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Cloud campaign intensifies for Atlassian software products

Atlassian plans to continue updating Data Center products, but accelerating cloud updates and migrations touted at Team '24 prompt questions about their long-term future.

Atlassian has emphasized its cloud software products over on-premises versions since 2020, but the last year has seen the divergence between the two versions grow at a faster pace than ever before.

More than three-quarters of Atlassian customers now use cloud products, according to presenters at this week's Team '24 conference. In the last year, Atlassian has opened seven new cloud data residency zones for customers with compliance concerns, adding to its previous total of four. In that time, multiple products -- so far without on-premises Data Center equivalents -- launched or were made generally available, including Jira Product Discovery, Atlassian Compass, Loom and Atlassian Intelligence.

In fact, Atlassian shipped more than 10,000 new features for cloud in the last year, at a rate of 8,000 deployments per month, according to Atlassian co-founder and co-CEO Mike Cannon-Brookes during a keynote presentation Tuesday.

"To all of you on Data Center thinking about your cloud journey, we encourage you to evaluate the Atlassian cloud for yourself," Cannon-Brookes told Teams '24 attendees. "We've taken huge strides for you in the last year."

And there's more where that came from: Atlassian officials previewed new cloud-only tools this week, such as a Rovo AI automation product and Guard, a cloud security tool that will incorporate and expand upon the previously released Atlassian Access and Beacon.

Atlassian cloud not only has more new users, but the size of user deployments has increased at a higher rate over the last year, said Rae Wang, head of product for enterprise and migration at Atlassian, during a Team '24 super session presentation.

Since 2018, we have averaged 111% year-over-year growth in the number of users supported on Atlassian cloud. In the last year, cloud customers grew in scale by 200%.
Rae WangHead of product for enterprise and migration, Atlassian

"Since 2018, we have averaged 111% year-over-year growth in the number of users supported on Atlassian cloud," Wang said. "In the last year, cloud customers grew in scale by 200%. So as a result, we now support 150,000 users [per site] in Confluence and 50,000 users per site in Jira."

Integrations between Rovo and Atlassian Intelligence and third-party SaaS tools such as Microsoft SharePoint, Google Docs, Slack and GitLab were demonstrated during the Team '24 keynote, but company officials weren't yet ready to talk about plans to integrate AI-assisted search features with Data Center products.

"We're definitely thinking about Data Center customers," said Jamil Valliani, vice president and head of product for search and AI at Atlassian, in an interview with TechTarget Editorial before the conference. "We don't have anything to share about how [Rovo] connectors might work with them. ... We'll probably have some more to discuss later on, but not at Team."

These discrepancies aren't lost on Atlassian customers.

"On-prem [software] is very good at what it is. But it's not the [long-term] future," said Dan Tombs, an Atlassian architect at a satellite communications company, which uses both cloud and Data Center versions of Atlassian software products. "I understand on-prem will exist for the current foreseeable [future], but it's difficult at times with such different features."

Another customer who has stuck with Data Center editions of Atlassian software products said this week that he's not happy with Atlassian's support and development for them.

"They are introducing new features only for cloud, which is obvious, because they want to force customer migration into their SaaS," said Marcin Lis, a senior Atlassian engineer at an EU entertainment company, in an online interview this week. "Right now, Jira Cloud and Jira on-premises are two different products. [It's] the same for Confluence. Data Center is missing a lot of features if you compare it to cloud."

Team super session drops heavy cloud hints

Presenters spent most of a 50-minute Team '24 super session, one of a handful of sessions livestreamed for virtual conference attendees this week, discussing ways cloud is catching up and overtaking Data Center products. Approximately 13 minutes were set aside for a discussion of forthcoming updates to Data Center software this year.

An Atlassian official who kicked off the super session echoed Cannon-Brookes' call for Data Center holdouts to check out the cloud.

"For any Data Center customers in the room today who haven't taken the first step, please come and explore our cloud offering," said Disha Rustogi, head of product marketing for transformations and platform at Atlassian.

