Okta, a major identity and access management company, has announced a workforce reduction of 7%, amounting to 400 employees, as part of a restructuring effort aimed at achieving greater operational efficiency. This marks the second round of layoffs in the past 12 months for the San Francisco-based company. The decision, expected to result in a $24 million expense for severance and extended benefits, comes in the context of Okta’s CEO, Todd McKinnon, emphasizing the necessity of cost reduction despite positive stock performance, citing the need to run the company more efficiently.
Okta has faced challenges, including security incidents such as a September 2023 hack where details for all users of its primary customer support system were stolen. In a previous incident in March 2022, a member of the Lapsus$ extortion group gained access to Okta servers for five days. These incidents prompted the company to announce a 90-day pause on product development and internal projects in November 2022 to enhance its security architecture. Despite these efforts, the cybersecurity market’s uncertain economic indicators and a shift in investor demands from growth to profitability have contributed to the layoffs, reflecting the broader trend in the industry.
The decision to downsize is not unique to Okta, as it aligns with an industry-wide trend of cybersecurity companies facing lower-growth years after the initial surge in business during the COVID-19 pandemic. The layoffs at Okta, the fourth-largest by a pure-play cybersecurity company since the pandemic began, highlight the challenges of maintaining hyper-growth levels and navigating headwinds in the industry. Industry experts suggest a potential consolidation trend in the identity and access management sector, driven by the challenges faced by large companies in managing relationships with individual providers offering specific functions.
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