Atlassian has a reputation for doing business somewhat differently than traditional Enterprise Software companies. Examples are:
- Providing free 30-day evaluations (with Support!)
- Showing all of our pricing on our website
- Having all of our documentation accessible online (to anybody!)
- Giving Source Code to our customers (no need for escrow agreements!)
- Having no salespeople
- Not requiring customers to purchase software renewals
In this blog post, I’ll discuss those last two topics in a bit more detail.
Traditional large Enterprise Software companies operate by having “Account Executives” (also known as salespeople) assigned to industry groups and government departments. Their jobs are to track the projects taking place within their target companies and departments and, more importantly, to track the decision-makers who have the power to spend money.
If a lead comes in for a potential sale, the Account Executive will use his contacts to obtain information and position for the sale. They’ll take people out to lunch, provide box seats to sporting events and invite potential customers for a round of golf at an expensive course. The cost of sales for these types of companies can easily exceed 50% of the sale price. (Want some interesting reading? Take a look at Confessions of an Ex- Enterprise Salesperson.)
This business model might work if you’re selling $100k+ software, but it doesn’t really add much value for customers. At Atlassian, the average cost of software that we sell to a new customer is $2200 — low enough to put on a credit card. Therefore, we can’t afford salespeople. Instead, we use the power of the Internet to sell our software — free evaluation downloads, automated ordering systems, online community forums, email marketing, the power of Word of Mouth and garnering goodwill by supporting Open Source projects. And it works!
Support and Maintenance
However, we do have one guilty little secret. While we don’t have any salespeople, we do have a team of Renewal Specialists dedicated to encouraging our customers to renew their annual Support and Maintenance subscriptions.
When people purchase a product from Atlassian, we include a free year of Support and Maintenance (new version releases). After this year, Support and Maintenance can be purchased for an additional period of time. Unlike many large Enterprise Software vendors, we do not force our customers to purchase Support and Maintenance. If they wish, they can continue to use their existing product into the infinite future without paying us another cent. (However, they won’t be able to use new versions that contain bug fixes and feature improvements.)
We’re pleased to say that around 80% of our software products are renewed each year. Some customers even purchase multiple years of Support and Maintenance in one transaction. Getting this level of renewal isn’t easy — we need to offer great products, useful Support services, worthwhile new versions and… a bit of encouragement!
Our biggest success came three years ago when we implemented a new ordering system that automated the ordering process and allowed us to automatically send Renewal Quotes to customers in advance of their expiry. The simple act of attaching a quote to an email made it easier for customers to process the invoice through their company and renew products before they expired. It was a win-win for both Atlassian and our customers.
However, there were still renewal opportunities being missed so we formed the Renewals team to focus specifically on Support and Maintenance Renewals that had expired. Rather than being traditional ‘salespeople’, the Renewal Specialists deal only with existing customers and can deal with issues ranging from product difficulties through to strange corporate purchasing practices. They also serve as an important information-gathering channel back to our Product Managers — customer comments are tracked on an internal “Customer Megaphone Report” that is available to all staff on our internal Confluence system.
We also track why customers choose not to renew with us. Here’s some high-level statistics why people do not renew:
- 21% had no need for Support nor Maintenance (that’s their choice!)
- 17% could not be contacted
- 16% no longer use the product
- Only 7% thought we were too expensive for their budget
- …plus a smattering of other reasons
We’re very pleased that price is not a factor in people’s decision to continue to receive Support and Maintenance. We continue to focus on product improvements to capture more of that first 21% and we really want to keep in better touch with our customers rather than losing contact with them.
We’d be interested in hearing from our customers to find ways that we can improve our products and our services to encourage an even higher rate of customer retention, but true to Atlassian’s core values we won’t get pushy if they choose not to renew. We’ll just keep providing great-value products rather than expensive ‘free’ lunches.