That's not to say it doesn't have competition and that there aren't headwinds. But the upside is huge. SailPoint, a B2B software company focusing on identity governance, has a market cap of $2.7 billion and trades at 14 times its 2017 revenue of $186 million. While that may be a lot to put on a company going up against Oracle Corp. (ORCL - Get Report) and RSA Security LLC, there's a possibility out there that many would find surprising.
SailPoint's growth potential could be so great, yet we don't have a real grasp on where it could go. That's because of how broad and deep the market for identity governance is. Identity governance is a service that aids identity management, which is technology that literally every single small, mid-sized, and large organization - public, private, government, non-government - uses. When a person joins any kind of entity, moves to a different role in that entity, or leaves, the entity must know that particular person is who he or she is.
Identity management is imperative to literally every single entity that has ever existed. Identity governance creates the policy and software for how identity management systems work, which means that identity governance is imperative to literally every single identity management system that has ever existed.
It would seem logical that the need for cyber security is in more corners of the world than one can even conceive of. That's "absolutely right," SailPoint CEO Mark McClain told TheStreet, "in the sense that pretty much every mid- to large-sized organization in the world has this problem," he said. That problem McClain was referring to is the security and safety problem.
"We have about 1,000 customers out of about 80,000 companies," McClain said. "There's a large available market." McClain said the next geographical market of attack will be Asia.
While about 75% of the firm's revenue comes from commercial customers, there's one other fairly important customer: the federal government. And this idea of the ever-expanding market for cyber security holds true for the federal government. "Does that still apply to the federal government today?" McClain said. "Absolutely yes, because they're not getting any less scalable today." The federal government has at least 30 agencies it plans to spend cyber security dollars on in 2019, according to Statista, with the Department of Defense being the most needy of the agencies, requiring a planned $8.4 billion of spending.
Of course, questions remain as to how much of these new markets SailPoint can scrape up for itself, and what the plan of attack is. McClain said Oracle, RSA, and other legacy vendors Sailpoint competes with are nothing to scoff at, but that SailPoint has an advantage over them: new technology.
"Those legacy vendors have a very difficult time adapting to new technology," he said. "Our technology is more adaptable to the environment." Oracle's service revenue, which encompasses identity governance, shrunk more than 1% year over year in the fourth quarter of this year. Surely, Oracle has the cash flow to invest in the new technology that could make it more competitive in identity governance, and "they could," McClain said. "They just haven't yet delivered that."
In the meantime, McClain's marketing strategy is clear. For mid-sized customers, SailPoint needs channel partners, or a re-seller. It relies on "fundamental, go to market" strategies. "We're certainly doing more brand awareness," McClain said. "We're holding webinars and seminars, in conjunction with those partners like Deloitte, KPMG, and Okta."
For largesized customers, it's "hand-to-hand combat," McClain said. These are pretty sophisticated buyers. They're nuanced in their understanding of the problem," he said. "We will come in with our products, run through their use cases, do a very detailed analysis of the service."
SailPoint has more than doubled in market value this year.
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