According to a recent Gartner report, Worldwide IT spending is projected to grow 3.1% over the year to $3.8 trillion this year. Growth in the market will be driven by the Enterprise Software segment which is projected to increase 6.8% this year to $320 billion.
Within this high growth enterprise software market, Sydney, Australia-based Atlassian is making a big mark. Atlassian provides collaborative tools for enterprise software solutions through their products Jira and Confluence. Jira is a project and issue management tool that helps teams track issues, bugs, tasks, and deadlines, and Confluence is their content collaboration tool that lets teams create and exchange multi-media content. Atlassian’s products not only help the developer community but also help integrate other departments within the organization for collaboration on software projects.
Atlassian’s recent product upgrades include the launch of Atlassian Connect, a platform for developers to build add-ons to integrate with JIRA and Confluence offerings. The platform is built on web standards and features additional modules for developers to help integrate the add-ons directly into Atlassian applications. Developers can also use the Atlassian Marketplace to sell these add-ons to Atlassian’s 35,000 customers.
Earlier this year, Atlassian also released Git Essentials, their first fully integrated development solution for Git. Git Essentials improved the development experience by integrating JIRA’s issue management and planning and development capabilities with their other products including Stash for enterprise Git source code management, Bamboo for continuous integration and Marketplace for the add-on offerings.
Like others in the industry, Atlassian too has seen strong revenue growth. But what sets it apart from other players in the cloud computing industry is their profitability. Back in 2012, Atlassian boasted of a compounded annual growth rate of 47% for five years with forty quarters of profitability. For fiscal 2013, Atlassian is estimated to have recorded revenues of $150 million compared with $103 million recorded in 2012. They ended last year with an EBITDA of $21 million and a net cash of $90 million. They are expected to end the current year with revenues of more than $200 million. Their customer list includes more than 35,000 organizations with names like NASA, Rakuten, and Audi to name a few.
Atlassian attributes its profitability to the fact that they spend very limited funds on sales and marketing efforts. In fact, Atlassian does not have any sales professional on its payroll and instead invests that money on R&D efforts. Atlassian believes that their strong product promoted by word-of-mouth advertising coupled with a modest marketing budget for billboard and online ads will help them grow sales. Surely the sales costs may change as the company grows, but for now Atlassian’s limited sales cost model is working for them.
Till date, Atlassian has raised $210 million in venture funding from Accel Partners and T.Rowe Price. Their latest round of funding was held last month when they raised $150 million in funds and added T.Rowe Price to their investor list. The funding helped value them at $3.3 billion making them among the world’s most valuable venture-backed companies. The new funds are being used by the investors to buy existing shares from past and present employees to offer liquidity and talent retention benefits. Atlassian also believes that an IPO is the next step though timelines and further details are yet to be ironed out.