{"id":3048,"date":"2017-02-02T01:46:36","date_gmt":"2017-02-02T06:46:36","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-digit\/submission\/atlassian-quietly-rebuilding-the-enterprise-from-below\/"},"modified":"2017-02-02T14:11:52","modified_gmt":"2017-02-02T19:11:52","slug":"atlassian-quietly-rebuilding-the-enterprise-from-the-bottom-up","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-digit\/submission\/atlassian-quietly-rebuilding-the-enterprise-from-the-bottom-up\/","title":{"rendered":"Atlassian: Quietly Rebuilding the Enterprise from the Bottom Up"},"content":{"rendered":"

A year after its IPO, Atlassian recently topped earnings expectations<\/a> 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\u2014as opposed to those who purchase<\/em> them.<\/p>\n

Atlassian originally catered to software developers with offerings like JIRA<\/a> (for project management) and Confluence<\/a> (for document collaboration), and has expanded to more general enterprise applications like HipChat<\/a> (for, you guessed it, chat). With their recent purchase of Trello<\/a>, a flexible project management and productivity application, Atlassian is poised to keep winning in a rapidly changing enterprise market.<\/p>\n

The Future: Partly Cloudy<\/h3>\n

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 But firms increasingly find this model outdated, as few derive a competitive advantage from on-premise IT infrastructure.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 Amazon Web Services<\/a> (AWS) and Google Cloud<\/a>, firms large and small have awoken to the value of outsourced cloud computing.<\/p>\n

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 Atlassian\u2019s products quickly. And this design has other product-specific benefits: Atlassian\u2019s StatusPage<\/a> (which informs website users and publishers of maintenance and downtime issues) works best because<\/em> it exists outside of customers\u2019 IT and application infrastructure. As more IT spending migrates to the cloud, Atlassian will be poised to capture it.<\/p>\n

Of course, not all companies are ready to outsource hosting of essential infrastructure\u2014especially large enterprises. Those customers can still purchase on-premise licenses for Atlassian\u2019s products and administer them themselves. The firm even offers convenient hybrid approaches, like making it easy to run JIRA on AWS<\/a>. In all, this \u201cpartly cloudy\u201d 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.<\/p>\n

An Innovative Sales Model: Don\u2019t Bother<\/h3>\n

\u201cTraditional\u201d enterprise-focused firms\u2014think Microsoft and Oracle\u2014have 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 \u201cchecklist\u201d of features demanded by purchasers who seldom use the products they buy.<\/p>\n

Atlassian follows a different model: no sales staff at all<\/a>. 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\u2014which they claim to do<\/a>. But capturing value is not as simple as cutting costs; other features of Atlassian\u2019s customers and product philosophy enable this approach.<\/p>\n

Atlassian\u2019s IPO prospectus<\/a> describes it as their mission to \u201cunleash the potential in every team,\u201d and demonstrates why the \u201cconsumerization of the enterprise\u201d\u2014increased user involvement in purchasing decisions\u2014allows them to capture value. Atlassian\u2019s sales and pricing structure enables individual teams to sign up for access and then evangelize Atlassian\u2019s 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.<\/p>\n

Building an Ecosystem<\/h3>\n

Selling individual enterprise software products can be valuable, but building an ecosystem<\/em> of software offerings creates much more value for those involved. Atlassian offers a marketplace<\/a> of add-ons for its products, featuring both independent developers and integrations with larger companies\u2019 services (e.g., Upwork<\/a>). 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.<\/p>\n

Looking Ahead<\/h3>\n

As demonstrated, trends in enterprise software\u2014cloud computing and consumerization in particular\u2014enable 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 entry point into the Atlassian ecosystem<\/a> (link is a paywalled interview with co-CEO Scott Farquhar). Still, success has not gone unnoticed by competitors, and some (like Slack<\/a>) have built similarly devoted user-bases in a cloud-first environment. Atlassian\u2019s 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.<\/p>\n","protected":false},"excerpt":{"rendered":"

The Australian firm sells enterprise software directly to teams and anticipates a future in the cloud.<\/p>\n","protected":false},"author":444,"featured_media":3127,"comment_status":"open","ping_status":"closed","template":"","categories":[1066,654,578,1067,1068,1069,7],"class_list":["post-3048","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-atlassian","category-cloud-computing","category-ecosystem","category-enterprise-software","category-the-cloud","category-trello","category-winner"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-digit\/assignment\/digital-winners-losers\/","yoast_head":"\nAtlassian: Quietly Rebuilding the Enterprise from the Bottom Up - Digital Innovation and Transformation<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-digit\/submission\/atlassian-quietly-rebuilding-the-enterprise-from-the-bottom-up\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Atlassian: Quietly Rebuilding the Enterprise from the Bottom Up - 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