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Those large enterprise customers are expensive to acquire. Zendesk spent 37M on sales and marketing, with 9M going towards commissions. As they push into the en

Those large enterprise customers are expensive to acquire. Zendesk spent 37M on sales and marketing, with 9M going towards commissions. As they push into the enterprise more, the cost of sales went up. They increased their sales and marketing expenditures by 65%. Contrast this with Atlassian, which has offices here in Vietnam and the Philippines - which keeps engineering costs down - and who doesn't have an expensive sales force. Ripe for disruption: changing the way companies sell to enterprises - or changing the way enterprises buy products. Possible?

sdesol 13y ago
I've been studying Atlassian for some time and I really admire their approach to enterprise and this is why I think they have been successful so far: The majority of their tools can be installed on site. SAAS for enterprise is a lot harder to sell. Most of their tools are built with Java so things are self-contained which makes it easier to install. Also their installations will most likely not need root access. Anybody who knows enterprise knows root access is usually clamped down in enterprise. Their pricing model encourages a bottom up sales approach. Traditional sales channel for enterprise is top down where you go after execs, senior management, etc. and work your way down. IBM, Microsoft, Oracle, etc. can afford the top down approach. For most startups, this would be impossible. By making it very affordable for disgruntled employees/departments to use their product, they are able to create internal advocates for their product if it does make their life easier. tldr; Don't make SAAS. Try to make your tool installable with non-root/admin access. Make it very affordable for individuals and small teams because they will become internal advocates if your product is good.
- seeingfurther 13y ago
  Agreed. But is there a magic number that small internal teams can afford to put on the company expense monthly and have it pass.
- malkia 13y ago
  I had to install JIRA trial on my Windows, and decided to give it a go on a debian-vm through virtualbox. It was smooth - downloaded ~200mb bin file, ran it (not root), and installed it. Then all other updates (as you've said) came as .jar packages and installed them while it was running. As a C/C++ programmer I felt impressed :) Oh and there is lovely API to talk to the system (unlike say... other systems that I won't name here for which you have to spent 10K only for the API).
- datasage 13y ago
  While I do think being installable on site helps, I don't think that is the primary advantage Atlassian has over other software companies. In my opinion it has everything to do with the market. They build products for a market which likes good tools, has no problem putting them into their workflow, and telling all their peers about how awesome their tools are. Contrast that to Zendesk which is largely a customer service tool. In a large company, customer service is largely run business majors who are more concerned with risk of process changes, than they are with (potential) cost savings from better software.
  - buster 13y ago
    Nahh, there are PLENTY of enterprise customers who will never move to the cloud with sensitive data. So software installation at the customers site is a must for many of them, especially the larger enterprises. Sure, the small web startup of 10 people doesn't care where their employees data is, a 100k employee enterprise very well does.
- inthewoods 13y ago
  I think you're drawing the wrong conclusion from the download correlation. There are tons of companies that offer their products as downloads that don't have the success that Atlassian has.
  - sdesol 13y ago
    Yeah but do these downloaded software meet the following criteria: - Insanely cheap ($10) where an employee would be willing to pay for it out their own pocket. - The software actually makes the employee/departments life easier. - The downloaded version doesn't contain any crippled support. Atlassian's whole approach to enterprise is to create internal advocates. They don't care about the revenue that is generated from a $10 sale. They just want to plant seeds in companies so that when they do end up purchasing more than 10 user licenses, they know they can charge a shit load more. I'm not sure if Atlassian is the first to implement this pricing model, but I believe it is the future for most enterprise sales.
    - inthewoods 13y ago
      Yes it's been done before and other companies do it - Atlassian is the most successful at this because their audience imho.
imkevinxu 13y ago
The actual filing says "The overall increase was primarily due to increased employee compensation-related costs of $9.4 million and increased marketing program costs of $3.3 million" So of that 37M, commissions et al. INCREASED by 9M from 2012-2013. I wonder how much of that 37M is actually salary/commission vs travel + lodging + fancy dinners + customer gifts et al.
inthewoods 13y ago
Yes, but difficult. SaaS is/was supposed to be a different way to sell to enterprise. Transparent easy to understand pricing. Then the enterprise and, more specifically, procurement, stepped in. And they don't care about transparent pricing - their job is to get the price down. Thus, they don't buy online - they want to negotiate (and they want three vendors in the mix) - and the whole model goes right back to where we started.

