Atlassian is 'rewriting the playbook' in cloud software, and customers love it so much it could raise prices without anyone complaining, says analyst
- After Atlassian reported blockbuster earnings last quarter, BTIG analyst Joel Fishbein says customers now see Atlassian's products as "must-haves."
- If Atlassian raised its prices by 7-15%, customers likely wouldn't complain that much because its software products are seen as essential for companies.
- The demand for products for software developers will only grow, Fishbein says, and Atlassian's acquisition of Opsgenie make a splash in the IT space as well.
If Atlassian, the $25 billion Aussie software giant, raised prices on its products, there would be virtually no pushback from customers, because they both love them and need them, says one analyst.
In fact, Atlassian is completely "rewriting the SaaS playbook," wrote Joel Fishbein, managing director and software and cloud technology analyst at BTIG, in a note to clients on Friday. He believes Atlassian's products are likely underpriced, and if they raise prices by 7-15%, customers are unlikely to complain much, if at all.
Atlassian is best-known as the proprietor of Jira, popular for helping developer teams track software bugs, though it also offers the BitBucket code-sharing service, the Confluence document-sharing tool, and other services. Notably, Atlassian deploys no traditional sales team; customers buy Atlassian software straight from its website.
It's an unusual model, but it's worked: Even if there was an economic slowdown, it wouldn't be a blow to Atlassian, Fishbein says. Atlassian is somewhat "recession-proof," as Atlassian's software is now seen as a "must-have" for enterprises, he says. Because of that, Atlassian has tons of room to grow, in his reckoning.
"At current levels, Atlassian could make similar price increases for years with a particular focus in the large enterprise, which is likely well under-priced," Fishbein wrote.
Last month, Atlassian beat Wall Street's expectations and reported $1 billion in annual revenue for the first time ever. It actually just raised the prices on its products in January, but the change mostly affected only its largest customers. Fishbein wrote that there was "limited pushback."
Fishbein says that Atlassian's business strategy is especially effective, as it is continuously working to improve its apps by investing in R&D. On the other hand, it spends relatively little on sales and marketing, but users are enthusiastic about its products, allowing them to spread via word-of-mouth.
Atlassian has tons of room to grow also, says Fishbein. He's optimistic about the company's future, as it has the opportunity to capture even more of the market.
The demand for Atlassian's products will only increase, says Fishbein, because there will be more programmers than ever, and they'll need tools. According to the U.S. Bureau of Labor Statistics, employment for software developers will grow 24% between 2016 and 2026 because of the demand for computer software.
"The rise of the software developer is fundamentally changing how applications are designed, bought, and used," Fishbein wrote. "We see this not as a fad but instead as only the beginning of an ongoing shift in the software industry, with Atlassian at the heart of this movement."
Plus, Atlassian's products serve more than software developers. They're often used by product managers and people in other aspects of the tech scene. And last September, Atlassian acquired incident management platform Opsgenie, which means that it's rolling into the IT space as well, as it takes on the likes of Splunk and ServiceNow.
"While it remains to be seen exactly how this war will play out, there is substantial upside for Atlassian if it is able to effectively make inroads into the closely guarded IT market," Fishbein wrote.
On a final note, Fishbein may not be the only one who sees a lot of upside in Atlassian - the company frequently comes up in industry rumors as a potential acquisition target for Google Cloud.
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