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Atlassian cloud shift quickens with Data Center price hikes

Atlassian's on-premises customer base has expressed alarm at the company's plans to discontinue Server licenses and make major Data Center price increases.

Atlassian's push toward cloud software became a shove with its announcement of a sweeping overhaul for the on-premises versions of its products, a move that came as an unpleasant surprise to many customers.

Atlassian will no longer sell new licenses for its Server editions of products as of February 2021 and will end support for them in February 2024. Existing Server edition users will have the option of moving to the cloud versions of those products, including Jira issue tracking, Confluence collaboration and Bitbucket CI/CD software, or the higher-end Data Center versions.

However, Server users that wish to stay on-premises with Data Center editions are in for more bad news: At the same time, list prices for one of those products, Jira Data Center, will soon double for new subscribers, and existing subscribers with more than 500 users will see an immediate price hike of about 15% over previous Data Center costs, followed by a transition to the new, much higher prices.

These changes will support Atlassian's ongoing cloud product development, wrote Scott Farquhar, the company's co-founder and co-CEO, in a company blog post Oct. 16.

"You need us to move faster and go even further," Farquhar wrote. "In response, we are announcing changes to our server and Data Center offerings in order to sharpen our focus as a cloud-first company."

For customers that must remain on premises, higher Data Center pricing will support making new features developed for cloud available natively in Atlassian's self-managed software. It will also allow the company to include priority support for Data Center subscriptions at most user tiers, which it didn't do in the past, according to Farquhar's post.

Atlassian cloud changes met with user unrest

Atlassian's user forums erupted following the announcement of the changes in a company blog post Oct. 16.

"Before, a customer could try Jira on-prem for as little as a $10 starter license," wrote Taylor Huston, a senior Atlassian engineer at an autonomous vehicle startup who previously worked for an Atlassian partner. "Now the cheapest option they have is, what, over $40k? That is insane."

This will ultimately hurt small and midsize Atlassian customers and partners like the one Huston used to work for the most, he wrote in a separate blog post.

It's clear that Atlassian did the math. I don't see how this move is motivated by anything more than them trying to increase their profits.
Taylor HustonSenior Atlassian engineer

"It's clear that Atlassian did the math," Huston wrote. "I don't see how this move is motivated by anything more than them trying to increase their profits. Which is really disheartening, as Atlassian is a company that I owe a lot to and I want to really respect."

Atlassian's post announcing the changes and messages from Atlassian reps on the company's forums acknowledged the shift will be disruptive for many users. "We know that change of any type can be hard, and our teams at Atlassian have been working hard to make sure you have the resources you need to navigate these changes and plan for the future," wrote Brian Mayo, head of customer support at Atlassian, in a forum post on Oct. 16. "We have a team of Atlassians standing by who are ready to help."

The list price for existing Jira Data Center subscribers with up to 500 users will remain the same at $20,400, while new subscribers will pay $42,000, according to Atlassian's documentation. Existing Jira Data Center subscribers with up to 1,000 users will pay an initial list price of $34,500, but eventually that price will be $72,000.

Huston's current company uses the Data Center editions of Atlassian's products, including Jira, and will likely be able to absorb the price increases for the foreseeable future, he said in an interview this week.

"We're majorly invested in the Atlassian stack, so moving out to something else would be a very expensive endeavor in terms of just man-hours," Huston said. "If Atlassian keeps increasing the prices at this rate, and some other company comes up with a viable, lower-priced alternative ... maybe [we'll consider others]."

Atlassian cloud migration an option for some

Most industry watchers agree that Atlassian will likely lose at least some smaller accounts as it makes these changes, but many larger or more well-funded companies like Huston's are either willing to pay the higher prices to stay on premises or more open to a cloud migration than they had been in the past. Atlassian estimates more than 150,000 of its customers, a majority, already use its cloud offerings, including 90% of new customers.

Atlassian Data Center pricing
Atlassian chart shows planned Data Center price increases amid the vendor's push to cloud.

"The risk they run is alienating midmarket enterprises -- they have a coherent, 'from startup to enterprise' pipeline strategy, but this could put a blockage in it at the midmarket," said Charles Betz, an analyst with Forrester Research. "However, that would mainly be for midmarket firms that feel a need to run some on-premises [resources], which is a diminishing proportion."

One Atlassian customer, Tyler Technologies, a user of Confluence Server, Jira Data Center and Bitbucket Data Center on premises, had already planned a move to Atlassian cloud in early 2021, before its next license renewal in June.