sdesol 13y ago

I've been studying Atlassian for some time and I really admire their approach to enterprise and this is why I think they have been successful so far: The majority of their tools can be installed on site. SAAS for enterprise is a lot harder to sell. Most of their tools are built with Java so things are self-contained which makes it easier to install. Also their installations will most likely not need root access. Anybody who knows enterprise knows root access is usually clamped down in enterprise. Their pricing model encourages a bottom up sales approach. Traditional sales channel for enterprise is top down where you go after execs, senior management, etc. and work your way down. IBM, Microsoft, Oracle, etc. can afford the top down approach. For most startups, this would be impossible. By making it very affordable for disgruntled employees/departments to use their product, they are able to create internal advocates for their product if it does make their life easier. tldr; Don't make SAAS. Try to make your tool installable with non-root/admin access. Make it very affordable for individuals and small teams because they will become internal advocates if your product is good.

seeingfurther 13y ago
Agreed. But is there a magic number that small internal teams can afford to put on the company expense monthly and have it pass.
malkia 13y ago
I had to install JIRA trial on my Windows, and decided to give it a go on a debian-vm through virtualbox. It was smooth - downloaded ~200mb bin file, ran it (not root), and installed it. Then all other updates (as you've said) came as .jar packages and installed them while it was running. As a C/C++ programmer I felt impressed :) Oh and there is lovely API to talk to the system (unlike say... other systems that I won't name here for which you have to spent 10K only for the API).
datasage 13y ago
While I do think being installable on site helps, I don't think that is the primary advantage Atlassian has over other software companies. In my opinion it has everything to do with the market. They build products for a market which likes good tools, has no problem putting them into their workflow, and telling all their peers about how awesome their tools are. Contrast that to Zendesk which is largely a customer service tool. In a large company, customer service is largely run business majors who are more concerned with risk of process changes, than they are with (potential) cost savings from better software.
- buster 13y ago
  Nahh, there are PLENTY of enterprise customers who will never move to the cloud with sensitive data. So software installation at the customers site is a must for many of them, especially the larger enterprises. Sure, the small web startup of 10 people doesn't care where their employees data is, a 100k employee enterprise very well does.
inthewoods 13y ago
I think you're drawing the wrong conclusion from the download correlation. There are tons of companies that offer their products as downloads that don't have the success that Atlassian has.
- sdesol 13y ago
  Yeah but do these downloaded software meet the following criteria: - Insanely cheap ($10) where an employee would be willing to pay for it out their own pocket. - The software actually makes the employee/departments life easier. - The downloaded version doesn't contain any crippled support. Atlassian's whole approach to enterprise is to create internal advocates. They don't care about the revenue that is generated from a $10 sale. They just want to plant seeds in companies so that when they do end up purchasing more than 10 user licenses, they know they can charge a shit load more. I'm not sure if Atlassian is the first to implement this pricing model, but I believe it is the future for most enterprise sales.
  - inthewoods 13y ago
    Yes it's been done before and other companies do it - Atlassian is the most successful at this because their audience imho.

imkevinxu 13y ago

The actual filing says "The overall increase was primarily due to increased employee compensation-related costs of $9.4 million and increased marketing program costs of $3.3 million" So of that 37M, commissions et al. INCREASED by 9M from 2012-2013. I wonder how much of that 37M is actually salary/commission vs travel + lodging + fancy dinners + customer gifts et al.

inthewoods 13y ago

Yes, but difficult. SaaS is/was supposed to be a different way to sell to enterprise. Transparent easy to understand pricing. Then the enterprise and, more specifically, procurement, stepped in. And they don't care about transparent pricing - their job is to get the price down. Thus, they don't buy online - they want to negotiate (and they want three vendors in the mix) - and the whole model goes right back to where we started.