Atlassian softens its cloud-first approach for remaining on-prem customers
(2024/08/05)
- Reference: 1722830409
- News link: https://www.theregister.co.uk/2024/08/05/atlassian_q4_2024/
- Source link:
Fresh from moving its smaller customers off its server-based products onto and into its cloud, Atlassian has softened its cloud-first approach after recognizing that its larger customers can't or won't go there in a hurry – if ever.
The Australian collaborationware concern outlined its ambitions last week in the [1]Shareholder Letter [PDF] it uses as a substitute for remarks made at the start of an earnings call.
"Over the last few years we've spoken frequently about migrating customers to cloud as a top company priority," the letter states, before characterizing the years-long effort as focused on "smaller customers who could make the switch to cloud in a day."
[2]
In the letter, users of Atlassian's datacenter licenses are characterized as "large enterprises with more complex, integrated instances."
[3]
[4]
"As we've turned our focus to this next cohort of customers, we've shifted our mindset from 'cloud-first' to 'enterprise-first'," the letter states. "Many of these enterprise customers will move to cloud over a multi-year period, and an increasing number will adopt a hybrid approach of both datacenter and cloud as they shift their teams and users over time." The letter promises "you'll hear us speak more about enterprise as a top strategic growth initiative in the years to come, encompassing the datacenter to cloud journey."
In the short term, the biz is bedding down its new "System of Work" – a strategy to help orgs move from having teams each use their own collaboration environment and instead adopt more interlinked Atlassian tools. Improving the Atlassian Cloud is another priority, as is adding AI (of course) when appropriate.
[5]After 13 years, Atlassian delivers custom domain names for Jira
[6]Atlassian outsources office drudgery to GenAI agents
[7]Atlassian loses half its CEOs, but customers stay solid after Server products exit support
[8]How a cheap barcode scanner helped fix CrowdStrike'd Windows PCs in a flash
At a more prosaic level, Atlassian has the challenge of implementing its incoming leadership team. This earnings announcement was the last for co-CEO Scott Farquhar, who will [9]step down from that role and day-to-day involvement with Atlassian. The firm is also on the hunt for a chief revenue officer to replace chief sales officer Kevin Egan, who has decided to leave.
On the [10]Q4 2024 earnings call [PDF], CFO Joseph Binz said Atlassian has begun an "evolution of our high-touch go-to-market motions."
[11]
"We are driving larger, more complex deals that include more products and require more approvals. And in some cases, we're targeting large complex migrations, and all of that adds up to longer sales cycles than we anticipated."
Binz offered the complexity of those migrations as one reason the biz missed its forecast of 32 percent revenue growth for its cloud products – albeit by a single point. He also pointed to the timing of big deals, which he said landed too late to be recognized in the quarter.
Overall performance for the quarter, and year, was mixed. Q4 revenue of $1.07 billion was up from $800 million in the same quarter last year. Full year revenue of $3.9 billion was up a billion over last year. Yet the company remained unprofitable.
[12]
Allowing large customers to create hybrid rigs was mentioned as one way to help improve matters – CEO Mike Cannon-Brookes pointed to large government customers that can't go cloudy in a hurry, but can take small steps.
Asked if Atlassian can hit its previous guidance of 20 percent growth for the next three years, Cannon-Brookes observed that his conversations with customers that need a hybrid approach give him confidence the goal is achievable –especially as Atlassian's own engineering teams are delivering as promised and its products are therefore evolving.
"We're in one of those adoption phases at the moment as we deal with the enterprise transition, I think, adroitly. And that evolution capability that Atlassian has will continue, as we help those largest customers to go increasingly wall-to-wall across their enterprises. So huge bullishness for me that we'll hit those numbers that we've given out," the CEO enthused.
Those numbers include Q1 2025 guidance of $1.149 billion to $1.157 billion revenue, with cloud revenue growing 27 percent and datacenter revenue to pop by 35 points. For the full year, revenue was forecast to grow 16 percent, with cloud improving by 23 points and datacenter slowing to a 20 percent improvement.
