Atlassian continues to be the dark horse in the digital teamwork market

By Phil Wainewright

September 10, 2021

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Like most digital teamwork vendors, Atlassian has had a good pandemic. At first, there had been some worries — six months before COVID-19 brought an economic slowdown across the world, the company had introduced new pricing and confirmed its determination to move existing on-premise customers to the cloud. In the midst of all the uncertainty in the first half of last year, it proved important to hold its nerve. As co-founder and CEO Mike Cannon-Brookes told Wall Street analysts when reporting the company's financial results for the ensuing year to 30th June 2021:

We continue to take our long-term thoughts in mind. If you think about the last year, in such a maelstrom, bone-headed moves are really easy to make. And we’ve kept our heads.

In the event, the year turned out well, ending with what Cannon-Brookes described, in an Australian turn of phrase, as "a ripper of a quarter." Over the year as a whole, revenue was up 29% to $2.1 billion, while paying customers rose to 236,118, an increase of 62,021 over the year, with 23,311 arriving in the final quarter. Growth at the high end was even more impressive, with the number of customers spending more than $1 million annually up 71%, from 104 the year before to 178 at the year end, and a rise of 40% in the number spending more than $50k, to 8,246.

Earlier this week I caught up with Cameron Deatsch, Atlassian's Chief Revenue Officer, to find out more about the company's recent progress and its strategy going forward. Compared to other vendors in the digital teamwork market, Atlassian is something of a dark horse — often overlooked as an outsider but with the capacity to outperform expectations. He attributes its success over the past year to "two big waves" which he explains as:

It accelerated digital transformation, as every company was trying to figure out ... what to do. Atlassian always was riding that wave anyways, because of our core in software development history.

The next was this cultural transformation, as effectively the office-driven culture processes and practices are being rewritten — no one knows how it's going to end up, but everyone knows it's going to be different ... That's the place where Atlassian is — our main mission is to help teams.

A third element is being able to help customers move forward with the transition away from on-prem servers to the cloud — something that will help avoid issues such as the slowness in customers patching the vulnerability recently discovered in its Confluence software. Deatsch cautions that "It's still early days," but there has been a marked acceleration this year in the numbers making that move. Another important factor is that the partner ecosystem is getting on board with the trend. Deatsch explains:

Atlassian has 700 solution partners out there in the industry, doing consulting engagements. Many of them had built large businesses around managing, installing and patching on-prem software. Over the last year, we saw them all on the cloud, or a huge majority, and we saw a 300% increase in our channel selling cloud in FY21.

Expanding Atlassian's reach

Product announcements in the past year have focused on expanding Atlassian's reach beyond its historical following among agile development teams. In November last year, it launched Jira Service Management, a new offering for the ITSM market, which has already grown to over 30,000 customers. Its success reflects a growing recognition of the need for development and IT teams to work in close collaboration, says Deatsch. This year saw the launch of Jira Work Management, designed for business users working in teams outside of IT, across product management, marketing, operations, finance, HR and elsewhere.

But its existing products are also important in driving Atlassian's growth in the digital teamwork space, as the world adapts to a more digitally connected, hybrid workplace, in which teams collaborate across many different locations. While Atlassian has elected not to play in the messaging and video conferencing segments — there, it's happy to integrate with the likes of Zoom, Slack and Microsoft Teams — it believes it has much to offer elsewhere in the teamwork space. Deatsch says:

Atlassian believes that teamwork is exceedingly complex. Different types of teams, different types of processes, need different types of solutions. So while everything is powered by the Atlassian platform where you can have common experiences, we believe that teamwork is going to require many different types of applications and solutions to make teams more productive.

We are adamant that the 'one team product to rule them all' is simply not going to be the case.

One product in particular that's prospered in the past year is the shared document platform Confluence. Originally designed as a platform where development teams can share and collaboratively edit technical documentation, it's now finding a new fanbase among business users. Deatsch elaborates:

We start to see more and more teams adopting Confluence for managing their marketing campaign, putting detailed documentation into [legal] or finance applications, or writing the processes for HR onboarding. That was largely organic historically, as these new teams [in existing customers] adopted Confluence. But this is a place where we've increasingly started treating Confluence as a net-new land experience — meaning people are choosing Confluence as their first product with Atlassian.

Connecting with Confluence

Confluence has always been an online, connected documentation platform and therefore it differs from the likes of Microsoft Office or Google Workspace. Although in some ways these platforms are now beginning to introduce some of the capabilities that have already long been native in Confluence, sharing is not native to them. Deatsch explains:

Confluence is much more than just text and tables. You can actually build rich applications in a Confluence page, and link that into your other systems of record. So you have pages that are always automatically up to date, always dynamic.

And then the big thing for us is that Confluence pages are, by default, open. One of the big challenges that organizations are going to continually have, as they're not all working in the same office together, is tracking what people are doing and understand what's going on across the business.

Instead of having to have the exact link for the Google Doc so you can stay up to date on whatever your colleagues working on, your Confluence pages are, by default, generally open to your entire company. People can follow spaces, they can follow projects, they can follow users, and help them keep up to date of what's going on, what's the most important information, and where the work is happening in their business.

Once companies figure that out, the Confluence adoption just goes through the roof ... as soon as [they] realize how much better that is than simply sharing links to documents.

The switch to introduce a free tier for up to 10 users for both Confluence and Jira has also boosted adoption, along with the continuing popularity of Trello, which is gaining ground in the enterprise too. The free tier arrived just in time to meet the sudden need to quickly add digital tools in the pandemic, and is fueling a 'land-and-expand' strategy that Atlassian's sales teams are actively pursuing across midmarket and enterprise prospects.

As with any digital teamwork player, one of the biggest remaining challenges is simply helping customers and prospects get the best out of the tools. Over the past several years, Atlassian has built up a library of playbooks to help customers and others hone their teamwork skills. It's an important asset, believes Deatsch:

As a technology company, we are always much more comfortable talking about features and innovation, over 'Here's how do you actually run different practices and rituals in your business.' I personally believe — I'm one of the loudest people on the exec team at Atlassian [on this point] — that it's our practices and our playbooks content that is what resonates in the market the best.

In addition, the company is building up its customer success and training resources, as well as working with partners to offer more strategic change management advice to customers. He elaborates:

We can go in, with a much heavier touch than we historically had, to diagnose how they work and make recommendations in practices and routines. Then the tools come in after that. I'd say that's a newer muscle for Atlassian. But once we get engaged in those conversations with customers, our entire relationship changes with them.

My take

Atlassian holds two important trump cards. First of all, it is deeply embedded in IT departments thanks to its long association with software engineering teams. As ServiceNow has shown, that relationship often brokers the ability to widen a vendor's footprint within an organization.

Secondly, it has almost twenty years' experience in supporting digital teamwork. That shines through firstly in products such as Confluence, whose value becomes much easier to convey now that digital teamwork is becoming more mainstream. Secondly the investment in playbooks and guidance that Deatsch describes gives the company a head start in helping enterprises adapt to these new ways of working that are so unfamiliar to many.

It may not have as glamorous a profile as the likes of Zoom and Slack, but it has hidden depths that give it considerable staying power in the digital teamwork market.