Atlassian: Analysis Of Strategies And Success In The Software Industry Essay.

Company Background and Overview

Question:

Discuss about the Analysis Of Atlassian Strategic Management.

Atlassian is an Australian software company, incorporated in 2002. The company was founded by Scott Farquhar and Mike Cannon-Brookes while they were students at University of New South Wales, situated in Sydney. The enterprise financed on a ten thousand dollar credit card debt. The founders of the organisation believed that creating great software, pricing it correctly and putting it on the internet to download, will automatically attract customers. The firm has no sales force in their beginning, the founders work on this belief that if their customers liked their products then they will tell their friends and family about it.

Atlassian operated in the software industry, and they create products for software development, project supervision, and content administration. The products of the organisation include JIRA, Hipchat, Trello, and Confluence. The company’s team collaboration software helps corporations in arranging, discussing and finishing shared work. The form has more than five million active users in a month. The corporation has more than 37000 clients including large companies, such as Coca-Cola, NASA, Facebook, eBay, and Netflix. The enterprise was a quick success after earning one million dollars in its first year of business. The firm’s revenue has grown up to AU$149 million in 2006 financial year. The founders were named entrepreneurs of the year by ‘Ernst & Young’ company. This report will discuss and analyse the strategies of the organisation.

Atlassian operated in the software industry, consist of creating, maintaining and publishing of software services and products used by various organisations. According to the research of Gartner (2016), the worldwide expenditure in information technology (including software, hardware, telecommunication, and services) will reach US$3.5 trillion in 2017. The industry of information technology changes rapidly, with customers demanding greater quality, lower costs, improved facilities and more innovations. The constant change and high demand have created several problems for software services and corporate models. The organisations cannot depend on simple strategies, and finding new methods for revenue are necessary for their success. The corporations are facing difficulty in maintaining their financial performance and facing constant competition from well-funded start-ups (Ojala 2007).

The giant players, such as IBM, Hewlett-Packard, eBay, and Symantec, are finding new corporate models to be more elastic in operations and supplying better products and services according to the customer’s demands. The companies are required to widen their revenue streams in order for their long-term survival in the software industry. The enterprises are in a significantly delicate position where a few financial mistakes could disappoint their shareholders and reduce their market capitalisation. Traditional business models are focused on cost-cutting in the organisation but tech firms require beating their competition in modern technologies, such as cloud computing, cyber safety, and information analytics (Pino 2008).

Five Forces Analysis of the Software Industry

Understanding of the five factors assists a firm to recognise the framework of its industry and find the place that is highly beneficial and less endangered to undertake. The firm should not concentrate on removing its competition because that could attract new competition and criticism from consumers (Carlson 2017). Following are the five forces that should be analysed by a corporation:

The bargaining power of customers is linked to the level of ease or struggle with which customer can change the companies. Traditionally the bargaining power of the customers in software industry was low, due to the high cost of switching. But in modern times, new models of monthly subscriptions have lowered the switching cost for buyers. Therefore, the negotiation power of buyers in the Australian software industry is medium.

The bargaining power of suppliers in the software industry is high. The competition between tech companies is high due to increase in demand for highly skilled employees. Therefore, the suppliers or employees have a high power of bargaining their prices or salary and incentives packages.

The threat for alternatives in the software industry is medium. The software industry has grown and there is numerous organisation’s software solutions present in the industry. The basic tools of Microsoft such as Word and Excel are available in the market, particularly for the medium and small organisations.

The threat of new competition in the software industry is medium. In the industry, it is easy to enter with a low initial capital for start-ups, but it is hard for companies to create a profitable product.

In the software industry, the competition between companies is significantly high. As the industry grows, the market has been filled with new enterprises, therefore increasing the competition.

Figure 1: Five Forces

(Source: Dudovskiy, 2012)

Atlassian can study the market before creating future strategy’s to enhance their profits. The evaluation of external factors is necessary to ascertain the requirement and desires of the customers (Bernroider 2002). Following items are included in the external environment of an organisation:

1. Government Regulations: The policies and regulation created by the government have a direct impact on the business of tech companies. The government involvement is necessary to avoid danger to public interest such as cyber crimes or hacking.
2. Technology: The technology market changes rapidly and in order to stay ahead of their competition, the companies are required to adopt new technologies such as cloud computing, cyber safety, and information analytics.
3. Customers: Atlassian serves more than 37000 customers, including 291 of fortune 500 companies. The company fulfils software need of teams by their products such as JIRA.
4. Globalisation: There are several new foreign organisations in Australian software markets which increase the competition between software companies. The globalisation increases the necessity of quick adoption of the latest technologies in the software companies.
5. Economic Factors: The factors, such as slow growth in the economy of Australia, enhancing unemployment rate, affect the growth of the software companies as well.