Investors were not thrilled. Atlassian's share price tipped past $180 early last week, but ended the week at $143.68, after diving to the low $150s after the earnings announcement. ®
Get our [13]Tech Resources
[1] https://s28.q4cdn.com/541786762/files/doc_financials/2024/q4/TEAM-Q4-2024-Shareholder-Letter.pdf
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[5] https://www.theregister.com/2024/06/19/atlassian_cloud_custom_domains/
[6] https://www.theregister.com/2024/05/03/atlassian_rovo_generative_ai/
[7] https://www.theregister.com/2024/04/26/atlassian_q3_2204/
[8] https://www.theregister.com/2024/07/25/crowdstrike_remediation_with_barcode_scanner/
[9] https://www.theregister.com/2024/04/26/atlassian_q3_2204/
[10] https://s28.q4cdn.com/541786762/files/doc_financials/2024/q4/TEAM-253891410_1887475929_3209491_Transcript_EditedCopy_20240802012632.pdf
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The Australian collaborationware concern outlined its ambitions last week in the [1]Shareholder Letter [PDF] it uses as a substitute for remarks made at the start of an earnings call.
"Over the last few years we've spoken frequently about migrating customers to cloud as a top company priority," the letter states, before characterizing the years-long effort as focused on "smaller customers who could make the switch to cloud in a day."
[2]
In the letter, users of Atlassian's datacenter licenses are characterized as "large enterprises with more complex, integrated instances."
[3]
[4]
"As we've turned our focus to this next cohort of customers, we've shifted our mindset from 'cloud-first' to 'enterprise-first'," the letter states. "Many of these enterprise customers will move to cloud over a multi-year period, and an increasing number will adopt a hybrid approach of both datacenter and cloud as they shift their teams and users over time." The letter promises "you'll hear us speak more about enterprise as a top strategic growth initiative in the years to come, encompassing the datacenter to cloud journey."
In the short term, the biz is bedding down its new "System of Work" – a strategy to help orgs move from having teams each use their own collaboration environment and instead adopt more interlinked Atlassian tools. Improving the Atlassian Cloud is another priority, as is adding AI (of course) when appropriate.
[5]After 13 years, Atlassian delivers custom domain names for Jira
[6]Atlassian outsources office drudgery to GenAI agents
[7]Atlassian loses half its CEOs, but customers stay solid after Server products exit support
[8]How a cheap barcode scanner helped fix CrowdStrike'd Windows PCs in a flash
At a more prosaic level, Atlassian has the challenge of implementing its incoming leadership team. This earnings announcement was the last for co-CEO Scott Farquhar, who will [9]step down from that role and day-to-day involvement with Atlassian. The firm is also on the hunt for a chief revenue officer to replace chief sales officer Kevin Egan, who has decided to leave.
On the [10]Q4 2024 earnings call [PDF], CFO Joseph Binz said Atlassian has begun an "evolution of our high-touch go-to-market motions."
[11]
"We are driving larger, more complex deals that include more products and require more approvals. And in some cases, we're targeting large complex migrations, and all of that adds up to longer sales cycles than we anticipated."
Binz offered the complexity of those migrations as one reason the biz missed its forecast of 32 percent revenue growth for its cloud products – albeit by a single point. He also pointed to the timing of big deals, which he said landed too late to be recognized in the quarter.
Overall performance for the quarter, and year, was mixed. Q4 revenue of $1.07 billion was up from $800 million in the same quarter last year. Full year revenue of $3.9 billion was up a billion over last year. Yet the company remained unprofitable.
[12]
Allowing large customers to create hybrid rigs was mentioned as one way to help improve matters – CEO Mike Cannon-Brookes pointed to large government customers that can't go cloudy in a hurry, but can take small steps.
