Software – hardwired!

Scott Farquhar tells how, with partner Mike Cannon-Brookes, he built the enterprise software house Atlassian to a global operation turning over $22 million. By JACQUI WALKER.

Scott and Mike are ready to share their knowledge with readers. Just email feedback@smartcompany.com.au with your questions.

Jacqui Walker: What is the niche you saw when you started the company in 2002?

Scott Farquhar: Mike and I started Atlassian initially because we wanted to create something different. We had both worked for large companies during university, and we wanted a change.

While doing consulting and support to bootstrap our business, we saw that issue-tracking software on the market was either free and complicated to set up and use, or priced to be so expensive that only the largest companies could afford it.

We made software tools that people wanted to use, and priced them so that all companies could afford it, all backed by Atlassian’s ‘legendary service’.

Atlassian’s main products are JIRA – a project management and issue tracking application – and Confluence – an enterprise collaboration tool (a Wiki).

Your clients include Linden Labs, Citigroup, NASA, Cisco and the BBC. How did you win such big clients as a startup?

Our focus has always been to create the best products available. People are amazed that we have managed to sell to blue-chip customers without a direct sales force.

What people miss is that you can sell to all levels of the organisation, not just the CTO, or the CIO. We often sell to a departmental level, and then because the software is so useful, so easy to use, that it spreads throughout the organisation.

BNP Paribas, a French investment bank, originally used JIRA for one development team, and now have around 3000 staff using JIRA across their London, Paris and New York offices.

If you don’t have a large direct sales force, try getting in through the back-door, and have a way of scaling up to company wide.

What is your best tip on gaining new customers?

By far the best strategy is word of mouth. By concentrating our efforts on R&D instead of sales and marketing, we aim to create products that are “remarkable” in the true sense of the word – that you “remark” on them to your peers.

Once you have something that is remarkable, you need to get it in front of a community that talks to each other. For example, although Atlassian’s products can be used across the entire organisation, we recognise that it is usually technical staff that choose and deploy these applications. So we focus our marketing effort on making our product appealing to technical people.

What export strategies have worked best?

To be honest, we have never had an export strategy. We were “born global” so to speak. We sold to eight countries in our first three months of operation. Selling online allows you to reach a global audience.

Some tips for selling online:

• Have a ‘.com’ domain name unless you are targeting Australia.
• Have your base currency in US dollars or euros, not Australian dollars.
• Use customer lists, testimonials and case studies to build trust with your potential customers.
• Have a ‘contact us’ form on your website, and a US phone number.
• Use being ‘Australian’ to your advantage. Australia has a good international standing, don’t be afraid to promote your heritage.

I prefer to use British spelling on the website, even though it leads to the occasional emails from your US customers complaining about spelling mistakes.

What is the biggest strategic mistake you have made?

Opening a New York office. We trialled opening a US office in New York for six months before moving it to San Francisco. New York was just too far away from Sydney, it was hard to recruit staff (IT isn’t a primary industry in NYC), and it was an expensive city to base operations in.

Your revenue has grown significantly. What was the hardest point to manage?

The hardest part about managing growth is to say “no” to opportunities.

There is a certain rate at which a company can grow – you can only add so many customers, features and staff at any one time, and you need to ensure that there is a balance between them.

You are both under 30. What is the hardest thing about leading?

Leading people has nothing to do with age! If that were true, all I’d have to do to get better at it would just be to get older.

Mike and I do read every book there is to read about leadership, and learn what we can. Beyond that, you just learn from your mistakes as fast as you can.

You’ve been approached by VC firms and turned them down. Why? Couldn’t you grow faster with more investment?

The biggest restriction on growth is not capital, but finding the right software developers. There is a global shortage of IT talent. IT enrolments are down for their fifth or sixth straight year, which means that IT graduates will be down for the next three or four years.

If anyone is looking for a job in a fast-growth software company that values its staff, please let me know.

How is your industry changing and who are the biggest winners?

In software, there is a move away from monolithic applications to a more user-centric approach. This is seen by websites such as Facebook, which have allowed users to build applications on top of their platforms.

We’ll see more of these “mash-ups” inside companies over the coming years.

Companies such as Salesforce.com, which delivers software as a service (Saas). SAASs are becoming increasingly popular, as they bypass corporate IT, and allow further consolidation of functionality with the user, rather than corporate IT.

What’s coming next in Web 2.0?

I don’t like the term Web 2.0, as it doesn’t really mean much. It covers user-generated content (like blogs and Wikis), Ajax technology (which allow for dynamically updated web-pages like Gmail, mash-ups (mixing technology from two different systems – my personal favourite is chicagocrime.org).

What we are seeing is that more users are demanding this sort of technology at work. They are saying “Gmail has unlimited storage – why do I still have a 200mb cap at my work”.

We are already seeing many of the larger vendors start to bring this democratisation of software to enterprise applications, and we’ll see it more in the future.

How should small and medium businesses use Web 2.0 technology in a cost efficient way?

Start by using an online system for something simple, like timetracking.

We use tickspot.com for this. On your “contact us” page, link to a Google map, so people can find you.

How do you make sure you are developing new products that clients want?

When making developing a product, you need to go to great lengths to get feedback from your customers. However, if all you do is listen, and then create what they ask for, there is no way that you can amaze your customers.

To create remarkable products you need to listen to all that your customers say, but ignore most of it, and forget your own direction.

What are the big risks for your business now?

By taking a portfolio approach to business – having many customers rather than a few, we have tried to reduce risk in Atlassian. Having multiple products also reduces our risk.

The biggest risk at the moment is that we can’t find enough software developers to support all the products that we are developing.

What is your exit strategy?

We have always focused on making a great company, rather than planning for an exit. We want to be known as an Australian success story.