Atlassian has become a very attractive vendor of project management applications. An acquisition of Atlassian would have numerous implications for business across many engineering-centric industries. The question may be not “if” but “when Atlassian will become acquired?”
Software tools come and go, but some are here to stay for decades. What may become of Atlassian?
Atlassian, a popular tool vendor of apps like JIRA and Confluence, emerged from obscurity in 2002 to become a NASDAQ-based corporation today. Since its IPO in 2015, thanks to a clever PR strategy, the company has quickly gained in popularity. The flagship of the company, JIRA (a name derived from the legendary Japanese monster “Godzilla”), is so popular that the QA managers are forced by the employees to – at least informally – accept the presence of JIRA in many companies, making established competitors like HP’s Quality Center and IBM’s Rational ClearQuest look like grayed-beard hermits.
While being a low-cost tool, selling at just $10 for ten-licenses-package for starters, it is hardly a free tool. There are a number of tools on the market, with an arguable strong following, starting at for $0 (at least for the basic version), such as the popular Bugzilla (fighting Bugzilla vs JIRA like ancient two monsters) or Mantis. So far, JIRA is running circles around the competition.
Investors have discovered the ability to sell JIRA as a “cool tool” – the shares are skyrocketing and the kind of investors that is interested in the company resembles the likes of Apple or Tesla. However, the difference between companies like Apple and Atlassian is the market volume. Apple’s market cap is measured in hundreds of billions of USD, whereas Atlassian is still a newcomer (although Atlassian market capitalization is growing quickly towards a two-digit billion-figure).
The market for tools for engineering and software has an interesting history. IBM bought software and engineering tools company Rational Software by IBM in 2003 for $2.1 billion and Telelogic, the vendor of requirements management tool DOORS, acquired for around $800 million. Unsettling is the observation that the results of such acquisitions resulted in arguable destruction of the product. For instance, “Rational Rose”, a leading tool for UML design, has become relatively insignificant today.
What are the odds that Atlassian does not end up being yet another fossil? A skyrocketing market cap may prevent it from becoming cheap cannon fodder for acquisition-hungry CEOs, but will it be enough for Atlassian to survive long enough to grow organically? The P/E is just being above 20, so who might be interested in “swallowing” Atlassian? That is interesting speculation!
In my opinion, and because of the non-trivial market cap, there are only a few viable options and each of these options have their consequences. Here is my personal ranking of potential buyers:
- IBM. Atlassian is the perfect candidate here. For sure, IBM has a long history of questionable success in the acquisition of smaller companies. Typically, IBM would buy a company and the resulting product promptly becomes high-priced, boring, and soon-outdated. The culture of arrogant “we-can-do-it-better-then-anyone-else” anti-culture produces “re-designed” systems that tend to be clunky, over-engineered, and even more rarely attractive for the “tech crowd”. The overall result would likely be shelved – but the acquisition itself would likely be deemed successful.
- HP. Trying to re-invent themselves (e.g. breaking down of the company into semi-dependent parts) demonstrates their desperation. HP’s lost “mojo” becomes obvious when looking at their products. HP is reluctantly staying in the business of quality assurance (HP Quality Center) is not getting significant traction. Thus, Atlassian would be the welcome target for an acquisition; having fresh blood of a young team would be definitely added value as a building block of HP’s marketing managers.
- Oracle. If you wonder what Oracle is actually up to, you are probably not alone. The acquisition of Sun Microsystems made Oracle the de-facto Java shop. As a leader (albeit often unpopular) of the “free world of Java”, Oracle may be interested in eventually diversifying into more areas than just databases and cloud. Atlassian is a strong proponent of cloud-based services, which makes it Oracle-compatible. Oracle is expanding into application development areas (including planning and optimization of application) which would be a perfect round-up for Oracle’s application branch. The fact that Oracle does not have a significant offering in the area of quality assurance and project management tools would fit Oracle’s business model well.
- Unlikely but potentially surprising contenders:
- DELL. Since Dell went in “stealth mode”, it has not been clear what DELL’s strategy actually consists of. They are apparently trying to morph into cloud-based infrastructure by the acquisition of EMC (including VMWare).
- Amazon. Moving in the project application business appears unlikely, but it may actually make sense if Amazon chooses to expand the business-affine activities, starting with AWS and collaboration (Amazon Chime).
- TESLA. I am saying it only half-jokingly. While Elon Musk is a self-made man and he would rather build everything from scratch, TESLA is clearly running on PR. “Sexy” is everything in the start-up business, which TESLA arguably still is. Also, since “everyone and their brother” uses JIRA for issue management across the board in the automotive business, TESLA’s acquisition would pose a serious disruption to other, established companies, who are struggling to become “agile” (while Tesla is probably the only “agile” car makers on the planet).
Based on those speculations, my personal bet would be that IBM is buying Atlassian within 12 months from now.
The only question at the sidelines is then, “what becomes of Atlassian’s sexiness?” That remains to be seen and the outcome will surely surprise many.