Asked if Atlassian can hit its previous guidance of 20 percent growth for the next three years, Cannon-Brookes observed that his conversations with customers that need a hybrid approach give him confidence the goal is achievable –especially as Atlassian's own engineering teams are delivering as promised and its products are therefore evolving.
"We're in one of those adoption phases at the moment as we deal with the enterprise transition, I think, adroitly. And that evolution capability that Atlassian has will continue, as we help those largest customers to go increasingly wall-to-wall across their enterprises. So huge bullishness for me that we'll hit those numbers that we've given out," the CEO enthused.
Those numbers include Q1 2025 guidance of $1.149 billion to $1.157 billion revenue, with cloud revenue growing 27 percent and datacenter revenue to pop by 35 points. For the full year, revenue was forecast to grow 16 percent, with cloud improving by 23 points and datacenter slowing to a 20 percent improvement.
Investors were not thrilled. Atlassian's share price tipped past $180 early last week, but ended the week at $143.68, after diving to the low $150s after the earnings announcement. ®
Get our [13]Tech Resources
[1] https://s28.q4cdn.com/541786762/files/doc_financials/2024/q4/TEAM-Q4-2024-Shareholder-Letter.pdf
[2] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/applications&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2ZrCixlkz04-aS1Sgk6xAEgAAAIg&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
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[5] https://www.theregister.com/2024/06/19/atlassian_cloud_custom_domains/
[6] https://www.theregister.com/2024/05/03/atlassian_rovo_generative_ai/
[7] https://www.theregister.com/2024/04/26/atlassian_q3_2204/
[8] https://www.theregister.com/2024/07/25/crowdstrike_remediation_with_barcode_scanner/
[9] https://www.theregister.com/2024/04/26/atlassian_q3_2204/
[10] https://s28.q4cdn.com/541786762/files/doc_financials/2024/q4/TEAM-253891410_1887475929_3209491_Transcript_EditedCopy_20240802012632.pdf
[11] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/applications&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44ZrCixlkz04-aS1Sgk6xAEgAAAIg&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
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[13] https://whitepapers.theregister.com/
Re: Cloud a single point of Failure
Anonymous Coward
Crappy product we're forced to use but I think a lot of users like us don't see any advantage to moving to the cloud. Why risk it when the on-prem solution is fairly cheap, has no GDPR risk and for us at least doesn't take up much of our time.
I'd much rather Atlassian concentrated on fixing stuff and adding promised features.. oh, and tidying up the spaghetti solution they've created :-)
Thank the maker for Atlassian cloud
Anonymous Coward
As someone forced to administer the abomination known as JIRA and Confluence on prem, I'm grateful our company finally gave in and went Atlassian cloud. We simply dump the whole shooting match on another team and let them admin it now as it doesn't need much looking after. I finally get some of my time back and less stupd calls from people about crap products I utterly despise ever having come into contact with.
How about concentrating on quality?
Richard 12
Hire a QA team.
Finish the features that have been half-started.
It's been over 15 years, and not only is it still impossible to use the name of a sprint everywhere, it's still impossible to even find it's ID without examining a URL.
There's a huge number of issues that are over 15 years old. Fix them.
Oh, and maybe, just maybe, make QA effort possible to track within Jira without massive amounts of pain and customisation.
Anyone going on "Jira Cloud" has basically admitted they don't have a QA team.
I've just had an epiphany
t245t
I've just had an epiphany. The cloud is where you perform maintenance on other peoples computers and pay them for the privilege.
Almost $4 billion a year selling software and they're still losing money ?
Pascal Monett
Okay, I know Jira is crapware, but it's crapware that's selling.
How is it that Atlassian is losing money selling software ? How bad do you have to manage things to lose money when you're selling the same code over and over again ?
Cloud a single point of Failure
Enough said, lose access to the cloud and you are stuffed. I've heard a lot of discussion about how the internet is extremely reliable. Yea, right here in Oz one of the major providers Optus has had a major melt down.