$9 billion Okta started in the cloud, but it’s extending into the data center for the first time to reflect the ‘reality’ of what customers need (OKTA)

Okta

On Tuesday, Okta announced a product for hybrid cloud called Okta Access Gateway, which allows customers to authenticate and connect to their apps both in the cloud and on their own servers.
In the cloud industry, there’s a trend of companies embracing hybrid cloud — including Microsoft, which has long been a proponent of the concept, as well as Google and Amazon, which both announced new hybrid cloud offerings in the past year.
Okta CEO and cofounder Todd McKinnon said that this new product is in response to customer feedback: Okta built its business on helping customers log in to cloud applications, but users wanted to be able to use the product to log in to their legacy software, too.
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In the past few months, Amazon and Google have made major announcements around hybrid cloud, the concept for a combination of using the cloud and your own servers in conjunction. Now, Okta is introducing its own hybrid offering — another sign that even companies born in the cloud are recognizing that hybrid cloud is a reality.

On Tuesday, Okta announced Okta Access Gateway, which allows companies to connect to their on-premises applications — like those from IBM, SAP, or Oracle — using Okta’s software. In other words, these companies can use Okta for all their apps, whether it’s hosted on one cloud, multiple clouds, in their own data centers, or any combination therein.

Okta CEO and co-founder Todd McKinnon said that the company decided to launch this product in response to customer feedback: They were using Okta to log in to cloud apps like Google’s G Suite or Dropbox, a business that was, and is, the company’s bread-and-butter. But they wanted the ability to use it with more traditional apps, too.

"They wanted us to do much better with on-premise applications," McKinnon said in a press briefing on Wednesday. "We needed to help them with the reality instead of waiting for them to move to the cloud."

To McKinnon’s point, Alex Henderson, senior analyst at Needham, says that most enterprises are still running workloads either in their own data centers, or a combination of the cloud and data centers. According to Uptime Institute, 65% of enterprise workloads are stored in on-premise data centers.

"It’s about eliminating the barrier some customers might feel because the on-prem applications weren’t easily integrated into the Okta system," Henderson said. "I think it’s a very important announcement from their perspective. It eliminates that friction."

Right now, some of Okta customers are already using Okta Access Gateway today, and the company expects it to be generally available later this year. So far, the reaction from customers has been positive, McKinnon says.

"The feedback we got yesterday was ‘thank you! We’re so happy,’" McKinnon said.

The move to hybrid

Microsoft has bet big on the hybrid cloud for years, across the Microsoft Azure cloud and its Windows Server product line Last year, Google announced the hybrid Cloud Services Platform, which launched in beta in February. Amazon Web Services also announced its hybrid solution AWS Outposts in November, which will be available later this year.

While Okta isn’t a cloud platform in the same way as those industry heavyweights, its solution is hosted in the cloud, and primarily used with cloud services. Okta Access Gateway extends its reach into the data center.

"I look at Okta as a connective tissue in the cloud," Henderson said. "It connects various applications and users and locations. If that’s what you’re trying to do, you need to be able to connect to things that are all cloud related, but that doesn’t help you if you’re a company that has 75% of your footprint on prem."

It’s worth noting that Okta’s direct competitors, competitors Microsoft and Ping Identity already have products for hybrid cloud. Jonathan Ho, partner at William Blair & Company, which does business with Okta, says that previously, Okta did not have a strong solution for legacy systems in the past, and this new announcement helps close that gap.

"It’s having the best of both worlds to address the on-prem applications that aren’t going to go away anytime soon," Ho told Business Insider. "That’s a pretty critical spot to fill."

For now, many companies aren’t going to take their data off of data centers, often because of regulations. With Okta, as well as AWS and Google Cloud opening up the option for their products to run on-premises, it can attract more customers who otherwise wouldn’t buy their products if they were only for cloud.

"It has a long tail," Henderson said. "It’s not going to go away. You can either ignore it, or you can remove the friction. This is about removing the friction from the customer decision."

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