Atlassian's Viswanath on the firm's cloud model and impact of R&D spends on revenue

Sydney, Australia-based Atlassian had a successful initial public offering three years ago and has since seen its valuation grow five times to $22 billion. Last week, the team collaboration software firm said it was hiring more than 150 engineers at its Bengaluru research and development office. It has also leased a new office that could accommodate up to 700 people.

Sri Viswanath, the firm's technology head and formerly of Groupon, Sun Microsystems and VMWare, spoke to TechCircle about Atlassian's heavy R&D spend, 'land and expand' marketing strategy and more. Edited excerpts:

Could you tell us about Atlassian's global R&D efforts?

Our main products - Jira and Confluence - help bring collaboration within and between teams. We do on-premise, data centre and cloud. We have a strong presence in the US, Australia and India. We have identified Bengaluru as a centre for hyper growth.

Our strategy is to own certain products completely at a centre. We work on a 'land and expand' strategy. One team uses our products and tells the next team or company about them.

Globally, this is a crowded market and you also compete with Indian companies like Zoho and Freshworks. What is the brief that the founders gave you when you joined?

We just crossed $1 billion in revenue with a 40% growth year on year. We have grown by investing heavily in R&D, almost 40% of our revenue, which is the highest in the industry, and obviously, makes our products better.

We want our products to sell by themselves and our users to love it. While we started with teamwork software, we built IT products like the customer service desk which is now the fastest growing product.

Trello, a ge  ment tool, can be used by every department of a company. Teams are becoming global and diverse with different functions coming together and products need to work across departments.

Most of your competitors are born-in-the-cloud firms so why have you not adopted a 100% cloud model?

We are a 17-year-old company and we have been around before cloud became mainstream. Our premise is to focus on what our customers want and to give them options. More than 85% of our new customers chose cloud. A lot of our customers are already on the server.

We have been working with channel partners, who do installation and performance enhancements. They comprise a material portion of our revenue. Also, we have a marketplace now where we expose application programming interface (APIs) for all our products so that developers can build apps on top of our products. So our channel partners help customers with that too. Our marketplace has done more than $500 million in revenue over its lifetime. Customers who use our marketplace apps are stickier and happier. We can't build all the apps or features that our customers need, so we make it flexible. We get a 25% cut and everyone is happy in the value chain.

How big is your small and medium enterprise business?

We started with SMEs and then grew to acquire large customers. Now, we have 60% of Fortune 500 companies as our clients. This is not because of the sales teams. We are not sales-focussed like other enterprise companies and most of it (the SME business) is online.

Our products are more famous than our company. But we do marketing, but mostly for the brand and not for sales. We run user groups in all big cities where our users come and learn from each other. We keep our costs low and that lowers the investment cost for our customers. There is always strong competition, but we win because of our products and our business model.

How do you predict the next disruption?

We are a multi-product company. We made sure we have a strong foundation in cloud and moved all our infrastructure to Amazon Web Services. We also built common products to complement our other solutions and a single sign-in across our platform. The infrastructure and user experience is seamless across all our products.

We build products not just for software teams but for others as well of our enterprise customers. We ensure the products are easy to use and flexible. They are cheaper and quicker. We are adding drag and drop features to our products so that non-tech employees can use them without assistance.

We have invested in mobile apps and are also building artificial intelligence and analytics tools on top of our solutions. We have data on our customers' usage pattern across our products and those insights are now being used to add features and tools to make our customers smarter and more productive.