"[Atlassian's announcement] actually makes the argument for doing it easier," said Jeff Green, CTO at the Plano, Texas government information systems software maker. "We're developing for cloud now, and a migration actually frees up blockages we'd seen trying to integrate cloud tools with on-premises [deployments]."

Some customers want to stay on premises for security, compliance or data localization purposes, but Tyler is U.S.-only, and has begun to trust cloud-based security tools such as Okta for identity and access management.

There are sticking points, such as the fact that Atlassian requires a separate subscription to integrate with Okta via its Access product. Some application teams at Tyler use third-party add-ons that aren't yet supported in the cloud versions of Jira and Confluence.

We're developing for cloud now, and a migration actually frees up blockages we'd seen trying to integrate cloud tools with on-premises [deployments].
Jeff GreenCTO, Tyler Technologies

"I believe this announcement will have many add-on developers hard at work fixing the problem," Green said.

Atlassian's cloud prices are also significantly higher than what Server users were accustomed to. For example, Jira Server was priced at $10 per month for 10 users. Up to 10 users are free in perpetuity on the equivalent Jira Software Cloud, but for more than 10 users, a Standard cloud license costs $7 per user, per month, and a Premium license $14 per user, per month. Volume discounts apply at higher tiers, where a Standard license costs $5 per user per month, and a Premium license $7, according to an Atlassian spokesperson.

But Atlassian is offering a "cloud loyalty discount" for users that migrate from Server or Data Center to its cloud, at least initially, and provided the customer migrate at least 1,001 users to an annual cloud subscription for either Jira or Confluence. Green said these discounts will be a further incentive for his company to continue its move to cloud.

One industry analyst said the push toward cloud is inevitable, and Atlassian's direction here has been clear.

"This pricing is sending the strongest signal ever that Atlassian doesn't want to accommodate on-prem customers, they have more than enough customers eager or willing to migrate to cloud, and if you don't like it, that's too bad," said Tom Petrocelli, analyst at Amalgam Insights. "Good luck finding other products that aren't either cloud-only or heading there fast."

Atlassian competitors such as Microsoft and CircleCI do offer on-premises options for products such as Azure DevOps, but Tyler Technologies, which will also begin to replace Bitbucket with Microsoft's GitHub Enterprise, found that Microsoft is also strongly pushing for users to move to cloud. Green said Tyler will make the switch, in part, because of a pricing discount on GitHub the company received with its Visual Studio license agreement.

"It's clear they're trying to get more organizations to adopt GitHub, and that's going to be their primary DevOps tooling," he said.

Feature gaps, Atlassian cloud pricing may be showstoppers

For Huston's company, a move to Atlassian cloud isn't under consideration, in part because there are still things his company's IT team is used to doing with Jira Data Center on premises that don't work the same way in the cloud, such as sandbox environments for testing.

Atlassian Cloud began rolling out sandbox support for its Premium and Enterprise license tiers earlier this month, which creates a free, dedicated environment for testing configuration changes, apps and new features. However, while multiple Sandbox environments are coming for the Enterprise license tier, for now sandboxes are limited to one at a time. Any add-on apps used with Sandboxes are free for a 30-day trial only -- after that, users must pay to use them with sandbox environments as well, or start over.

Huston called this a step in the right direction, but not quite suitable for his company's purposes.

Atlassian reps were available on forums to answer questions and field criticism after the blog post to try to reassure customers. Reps urged users, including Huston, to join a newly created a Server champions user group meant to help ease the transition. Members of this group will be connected with cloud product managers to ensure feature parity with on-premises products.

One longtime Jira and Confluence Server edition customer at a midsize enterprise with more than 1,000 users, who requested anonymity, said the new Data Center prices appear to cost three times what his company currently pays, and equivalent cloud services could be up to seven times more costly.

"We have pretty huge vendor lock-in and it's unlikely we'll actually jump ship," the user said. His company will try to negotiate with Atlassian on a move to Data Center. The possibility has occurred to him, however, and other users in Atlassian's forums, that Data Center products might also not be around forever.

This seems unlikely in the near future, as Atlassian will bring some of its cloud features to Data Center under the new pricing, but it will be a long-term consideration for customers that want to stay on premises indefinitely.

"I suspect [Data Center] will be around for a while, but that would be another unpleasant announcement," the Server customer said.

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