Auth0 to keep its identity in $6.5bn Okta acquisition – for now

By Robert Scammell

Powered by

Okta plans to acquire fellow identity verification and management firm Auth0 for $6.5bn in the latest sign that the market is starting to consolidate.

Initially, Auth0 will maintain its own identity, operating as an independent business within Okta before it is gradually integrated into the San Francisco-headquartered firm.

In return for its billions – which will be shifted in the form of a stock transaction deal – Okta will gain Auth0’s 9,000 enterprise customers spread across more than 70 countries.

Okta will also get its hands on Auth0’s platform for authenticating, authorising and securing access for applications, devices and users.

These capabilities dovetail with Okta’s existing identity solutions, which it sells to more than 10,000 organisations including T-Mobile, Nordstrom, Siemens, and Slack.

Okta is betting on its investment boosting a chance of gaining a larger slice of the identity market, which it says is valued at $55bn. The acquisition is expected to close in the quarter ending 31 July 2021.

“Combining Auth0’s developer-centric identity solution with the Okta Identity Cloud will drive tremendous value for both current and future customers,” said Todd McKinnon, CEO and co-founder of Okta.

“In an increasingly digital world, identity is the unifying means by which we use technology – both at work and in our personal lives. With so much at stake for businesses today, it’s critical that we deliver trusted customer-facing identity solutions.”

The identity market is exploding

The deal comes on the back of a proverbial explosion of identity-verification companies in recent years. The growth of the sector has been fuelled by the introduction of regulations such as the European Union’s Payment Service Directive (PSD2) and a smattering of know-your-customer rules across the globe, making the sector particularly lucrative. The rising risk of fraud, identity theft, money laundering and other financial crimes has also driven the growth of the sector.

Identity verification tools are today used across the board, from remotely onboarding users on apps to authorising digital payments. The solutions in the market often use combinations of biometrics – such as fingerprint scans and facial recognition software – and document scanners to verify users’ identity. These solutions can also help enterprises spot suspicious activity on a network.

It is against this backdrop that the Okta-Auth0 acquisition marks a further consolidation of the identity verification market. In early March, Munich-based IDnow made its second acquisition in six months after it snapped up digital and offline identification firm identity Trust Management AG for an undisclosed sum. And in January 2020 London-based AI identity startup Onfido acquired US firm Aviata.

But big tech players are also cutting out a slice in the market for themselves. In March, Microsoft announced a range of enterprise identity tools, including ones for managing identities in its Azure cloud platform.

Regulators have also recognised the growing need for identification solutions. In September 2020, UK Department for Digital, Culture, Media & Sport, along with the Cabinet Office, announced that it was exploring digital identities as a means for individuals to securely verify their identity online.

Controversy remains over the deal

When the State Department gave Congress informal notice of the potential deal last month, Chairman of the House Committee on Foreign Affairs Representative Eliot L. Engel said that the sale “would significantly change the military balance in the Gulf and affect Israel’s military edge” adding that rushing approval of the deal was “not in anyone’s interest”.

Engel added: “My consideration of this sale will include several factors. First, we must maintain Israel’s qualitative military edge, as provided in US law, and ensure Israel’s military superiority in the region, as Israel remains our most crucial ally there. Israel currently has exclusive access in the region to the F-35, which has guaranteed its military edge over the last several years. As Congress reviews this sale, it must be clear that changes to the status quo will not put Israel’s military advantage at risk.”

The lawmaker said that increased activity from Russia and China in the Middle East meant that Congress would need ‘unimpeachable assurances’ that the fighter’s advanced technologies would be safeguarded. He added that a sale to the UAE would ‘inevitably’ generate demand for the jet from other neighbouring countries. In October, Qatar made a formal request to purchase the F-35.

Senate Foreign Relations Committee Ranking Member Senator Bob Menendez said: “As feared, the details of this proposed sale suggest President Trump is seeking to rush through an increase of complex weapons systems into a volatile region seemingly without serious consideration of US interests or the legal parameters of Israel’s qualitative military edge.

“Claiming Israel will maintain its edge while offering Abu Dhabi the same number of these sophisticated stealth warplanes as Israel simply does not add up. Recklessly accelerating the timeline around a reportedly artificial deadline precludes sufficient consideration of these issues by the national security professionals in the Departments of State and Defense.”

Menendez added: “Congress has statutory authority over foreign arms sales and our responsibilities will not be relinquished. The American public has a right to insist that the sales of US weapons to foreign governments – especially those of this magnitude and lethality – are consistent with US values, our national security objectives, and the safety of our closest allies.

“The Trump administration’s refusal to answer our questions about how the national security interests of both the US and Israel will be served, or undermined, by such a sale is a sure-fire way not to get Congressional support to move forward with this sale.”
Will President-elect Biden change course?

After the potential F-35 sale became public in October, Anthony Blinken, a Foreign Policy Advisor to Biden and former Obama-era official, was reported by the Jerusalem Post as saying that he had ‘concerns’ about what commitments the US Government may have made to the UAE.

Since then, US President Donald Trump lost his re-election bid, with President-elect Joe Biden set to take office in January. Democrat Senator Chris Murphy said that the Trump administration approving the sale after losing the election was “completely inappropriate”, adding: “It's a transparent attempt to narrow options in the Middle East for President-elect Biden when he takes office.”