to a couple of months ago? What new processes have you put in place?

TODD MCKINNON: Well, the biggest change we made at the beginning of this fiscal year was that instead of having two separate sales teams-- so a customer would have two reps-- now we have one joint sales team so a customer has one sales rep. So that one sales rep sells all of the products across the entire portfolio.

So that's powerful. But I think that takes a little bit more time than we expected for that sales rep to come up to speed on how to sell that broad portfolio. And those are some of the things we're addressing tactically in the near-term.

BRIAN SOZZI: When should investors see improvement?

TODD MCKINNON: Well, I think, first of all, with our guidance going forward that we issued on the earnings call, it's very prudent. And I think it takes into the realities of some of these opportunities and these challenges we're working through. So I think we have a lot of confidence in this prudent guidance. And I think over time, the numbers are going to speak for themselves as we make our way toward this long-term strategic opportunity.

BRIAN SOZZI: Does this environment feel recessionary to you?

TODD MCKINNON: I think for us, the industry we're in is such a critical need for customers. So we have seen sales cycles lengthen a bit at the back end of the quarter, and we've seen, anecdotally, some conversations about budgets being more scrutinized. I think what we sell is mission critical. And so I think for us, we're not in the best position to see that, given how critical it is what we sell. But we're watching it closely.

BRIAN SOZZI: I liked your presentation. It was yesterday, the webcast ran-- and you wanted to be in the same breath as Amazon Web Services at SAP in terms of identity. Are you there yet?

TODD MCKINNON: We have work to do. Identity traditionally has been purchased as part of another system. So you got it with your Windows desktop or you got it with your Oracle applications. And we're changing the game.

We're moving identity to be one of the most important technical platforms a company has. And with so much cloud and so much digital transformation, the opportunity is ripe. But we're not at the level of an AWS, or a household name, or in the terms of IT as an SAP.

But we can get there over time, because identity is so critical. And we have such a broad platform to address all of these use cases.

BRIAN SOZZI: All right, we'll leave it there for now. Okta CEO Tom McKinnon, good to see you. Enjoy the rest of the conference. Appreciate it.

TODD MCKINNON: Thanks for having me.

BRIAN SOZZI: All right, back to you guys.