Atlassian: Quietly Rebuilding the Enterprise from the Bottom Up
The Australian firm sells enterprise software directly to teams and anticipates a future in the cloud.
A year after its IPO, Atlassian recently and boosted revenue 36% (YoY). The Australian firm, founded in 2002, has racked up impressive growth numbers in its quest to reshape the enterprise software market for the cloud era. It has done so by focusing on the needs of those who use Atlassian products鈥攁s opposed to those who purchase them.
Atlassian originally catered to software developers with offerings like (for project management) and (for document collaboration), and has expanded to more general enterprise applications like (for, you guessed it, chat). With their recent purchase of , a flexible project management and productivity application, Atlassian is poised to keep winning in a rapidly changing enterprise market.
The Future: Partly Cloudy
Legacy enterprise software is designed to operate in traditional IT installations like large data centers, where companies install and operate software under license. But firms increasingly find this model outdated, as few derive a competitive advantage from on-premise IT infrastructure. With the advent of services like (AWS) and , firms large and small have awoken to the value of outsourced cloud computing.
Atlassian has embraced this trend by offering remote hosting and maintenance of its products to customers. This creates value for customers in several ways. Pricing is intrinsically more transparent as customers no longer bear the cost of manually maintaining software installations. They can also set up and use 础迟濒补蝉蝉颈补苍鈥檚 products quickly. And this design has other product-specific benefits: 础迟濒补蝉蝉颈补苍鈥檚 (which informs website users and publishers of maintenance and downtime issues) works best because it exists outside of customers鈥� IT and application infrastructure. As more IT spending migrates to the cloud, Atlassian will be poised to capture it.
Of course, not all companies are ready to outsource hosting of essential infrastructure鈥攅specially large enterprises. Those customers can still purchase on-premise licenses for 础迟濒补蝉蝉颈补苍鈥檚 products and administer them themselves. The firm even offers convenient hybrid approaches, like making it easy to . In all, this 鈥減artly cloudy鈥� approach to application deployment prepares Atlassian to win over forward-thinking cloud-dwelling enterprises while still satisfying the needs of more conservative (and often larger) clients.
An Innovative Sales Model: Don鈥檛 Bother
鈥淭raditional鈥� enterprise-focused firms鈥攖hink Microsoft and Oracle鈥攈ave sophisticated (and expensive) sales organizations. Those cultures developed to market products to those who purchase them (duh), often CIOs or top lieutenants in corporate IT departments. That sales process looks familiar: negotiations, long sales cycles, prioritized sales to large clients, and a 鈥渃hecklist鈥� of features demanded by purchasers who seldom use the products they buy.
Atlassian follows a different model: . The firm lists prices transparently on its website, and users can purchase easily with a credit card. By reducing costs, foregoing a sales organization enables Atlassian to capture more value from its sales or channel revenue back into value-creating R&D鈥攚hich . But capturing value is not as simple as cutting costs; other features of 础迟濒补蝉蝉颈补苍鈥檚 customers and product philosophy enable this approach.
础迟濒补蝉蝉颈补苍鈥檚 describes it as their mission to 鈥渦nleash the potential in every team,鈥� and demonstrates why the 鈥渃onsumerization of the enterprise鈥濃�攊ncreased user involvement in purchasing decisions鈥攁llows them to capture value. 础迟濒补蝉蝉颈补苍鈥檚 sales and pricing structure enables individual teams to sign up for access and then evangelize 础迟濒补蝉蝉颈补苍鈥檚 products to others in their organizations. This incentivizes the firm to care strongly about user feedback and create mechanisms (meet-ups, conventions, etc.) to receive it. The end result is a suite of products highly attuned to user needs and marketed organically. Legacy software firms competing in legacy sales channels will struggle to tap the growing market of user-driven IT spending, leaving Atlassian to ride the wave to increased penetration.
Building an Ecosystem
Selling individual enterprise software products can be valuable, but building an ecosystem of software offerings creates much more value for those involved. Atlassian offers a of add-ons for its products, featuring both independent developers and integrations with larger companies鈥� services (e.g., ). This capability creates value for others in the ecosystem (customers and developers), and allows Atlassian to capture value through improved products and increased lock-in.
Looking Ahead
As demonstrated, trends in enterprise software鈥攃loud computing and consumerization in particular鈥攅nable Atlassian to produce compelling products and capture a growing share of spending in its categories. Trello built a similar business model, and as an acquisition will likely prove to be a valuable (link is a paywalled interview with co-CEO Scott Farquhar). Still, success has not gone unnoticed by competitors, and some (like ) have built similarly devoted user-bases in a cloud-first environment. 础迟濒补蝉蝉颈补苍鈥檚 user-base and revenues continue to grow, but time will tell if it will have to adapt to competitive threat before reaching its full winning potential.