World’s Best Sales Department?

At­las­sian’s grass-roots strat­egy has be­come a model for busi­ness-soft­ware mak­ers “Sales­peo­ple are like your Ad­der­all right be­fore the exam”

Bloomberg Businessweek (North America) - - Technology - �Dina Bass

Bran­don Cipes, vice pres­i­dent for in­for­ma­tion sys­tems at Oceanx, has spent enough time in se­nior IT po­si­tions to hate sales calls. “It’s like buy­ing a car—a process that seem­ingly should be so sim­ple, but every time I have to, it’s like a five- to six-hour or­deal,” he says. “Most of our ef­fort is try­ing to get the sales­peo­ple to leave us alone.” Cipes didn’t al­ways feel that way, though. Back in 2013, he was used to the rou­tine. His con­ver­sion be­gan when he e-mailed busi­ness-soft­ware maker At­las­sian, ask­ing the com­pany to send him a sales rep, and it said no.

At­las­sian, which makes pop­u­lar project-man­age­ment and chat apps such as Jira and Hipchat, doesn’t run on sales quo­tas and end-of-quar­ter dis­counts. In fact, its sales team doesn’t pitch prod­ucts to any­one, be­cause At­las­sian doesn’t have a sales team. Ini­tially an anom­aly in the world of busi­ness soft­ware, the Aus­tralian com­pany has be­come a bea­con for other busi­nesses count­ing on wordof-mouth to build mar­ket share. “Cus­tomers don’t want to call a sales­per­son if they don’t have to,” says Scott Far­quhar, At­las­sian’s co-chief ex­ec­u­tive of­fi­cer. “They’d much rather be able to find the an­swers on the web­site.”

The way tech­nol­ogy com­pa­nies sell soft­ware has changed sig­nif­i­cantly in the past decade. The avail­abil­ity of open source al­ter­na­tives has pushed tra­di­tional brands and chal­lengers to of­fer more free tri­als, free ba­sic ver­sions of their soft­ware with paid up­grades, and on­line pro­mo­tions.

In­cum­bents such as IBM, Or­a­cle, and Hewlett Packard En­ter­prise, which em­ploy thou­sands of com­mis­sioned sales­peo­ple, are ac­quir­ing open source or cloud com­pa­nies that sell dif­fer­ently, says Lau­rie Wurster, an an­a­lyst at re­searcher Gart­ner. Slack, Drop­box, and Github are among the com­pa­nies try­ing to at­tract cor­po­rate clients with small­bore ef­forts that rely largely on good

re­views. The idea is to dis­trib­ute prod­ucts to in­di­vid­u­als or small groups at po­ten­tial cus­tomers big and small and hope in­ter­est spreads up­stairs.

So far, though, At­las­sian re­mains the most ex­treme ex­am­ple of this model. It’s a 14-year-old com­pany, val­ued at $5 bil­lion since go­ing public in De­cem­ber, with­out a sin­gle sales­per­son on the pay­roll. More than 80 For­tune 100 com­pa­nies use At­las­sian’s soft­ware, and ven­ture cap­i­tal­ists and peers of­ten talk about try­ing to fol­low, at least partly, its sales strat­egy.

Luck had a lot to do with that strat­egy, says Far­quhar. He and CO-CEO Mike Can­non-brookes founded the com­pany while fin­ish­ing their IT de­grees at the Univer­sity of New South Wales, and the pair ini­tially re­lied on word-of-mouth be­cause they didn’t know any­thing about sell­ing busi­ness soft­ware.

Their first break came a few months later, in 2002, when the web­site let cus­tomers down­load a free trial but wasn’t yet equipped for pur­chases, and all their or­ders ar­rived via fax. One day the fax ma­chine trans­mit­ted an or­der from Amer­i­can Air­lines, where some­one in IT had down­loaded and con­fig­ured the soft­ware with­out At­las­sian’s help. “That was a huge turn­ing point for us,” Far­quhar says, adding that it gave the founders con­fi­dence they could make their busi­ness model work with­out a ded­i­cated sales staff.

Amer­i­can paid about $800 for that first or­der. This year an­a­lysts fore­cast At­las­sian’s rev­enue will top $450 mil­lion. Last year, when sales reached $320 mil­lion, sales and mar­ket­ing spend­ing, mostly on ads and pay­ments to part­ners, to­taled one-fifth of that. By com­par­i­son, Sales­ spent about half its rev­enue on sales and mar­ket­ing; at Box, which has spent big to build a sales staff in the past cou­ple of years, the num­ber was 80 per­cent.

Jay Si­mons, At­las­sian’s pres­i­dent, says the sav­ings on staff means lower prices and more in­vest­ment in re­search and devel­op­ment to re­fine soft­ware, making it eas­ier to try, un­der­stand, and pur­chase. Far­quhar says he’s re­sisted calls for halfmea­sures, like hir­ing sales­peo­ple to man­age sub­scriber re­newals, and that he’s hap­pier with a steady, pre­dictable growth rate. “Sales­peo­ple are like your Ad­der­all right be­fore the exam,” he says. “It’s that last-minute kick when you’re not go­ing to do well oth­er­wise.”

In Sil­i­con Val­ley, them’s still fightin’ words. “When you add a sales or­ga­ni­za­tion, rev­enue ac­cel­er­ates far greater than the cost of that or­ga­ni­za­tion,” says Peter Levine, a part­ner at ven­ture firm An­dreessen Horowitz. At Github, where An­dreessen has in­vested, Levine lob­bied heav­ily for the startup to re­cruit sales staff. Ul­ti­mately it did. (Bloomberg LP, which owns Bloomberg Busi­nessweek, is an in­vestor in An­dreessen Horowitz.)

At­las­sian’s roots lie in Syd­ney’s bar­ren tech scene. It was kept aloft early on not by ven­ture cap­i­tal, but by the founders’ credit cards, mean­ing it didn’t have im­pa­tient in­vestors to an­swer to. “I don’t think their suc­cess is repli­ca­ble,” says To­masz Tun­guz, a part­ner at Red­point Ven­tures.

Star­tups in­clud­ing Drop­box and Slack are tak­ing a hy­brid ap­proach, re­ly­ing on grass-roots pitches to land ini­tial users within a com­pany, then set­ting up sales calls once those users grow to a crit­i­cal mass. “For me it’s not ei­ther-or, but how do we com­bine the best of both?” h?” says Kakul Sri­vas­tava, Github’s vice pres­i­dent for prod­uct man­age­ment.. Even HP En­ter­prise is ex­per­i­ment­ingng with on­line sales and try-be­fore-you­ubuy. Caro­line Tsay, the ex­ec­u­tive inn charge of that ef­fort, says she’s hireded some for­mer At­las­sian staffers.

At­las­sian faces a crowded mar­ket, and it’s un­clear whether the com­pany will be able to keep ex­pand­ing, says John Di­fucci, an an­a­lyst at Jefferies. Still, At­las­sian’s Si­mons says he’s not wor­ried about an end to growth with­out sales­peo­ple. “I’ve been asked that ques­tion every year for the past eight years,” he says. “What­ever the myth­i­cal wall is, we would have hit it by now.” The bot­tom line At­las­sian sold $320 mil­lion in busi­ness soft­ware last year with­out a sales staff. Every­one else in the in­dus­try has no­ticed.

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