The key factors of success of software companies are: the ability of product, elasticity, the cost of products, simplicity in usage and access, the performance of products, the satisfaction of customers and worldwide reach of the company. Atlassian competition has been divided into three categories, based on customers and products: Information technology and facility teams, software and mechanical group, and corporate group.

Evaluation of External Factors

The competition of Atlassian includes Salesforce, Workday, Box, HubSpot, ServiceNow and various other small software traders such as Slack and GitHub. Many of these companies include small start-ups businesses, but the majority is an organisation in acquisition business, engaging in the takeover of different firms to provide customers a one-stop shop solution (Mahroum 2016). The tiny companies can have a high impact on the industry, if acquired by tech giants, to make a competitive contribution.

Atlassian product JIRA has been a success in the market and company’s recent acquisition Trello, free online teamwork software directed at the corporate teams is allowing the company to increase their position in the software industry. With the growth of the industry, low-cost competition will begin, but the teamwork software industry is expected to increase in profits.

Atlassian has a significantly different business approach, compare to its competitor companies. The collaborative tool company has been profitable for last 12 year and attracting a significant amount of revenue. The firms generated AU$ 200 million in profits and their sale raises more than 40 percent annually in past five years. The organisation has a net worth of $3.3 billion and more than 37000 clients use the products of the enterprise. Atlassian did not have a sales team and spends just 15 to 20 percent of their profits on sales and marketing. Instead of hiring a sales team, the company focuses on making their products low-cost and easy to install from the web (Zalan 2009). Following are the values of the company:

• Transparency in the company
• Create everything with heart and passion
• Customers are the essence and company should think from customers perspective
• Team work is most important
• Become the change you want in the world

Figure 2: Atlassian Values

(Source: Atlassian, 2017)

Atlassian applies a separate corporate approach than other tech companies. The company had never taken any funding from venture capitalists, while other organisations strive to acquire funding for their enterprises. The company has started with ten thousand Australian dollar credit card debt from its founders. The organisation does have acquired funding from Accel and T.Rowe Price of $60 million and $150 million respectively, but not for the operations of the company. The money was taken to deliver liquidity to the employees of the organisation. This decision of founders affected the growth of the business since the company focuses more on increasing their customers instead of making money (Lew 2012).

The organisation imposes a permanent authorisation fee with continuing maintenance of 50 percent each year. The faster-growing client should see their bills rising from ten thousand dollars in the first year to fifty thousand dollars in the second year. Several of the clients have seen this type of growth with the company. The enterprise has invested $67.9 million in sales and advertising at the start of 2015. This amount is equal to 21 percent of total income of the firm that is $319.5 million. Without any debt, the company could focus on their organisational objectives and provide better work environment to their employees (Solomon 2015).

Competition and Atlassian

Figure 3: Atlassian Model

(Source: TechRepublic, 2017)

The founders of the company Scott Farquhar and Mike Cannon-Brookes believe in creating great products and providing it easily to their audience. The company did not have any sales team. The organisation invests less than 21 percent of their revenue in sales and marketing. The values of the company consist of providing a great product, thinking from customer’s perspective and providing better work environment to their employees. The enterprise has been started with a ten thousand Australian dollar credit card debt, by the founders of the company, since then the firm has not taken any money from venture capitalists (Swan 2010).

Atlassian’s strategies are different from other companies in the same industry. But despite all the differences, the company has found enormous success and growth. The organisation has been profitable for previous 12 years and the company has earned revenue of AU$619.9 million in the half year of 2017. Atlassian has topped BRW’s Best Places to Work list, for straight two years in a row (in 2014 & 2015). The company provides various benefits to their employees such as paid parental leaves, free snacks, fitness training and free transportations. Atlassian has entered the United States market and reached a valuation of AU$8 billion. The founders of the firms are ranked in 20 wealthiest Australians. The company has grown slowly by steadily, and with the help of unique strategies of its founders (Millar 2017).

• Unique culture in the company, providing high values to customers and employees.
• No debts from venture capitalists.
• Skilled workforce
• Financial support provided
• Significantly high growth rate
• Existing distribution and trades systems

• The rapid growth of company causing the constant growth of employees.
• More than two third (majority) of their revenue is from JIRM and Confluence.
• The organisation has customer self-service model. Several customers prefer traditional sales methods.
• Lack of business experience of its founders.

