Atlassian’s software company focus on cloud business
Atlassian Corporation Plc (TEAM), a provider of corporate IT services, plans to modernize the business and completely abandon the provision of so-called server services, transferring all users of these services to the cloud. They assume that in three years, such a decision can lead to a significant increase in revenue per client. Atlassian provides software solutions for remote and hybrid work.
The list of clients differentiated–it comprises about half of technical and non-technical companies. The peculiarity of Atlassian is that it offers three product segments: development operations, IT service management and team management. It focused most of the competing job management platforms on one of these areas, which provides Atlassian with an advantage. Thanks to this advantage, the company has 226,500 customers.
Until recently, Atlassian offered solutions in three segments: cloud, data centers and servers. The last segment involves the provision of a license for local versions of the company’s software. Recently, the developer announced he was transferring customers who had previously purchased licenses to the cloud.
Atlassian has already stopped updating these licenses, and in 2024 it will finally stop supporting server products. In the short term, this decision puts pressure on the company’s margins, as Atlassian needs to invest more in marketing. In the second quarter of fiscal year 2022, which ended December 31, 2021, Atlassian’s gross profit fell from 84.1% to 83.3%. The company expects gross profit to decline in the third quarter of the fiscal year.
However, in the long term, the company plans significant revenue growth, as could service customers to pay a monthly subscription fee and can easily add additional products to improve efficiency. Because of this, Atlassian estimates that a large customer spending $30,000 per year on the platform as a server client will end up spending approximately $94,500 per year in three years if they become a cloud client.
Thus, Atlassian can maintain its leadership position in the market, the volume of which is estimated at $29 billion. A differentiated customer base allows the company to feel confident and expect sales growth.
