How Atlassian’s dual-CEO structure has helped the company thrive

In this weekly sequence, CNBC will take a seem at corporations that produced the inaugural Disruptor 50 list, 10 many years afterwards.

In early March, collaboration software package maker Atlassian printed a website submit titled, “Atlassian stands with Ukraine,” laying out the company’s strategies to help employees and clients in the region and asserting it was “pausing the sale of all new program to Russia.”

The write-up was signed by co-CEOs Scott Farquhar and Mike Cannon-Brookes. They went again and forth on the material and the main details. But Farquhar did most of the get the job done, releasing up Cannon-Brookes.

Which is just one of lots of conveniences of preserving two men and women at the top of a organization. The atypical structure has assisted propel the Australians’ 20-year-previous business into the prime tier of the aggressive application business, with solutions so effectively regarded that major organizations may discover it tough to go away.

In 2013, Atlassian landed on CNBC’s inaugural Disruptor 50 list of private corporations truly worth viewing, ahead of its 2015 Nasdaq debut. The inventory has risen just about 1,000% considering that then, compared with 124% development for the S&P 500 in excess of the very same period of time.

The duo have experienced the exact career at the identical company for 20 yrs, they were born just one month aside, they became mother and father a few months aside, they ended up finest men at each other’s weddings, and they own assets following to every other in Sydney. “Our inventory ticker is Staff, and so, yeah, that’s what we are about,” Farquhar reported.

But they’re various people. Cannon-Brookes is a prolonged-haired idealist, who became an owner of a U.S. basketball team and attempted a takeover of Australian utility organization AGL Power. His responses are sprinkled with obscenities. Farquhar is thoroughly clean-slash and very careful as he speaks. Early trader Wealthy Wong of Accel phone calls Farquhar far more analytical.

“Mike is sort of the quintessential unreasonable guy,” Farquhar explained. “‘The globe need to work this way.’ ‘Mike, it doesn’t nonetheless.'”

Farquhar and Cannon-Brookes grew to become good friends in the late 1990s immediately after using the exact same training course at the University of New South Wales. The technologies bubble broke close to the time they graduated, and going through a dearth of career prospects, they formed a business. At first it made available guidance for a further firm’s application server. Then it altered path and commenced setting up its possess software. The initial edition of Jira, a instrument for monitoring difficulties and initiatives, appeared in 2002.

Within just about 5 many years, a lot of Accel-backed get started-ups had embraced Jira. “It was currently the normal that you experienced to integrate your software package with,” Wong mentioned. The corporation widened its portfolio with the 2004 start of doc-collaboration company Confluence and the 2012 acquisition of workforce messaging app HipChat. Along the way, Atlassian unveiled variations of Jira for distinctive sorts of workers.

Nowadays Jira is a marketplace chief, transcending its status as Silicon Valley darling and overtaking heavyweights with many years of encounter providing to enterprises. Atlassian managed greater share than any other enterprise in the sector for program alter, configuration and procedure management applications in 2020, forward of Microsoft, IBM and Broadcom, in accordance to an estimate from researcher IDC. Atlassian’s revenue in the market grew about 22% 12 months more than calendar year, faster than the in general class, which expanded virtually 15% to $4.8 billion, based on IDC’s information.

“Our exposure to application begun with things like video games,” Farquhar mentioned. “Back then, video games experienced diverse organization models. You could get your PlayStation kinds shrink-wrapped. If you search at Id Software program, they arrived out with a shareware model, type of try out in advance of you acquire. We assumed that was a wonderful way to provide application, for the reason that of class you want to try out ahead of you get. At SAP, there is certainly no seeking. You get to see what it looks like, mainly because it will take that extended to employ it.” (SAP does offer you totally free trials for some of its solutions.)

Atlassian was either the 1st or pretty early to provide program with a freemium supply, Farquhar mentioned, introducing that cloud file sharing application maker Dropbox produced it additional common. And in the late 1990s Crimson Hat, which IBM later obtained, gave away CDs made up of its distribution of the open up-supply Linux functioning procedure and permitted folks to download it no cost of charge.

Missing a pile of revenue from enterprise capitalists for its initial 8 yrs, Atlassian skipped the custom of assembling a squadron of salespeople to rating specials. Now, while, there are a handful of on team who go after find business enterprise opportunities, Farquhar reported.

Focusing a lot less on selling tricky and far more on providing products and solutions persons essentially want to use has provided increase to a sturdy financial profile. Atlassian enjoys the fifth widest gross margin of all 76 constituents of the WisdomTree Cloud Computing Fund, at 83%.