Rustogi then referenced a presentation slide that showed an estimate from a Forrester Research report that customers migrating from Jira Data Center to Jira Software Cloud gained a 358% return on investment.

"If you're on the business side and looking for the ROI justification, that's right here," she said. "It's not a small number."

Super session presenters mentioned approximately a dozen planned Data Center updates focused on security, performance and data management, such as automated archiving of assets and two-factor authentication in Jira and Confluence. A roughly equal number of cloud features were covered during the rest of the session, including AI, automation, security threat detection, and built-in integration with third-party SaaS apps and between Atlassian portfolio tools.

Atlassian's Gosia Kowalska standing on stage during a Team '24 presentation.
Gosia Kowalska, head of product for data center and migrations at Atlassian, concludes her Team '24 super session presentation on planned updates to Data Center products with a note about the cloud.

Five of the cloud offerings discussed in the session were specifically for migration from on-premises Atlassian software products to the cloud. More than half a dozen users that have already migrated were named or had testimonials quoted during the session, including Mercedes-Benz, Dropbox, United Airlines, Netflix and H&M.

"For the teams who have migrated out of the data center into the cloud, they're starting to see the benefit of 'I have free time now,'" said Oxana Trotsenko, former head of Agile transformation and digital technology at United Airlines, in a testimonial video shown during the super session. Trotsenko became a senior strategic engagement manager at Atlassian in February, according to her LinkedIn profile. "They can actually use that time to work on the things that are meaningful to our customers at the end of the day."

Wang's super session presentation emphasized recent improvements to the cloud administration console that now matches on-premises tools in security, compliance and performance management, along with new compliance options for Atlassian Marketplace cloud apps.

"Through partnering with you in your data center journey, we have gained an understanding of your priorities and use cases," she said. "And now we're taking this understanding into cloud ... to make sure [it] is enterprise-ready across scale, security, compliance and admin controls."

Industry watchers assess Data Center future

Atlassian has already discontinued part of its on-premises product line -- support for its lighter-weight Server editions ended Feb. 15. But when reached for comment this week, an Atlassian spokesperson told TechTarget Editorial the company still plans to develop its Data Center products.

"Data Center remains a core component of Atlassian's offerings for our enterprise customers today and into the future," the spokesperson said. "We are continuing to build a future vision of Data Center to meet customers' most critical needs. We are focusing our investment in Data Center across security, performance and scale improvements."

It's unlikely Atlassian will shut down its on-premises software completely, said Andy Thurai, an analyst at Constellation Research.

"They are trying to move as many customers to cloud as possible -- no denying that," Thurai said. "[But] the Data Center market is still huge. ... No one can completely shut down the data center and move to cloud. A few have done that successfully -- Capital One, Equifax and a few others -- but it cost them a lot."

But other industry analysts were not so sure that Atlassian will continue with Data Center indefinitely.

"Having two boats in the water is expensive. ... At some point, it may financially make more sense to put all their stuff into one boat," said Julie Mohr, an analyst at Forrester Research. "There are still some companies that will never go to cloud, and maybe that's time to say, 'OK, we'll have to let them go to a different platform.'"

In the short term, Mohr predicted Atlassian will link Rovo to on-premises data sets through its custom connectors.

"They're kind of covering themselves with the on-premises [tools] by having that capability, which I think is important, so you don't see customers leaving," she said. "But in the future, they're going to have to make the decision of whether they want to stick with both."

Other vendors such as Adobe have successfully made a full transition to SaaS, although Atlassian has a significantly different customer base, said Larry Carvalho, an independent analyst at RobustCloud.

"If Atlassian is not seeing a demand growth for on-premises implementations, redirecting investment to cloud services makes sense [since] subscription services typically deliver a higher profit margin," Carvalho said. "Encouraging customers to transition to the cloud confirms that they want to get to the subscription model while not alienating current on-premises customers. Atlassian on-premises customers should see the writing on the wall and take appropriate action, which may be to replace Atlassian."

Beth Pariseau, senior news writer for TechTarget Editorial, is an award-winning veteran of IT journalism covering DevOps. Have a tip? Email her or reach out @PariseauTT.

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