• The company can invest more i9n research and development since their sales and marketing costs are low.
• The organisation can expand their business in other countries markets.
• The enterprise has higher revenue compared to their competitors because of their unique structure.

• Change in government regulations
• Increase in Labor costs
• Change in price of software products
• Technology problems

Atlassian has more than five million active users in a month. The corporation has more than 37000 clients including large companies, such as Salesforce, Workday, Box, HubSpot, ServiceNow and various other small software traders such as Slack and GitHub. The company has earned revenue of AU$619.9 million in the half year of 2017. The firms generated AU$ 200 million in profits and their sale raises more than 40 percent annually in past five years. The organisation has a net worth of $3.3 billion. More than two third of their revenue is from JIRA and Confluence (Fisher 2013).

The organisation provides high value to their customers and employees. The company had managed to increase their clients more than 37000 without investing in a sales force. The company faces new challenges from the competition of low-cost software companies and technological changes in the industry. The organisation is expanding their business outside Australian markets as well (Davila 2015).

Figure 4: Position of Atlassian

Atlassian’s Unique Business Approach and Values

(Source: Ronen, 2015)

Conclusion

The above study concluded that Atlassian has adopted unique strategies in their organisation by providing more value to customers and employees. The organisation has found huge success in previous 12 years, and they are growing rapidly. The company is under no pressure of some outside board to achieve certain growth targets. The organisation can think long term because it has no commitment to venture capitalists. The major challenge of Atlassian is to innovate at a larger scale. The best path for Atlassian is to expand their market share in countries such as Sweden, Ireland, India and China. This expansion could increase the revenue of the company and it will bring them closer to achieving their goals.

References

Atlassian., 2017. Company values | Atlassian. Retrieved from < https://www.atlassian.com/company/values >

Bernroider, E., 2002. Factors in SWOT Analysis Applied to Micro, Small-to-Medium, and Large Software Enterprises:: an Austrian Study. European management journal, 20(5), pp.562-573.

Carlson, R.M., 2017. Atlassian: Analysis and strategic recommendation.

Davila, A., Foster, G., He, X. and Shimizu, C., 2015. The rise and fall of startups: Creation and destruction of revenue and jobs by young companies. Australian Journal of Management, 40(1), pp.6-35.

Dudovskiy, J., 2012. Oracle Porter’s Five Forces Analysis - Research Methodology. Research Methodology. Retrieved from < https://research-methodology.net/oracle-porters-five-forces-analysis/ >

Fisher, J., Koning, D. and Ludwigsen, A.P., 2013. Utilizing Atlassian JIRA for Large-Scale Software Development Management (No. LLNL-CONF-644176). Lawrence Livermore National Laboratory (LLNL), Livermore, CA.

Gartner., 2017. Gartner Says Global IT Spending to Reach $3.5 Trillion in 2017. Retrieved from < https://www.gartner.com/newsroom/id/3482917 >

Lew, P., Olsina, L., Becker, P. and Zhang, L., 2012. An integrated strategy to systematically understand and manage quality in use for web applications. Requirements Engineering, 17(4), pp.299-330.

Mahroum, S., 2016. Atlassian in Sydney: Beating the Tyranny of Distance. In Black Swan Start-ups (pp. 215-231). Palgrave Macmillan UK.

Millar, G., 2017. Measuring the Success of Incident Management at Atlassian.

Ojala, A. and Tyrväinen, P., 2007. Market entry and priority of small and medium-sized enterprises in the software industry: An empirical analysis of cultural distance, geographic distance, and market size. Journal of International Marketing, 15(3), pp.123-149.

Pino, F.J., García, F. and Piattini, M., 2008. Software process improvement in small and medium software enterprises: a systematic review. Software Quality Journal, 16(2), pp.237-261.

Ronen, L., 2015. Strong Profitability Makes Recent Atlassian IPO Attractive. Amigobulls : Technology Stock Analysis. Retreived from < https://amigobulls.com/articles/atlassian-ipo-growth-and-profit-go-hand-in-hand >

Solomon, M.R., Poatsy, M.A., Martin, K., Short, J., Wellman, S. and Shields, K., 2015. Better business. Prentice Hall.

Swan, G., 2010. Freedom Fighters. CIO, (Sep/Oct 2010), p.72.

TechRepublic., 2017. Atlassian's upside-down business strategy: Could it work for you?. Retrieved from < https://www.techrepublic.com/article/atlassians-upside-down-business-strategy-could-it-work-for-you/ >

Zalan, T., Muzychenko, O. and Burshtein, S., 2009. Atlassian: Supporting the world with legendary service.