That standing has caught the awareness of buyers.

“In my heritage of 33 many years of doing this, I have found additional than a handful of companies that have tried to do it with out an inner salesforce, or an external salesforce, either. The point I would say about Atlassian is they are the most prosperous at it,” reported Brendan Connaughton, founder and managing associate of Catalyst Private Prosperity, which held $91 million in Atlassian inventory at the end of 2021, its most significant place at the time.

Like several other cloud shares, Atlassian is just not essentially financially rewarding. Connaughton claimed Cannon-Brookes and Farquhar would come across it less difficult to turn Atlassian into an genuine moneymaker than its peers, thanks to its somewhat sparse product sales staff.

A additional popular attribute of Atlassian’s 7,000-particular person organization is the group that really builds the firm’s wares. Engineering, product and style and design report to Cannon-Brookes. Farquhar supervises lawful, human sources, finance, profits, promoting and purchaser-support groups. “I’m kind of the grandparents,” Farquhar explained. “I depart him to offer with the temper tantrums and the screaming.”

When they chat about duty, they consider equally competencies and pleasure. You don’t want another person who’s good at dealing with a job but isn’t going to like carrying out it, and vice-versa, Cannon-Brookes mentioned.

Internet marketing and profits documented to Cannon-Brookes for 15 years, and engineering as soon as described to Farquhar. And they have the two operate the overall firm at unique periods. They’ve absent on sabbaticals. Final yr Farquhar took three months off to caravan with relatives all over northwestern Australia. “We form of received to vacation unencumbered,” he reported. “I think other CEOs would have to retire or give up to be in a position to take a break that extended.”

The composition has contributed to Atlassian’s good results, explained Gregg Moskowitz, an analyst at Mizuho.

“I assume it has helped, possessing two powerful executives at the very top rated who see eye to eye, at the very least on all the crucial issues,” he reported. Other technological know-how companies have used CEOs in pairs, like Autodesk, Ceridian, Oracle, Salesforce, SAP and Workday. Alphabet’s autonomous-driving subsidiary Waymo a short while ago went the co-CEO route.

The method has a combined record, Moskowitz said, indicating it did not perform very well at all at handset maker BlackBerry. The romance concerning co-CEOs Jim Balsillie and co-founder Mike Lazaridis “experienced absent chilly,” in accordance to one account, and the two stepped down.

Wong pointed to Atlassian’s 2017 acquisition of task-management app Trello for $384 million, even now the firm’s most significant deal to date. At Trello it was a shock, because Atlassian’s Jira was viewed as a competitor, reported Stella Garber, who ran marketing and advertising at Trello at the time.

“I think it took conviction of the founders to say, ‘I know we could have developed it, but it would get us time, and it would actually increase the organization if we make the choice now and fork out what it requires to get the acquisition performed,'” Wong said.

When there is certainly an concern on Cannon-Brookes’ turf, it can be his selection to make. But when it’s some thing huge, he consults with Farquhar, since it can be just about unquestionably heading to impact them both equally. There are a lot this kind of illustrations in and all around the enterprise suitable now, and it is purely natural that they divvy issues up.

“The pandemic and Russia and Ukraine — at the minute Sydney is under floods,” Cannon-Brookes mentioned. “Set it all alongside one another, and you can find a lot of items you have to have to offer with in a development biz that aren’t just the products.”

Farquhar stated he and Cannon-Brookes experienced very long conversations about what to do with their staff-messaging app Stride, which arrived in 2017 as Slack and Microsoft Groups have been gaining momentum.

“It was weird, basically, mainly because anyone was conversing about how great Slack is. We were being making use of Stride internally,” Farquhar explained. “The item was basically improved. The Slack detail is astounding. It is really not as very good as what we had. We experienced to make a determination.”

In the end, Atlassian shut down Stride and HipChat Cloud and offered the intellectual assets to Slack. It also purchased an fairness stake in Slack, which shot up in worth as Slack stock appeared on the New York Inventory Exchange in 2019.

When Cannon-Brookes and Farquhar were being young, they could shut the office environment doorway and have a conversation with just about every other about a crisis, and for fun they could possibly go mountain biking or drink beer together. The pandemic stopped them from viewing each individual other in man or woman so generally. They’ve gotten good at connecting on Zoom, Farquhar claimed.

Cannon-Brookes doesn’t need to have to therapeutic massage what he says to Farquhar. Without having prompting, he imagined what would happen if Farquhar were to go away.

“I would be continuously outlining factors, which would sense like I was chatting down to someone,” he said. “‘Good notion, but enable me convey to you what took place in 2012.'”