Okta merged two sales teams; confusion lasted six months

Kihon Labs daily note: Communication, coordination and cooperation

On 31 August 2022, Todd McKinnon, Okta's chief executive and co-founder, told investors: "The sales integration challenges we've encountered lay squarely on my shoulders."

On 1 February 2022, Okta combined the sales team of Auth0, bought in May 2021 for about $6.5 billion (about €5.8 billion), with its own. Until then, he said, the Auth0 team "sold as an independent group".

On that call he also reported "heightened attrition within the go-to-market organization, as well as some confusion in the field". The two teams were merged on one date; the sentence that told a rep which product to lead with, for which buyer, came six months later.

I read this as a coordination problem: two teams, one customer, and no shared line on what to say. The decision is four years old; Okta has reported on it since, so you can read it whole.

Quote from Todd McKinnon, Okta chief executive, 31 August 2022: while we are making progress, we have experienced heightened attrition within the go-to-market organization, as well as some confusion in the field, both of which have impacted our business momentum. — **What the sentence leaves out.** It gives no number of reps who left and no count of the deals the confusion delayed; neither number appears in the later calls or filings.

The short version

Okta merged two sales teams on 1 February 2022 and gave them one product message in August.

Company-wide attrition went from about 15% to a little over 20%, and higher in the former Auth0 team.

Its CFO put over half of a $140 million billings outlook cut (about €120 million) on the sales integration.

The message came six months after the merger

Okta's annual report to 31 January 2022 records 5,030 employees and the Auth0 purchase on 3 May 2021. For nine months after it, McKinnon said, "the product team and the sales team ran alone, and they had an awesome year".

From 1 February, "hundreds and hundreds of Okta reps" sold both lines. Headcount grew 38% in a year, to nearly 5,800 by 31 July 2022, under a hiring plan he called "in retrospect, a mistake".

One end of the market was "very clearly Auth0", the other "very clearly Okta", and the middle "was more mixed". The share with no overlap was "65%, 70%"; the rest was where a rep had to decide.

Attrition across the company had "traditionally been around 15%" and was now "a little bit over 20%", he said, and "more pronounced in the former Auth0 team". Those reps, in his description, had a territory of "probably eight states" that got smaller while "being asked to sell to these multiple buyers with multiple products".

In August 2022 Okta drew the line. Auth0 became the Customer Identity Cloud; Okta's own customer identity product moved into the Workforce Identity Cloud, "removing confusion about which" product "to lead with".

The same month it unified pricing, quoting and opportunity management, so the team worked "from a single integrated CRM system, which wasn't the case previously". Training and the pay plan changed too.

Brett Tighe, the chief financial officer, lowered the year's calculated billings outlook "by approximately $140 million" (about €120 million). "Over half of the outlook headwind relates to our sales integration challenges," he said; attrition was "a secondary portion" and the economy a smaller part.

Okta was also "reevaluating" its fiscal 2026 targets; an analyst on the call named them as $4 billion of revenue (about €3.6 billion).

In the calls and filings read here, Okta gives no count of how many reps left or how many deals the six months cost.

What Okta reported since: on 30 November 2022, McKinnon said the attrition plan "has delivered meaningful improvement" and the two-cloud line "has alleviated prior confusion in the field". BankInfoSecurity quoted him on that call: "We put sales reps in a tough spot before we clarified the positioning around customer identity."

On 2 February 2023, Okta cut about 5% of its staff, around 300 people, citing overhiring and "our own execution challenges". By 31 January 2026 it had 6,366 employees, more than 20,000 customers and revenue of $2,919 million (about €2.6 billion), up 12%.

Okta's sales integration, dated: Auth0 bought May 2021; sales teams combined 1 February 2022; headcount nearly 5,800, up 38% in a year; attrition over 20% against about 15%, higher in the former Auth0 team; billings outlook cut $140 million; one message and one CRM August 2022; 300 roles cut 2023. — **Eight dated figures, one company.** The merger date, the message date and the attrition rate are all Okta's own; the cost of the gap between them is not published.

One deal in the middle of the spectrum

How this travelled inside Okta is my reading from outside; Okta has published no process map. Take one deal in the mixed middle: an app that partners and customers both use.

Before August 2022, the rep had two products in the bag and had to spend time "interpreting where in the middle of the spectrum" the deal sat. Pricing and quoting were not yet in one system, so the quote followed the product chosen.

A former Auth0 rep made that choice on a product line they had never sold.

After August, the rule was one sentence. A consumer or B2B app, bought by a CTO or a chief digital officer: Customer Identity Cloud. Access for employees, partners and suppliers, bought by a CIO or a CISO: Workforce Identity Cloud. One CRM held the quote.

What remained, McKinnon said in November, was "time and at-bats" on the product new to each rep.

One deal in the middle of the spectrum, before and after August 2022, in five steps: the lead arrives; the rep decides between two products; two systems quote; one sentence decides the cloud from August 2022; reps ramp on the new line. Kihon's reading from outside. — **The rule arrived in month seven.** Until August 2022 the choice sat with each rep and each system; after it, the remaining cost was ramp time on the new product line.

Read through the socio-economic approach, SEAM, developed by Henri Savall and the ISEOR team in Lyon, this is a coordination failure first: two teams were joined before the message and the system were. The symptoms are what you see in people's work: people who leave, the method's staff turnover, and deals hesitated over, its non-quality.

The larger cost is the sales not made while reps interpreted, priced at the margin they should have carried, not at salary.

Over half of $140 million, in Okta's own arithmetic

The billings outlook fell by about $140 million, and the CFO put over half of that on the sales integration: more than $70 million (about €62 million) of billings it had expected and no longer did.

The other part is people. Five points of attrition above the old 15%, on nearly 5,800 employees, is about 290 more leavers a year, my arithmetic on Okta's two numbers. Okta has not said how many were in sales. By March 2023 it reported "an upward trend line" in the number of reps who had closed Customer Identity Cloud deals.

You could object that every acquisition has an integration dip, and that Okta still grew 43% that quarter. But the CFO put the larger share on the integration, not on the market, and that is the part you can count.

You will want to conclude that the confusion caused the attrition. Okta names three causes and a hiring plan it calls a mistake, so I would not go that far. Two numbers Okta tracked but did not publish would decide it: attrition by team, and the share of reps who had closed a Customer Identity Cloud deal, before and after August 2022.

Two teams joined on a date and a message written six months later is the shape I expect of most software mergers; Okta is rare only in saying so. Kihon's work puts the merger date and the message date in the same plan, with the one sentence each rep needs and the one system each quote goes through, before day one.

Taking a commercial organisation through a change like this is what Operation does: an owner, a day count and a test for each step, up to the first quote on the new line; the software and technology page says how that looks in your sector. If two of your teams share a customer and not yet a sentence, thirty minutes on your own numbers is where we would start.

What a CRO would ask before merging two sales teams

Which product does a rep lead with, in one sentence?

Okta's took six months to write and fits in two lines: the app type and the buyer decide. If your reps cannot repeat it, the deal in the middle is decided call by call.

Do both teams quote from one system?

Okta did it six months after the teams were joined. Until your quotes go through one system, the line between two products exists only in each rep's head.

Who counts attrition by team, every quarter?

Okta knew attrition was "more pronounced in the former Auth0 team". After your next merger, watch leavers in the acquired team against the rest, every quarter.

Sources

Your turn: which two of your teams share a customer today and do not yet share one sentence about what to say to them? Write to me at cemgorer@kihonlabs.com, or answer on LinkedIn. I read every reply.