Authing is China's Okta as the domestic SaaS industry grows fast- PingWest

Authing is China's Okta as the domestic SaaS industry grows fast- PingWest

Authing is China's Okta as the domestic SaaS industry grows fast

Rebbeca Ren

posted on July 10, 2021 8:05 am

Informatization level of mid-sized enterprises remains fairly low in China.

Although the Covid-19 pandemic has disrupted "normality" in a devastating way, digital transformation has been accelerated. Software as a service (SaaS) companies are benefiting from the trend. The stock prices of SaaS giants including Salesforce, Okta, and Twilio have almost doubled since the outbreak of the pandemic.

In China, the sector, fueled by capital, is also expanding rapidly. According to data released by startups database IT Juzi, in the first half of 2020, 280 financing events occurred in the SaaS industry, raising a total of 35.413 billion yuan ($5.47 billion).

Authing's website

With the increase in the number of mobile devices and data access points in the cloud, cloud security is now the fastest-growing sector. As an important part of cloud security, identity as a service (IDaaS) is also riding on the high-speed train. Log-in–tech startup Authing has secured a $5 million exclusive investment from GGV capital in January. 

The company, founded by three entrepreneurs born in 1996, provides services that enable the workforces of clients to use a “single sign-on” across cloud services providers, such as Alibaba, Tencent, Baidu, and others. 

In March, Auth0, the American peer of Authing, was acquired by Okta for $6.5 billion, consolidating the latter's position in the IDaaS field. Okta concentrates more on pre-built, pre-configured solutions, while Auth0, which shares more similarities with Authing, focuses on purpose-built app developers.

The costly acquisition has brought IDaaS, which plays a central role in enterprise identity management by removing ID silos and enabling one account-access-all function, into the spotlight. According to Fortune Business Insights, the global identity and access management market is projected to reach $24.76 billion by the end of 2026, exhibiting a CAGR of 13.2% from 2018 to 2026.

Authing identifies itself as an API (application programming interface)-first, developer-friendly solution for identity management. ( API allows easier embedding of content from any site or application) 

"I have coded for more than 10 years. I noticed that people need to re-develop login and registration modules every time they develop applications, which will slow down the development progress to a certain extent. So I decided to turn identity authentication services into API forms and provide them to others," Xie Yang, the CEO, told PingWest.

"Modularization of software development and microservices are the future. As a developer-friendly identity infrastructure, Authing will contribute to the prosperity of cloud computing in China," said the CEO.

Speaking of the investment in Authing, Wu Chenyao, executive director of GGV Capital, said they felt the trend of SaaS services going to API-ization and SDK (software development kit)-ization from its global investments.

"In China, we clearly see the rapid development of enterprise digital transformation and IT infrastructure innovation, said the venture capitalist. "With just a few lines of code, non-core business function modules can be integrated into your own service, which enables you to focus on your core business."

SaaS reduces the enterprise's demand for IT talents while providing the latest technology applications to meet theirs requirements for digital management. Wang Huiwen, the co-founder of on-demand delivery giant Meituan, believed that the lack of well-capitalized mid-sized companies is the reason why enterprise-oriented SaaS has been developing relatively slowly in China. 

Traditionally, mid-sized firms are the landing point for SaaS companies in both the US and Europe, but in China, comparatively inexpensive labor and low willingness to pay for software hold back the expansion of SaaS.

Therefore, the current valuation of Authing is much lower than its western matches. In March, Vancouver-based startup Trulioo has raised $394 million at a $1.75 billion valuation for its identification technology service.

Now the informatization level of mid-sized enterprises remains fairly low in China, where Tencent's instant messaging app and e-mail service dominate the office.

Besides Tencent, giants such as Alibaba, Baidu, and Bytedance are all cultivating and promoting their own cloud-based services, which also poses a threat to start-ups. 

But Authing believes that neutrality is their advantage. "Tech barriers exist between the giants so they are unable to integrate with each other, but we can blend all of them into Authing," said the CEO.

According to the company, it currently serves hundreds of corporate customers, mainly state-owned enterprises and financial institutions, and tens of millions of users and corporate employees are using its secure access function.

The Beijing-based company also provides services for French advertising firm JCDecaux and Italian bank UniCredit.

Xie told PingWest that the company started with only 2 people and is expected to grow into a team of 100 people by the end of this year. Among them, staff of product and R&D will account for 68%.

Cloud infrastructure spending in China increased from about $107 billion in 2019 to $142 billion in 2020, surging more than 32% in the last quarter of the year. Industry analysis provider Qianzhan forecasts that the size of the country's enterprise-oriented SaaS market will reach 74 billion yuan ($11.43 billion) in 2021, and will exceed 270 billion yuan ($41.71 billion) by 2026.

Some investors believe software is the future and finds it valuable to review trends underway in the US. “In the next 20 years China will follow the US in using software to improve enterprise efficiency,” said Patrick Zhong, founder of M31 Capital. “We’re not saying it will be the exact same path as the US, but it’s a reference point.”

New opportunities are triggering the development of the SaaS sector in the country—the demographic dividend is waning, Covid-19 has accelerated the adoption of cloud and remote work, and the government has been vigorously promoting cloud adoption. It is foreseeable that startups like Authing will keep coming out to enrich the entire ecosystem.

Cover image credit: Pixabay