The SaaSpocalypse that wasn't, with Atlassian's CEO

Decoder with Nilay Patel

Nilay Patel interviews Atlassian CEO Mike Cannon-Brookes to discuss the impact of AI on enterprise software and the validity of the 'SaaSpoc

Key takeaways

• Mike Cannon-Brookes argues that AI will enhance business processes rather than destroy the SaaS category by increasing speed and reliability.
• Atlassian's strategy relies on a singular core platform that provides consistent capabilities across products like Jira, Trello, and Confluence.

Main topics

• The future of SaaS in the AI era
• Atlassian's platform-centric product strategy

Notable quotes

We're moving from information asymmetry to imagination asymmetry.

Conclusion

The episode offers a sophisticated look at how established tech leader

Transcript preview

Speaker 2 (0:00) Support for the show comes from CrowdStrike. It's not a huge stretch to say that AI is the next major computing platform. Every platform shift changes the way we build software, and it changes security too. CrowdStrike is defining cybersecurity in the AI era with AI detection and response, or AIDR, a solution for seeing, monitoring, and securing AI across the enterprise. Learn more about how leading companies are turning to CrowdStrike to secure AI and secure their business at CrowdStrike.com slash decoder. Speaker 1 (0:36) Hogging seats on a crowded train, not saying excuse me, watching videos on your phone with no headphones in. Sometimes it feels like we don't know how to act anymore. What we have been seeing increasingly is people breaking rules. Why should I Speaker 2 (0:52) play by the Speaker 1 (0:53) rules if nobody else is going to do that for me? This week on Explain It To Me, how to mind your manners. New episodes Sundays, wherever you get your podcasts. Speaker 3 (1:04) Support for the show comes from Square, the business platform that helps sellers become neighborhood favorites. Whether you're gearing up for a busy season or just trying to keep up with everyday demand, Square keeps your business running smoothly. It brings payments, operations, and insights together in one place, so you're ready for whatever's next. Right now, listeners can get up to $200 off Square hardware when you sign up at square.com slash go slash decoder. That's S-Q-U-A-R-E dot com slash go slash decoder. Get started with Square and build a setup that works the way you do. Speaker 4 (1:49) Hello and welcome to Decoder. I'm Nilay Patel, editor-in-chief of The Verge, and Decoder is my show about big ideas and other problems. Today I'm talking with Mike Cannon-Brooks, the co-founder and CEO of Atlassian. Atlassian is one of those companies that every other company runs on. It makes important platform tools like Jira and Trello that allow people to organize and manage big teams, create shared databases of company information, and generally allow work to happen. As you'll hear Mike say, all of Atlassian's products are actually different expressions of a single core platform. which really shapes how Atlassian itself is structured and those products are built. All of this means Atlassian is also right in the middle of the way AI is changing how every company works. AI tools might be able to look at all the different tools and systems you have and just read them for you, making a big migration to Atlassian's platform less enticing. Or if you buy the idea of the so-called sasspocalypse, AI might just build all of these tools for you. destroying this entire category of businesses. Obviously, Mike had a lot of thoughts pushing back on this, and we spent some real time talking about the value of design, human users, how AI is actually increasing the usage of Atlassian's tools, and what all this might look like a few years from now. Of course, AI has also changed Atlassian. Like so many other tech companies, Atlassian did a round of layoffs earlier this year, with Mike saying that he felt the company needed a different mix of skills. So I asked him what he thinks that mix of skills is, and how AI is changing what it means to run a software company. But Mike was also refreshingly direct about what AI can't do, and willing to push back on his own friends like Cloudflare CEO Matthew Prince, who was just on the show talking about AI eliminating what he called measurement roles. This was a fun one. We got deep. And shout out to Mike, who recorded this from Atlassian home base in Australia, which means that he had a deep conversation about org charts at 5 a.m. Before we get started, subscribe to Decoder on YouTube to watch new episodes every Monday and Thursday, and subscribe to The Verge to listen to this episode and every episode completely ad-free. Okay, Atlassian CEO Mike Cannon-Brooks, here we go. Speaker 4 (3:53) Mike Gannon-Brooks, you're the co-founder and CEO of Atlassian. Welcome to Decoder. Speaker 5 (3:56) Thanks for having me, man. Speaker 4 (3:57) I am really excited to talk to you. I believe you're in Australia. It's tomorrow for you. Speaker 5 (4:03) It is. Well, it's today. It depends on... Speaker 4 (4:04) What's going to happen tomorrow? At this point in the AI news cycle, I feel like I can just demand to know what's going to happen tomorrow. Everyone understands the urgency behind that question. There's a lot going on with Atlassian. There's a lot going on with your products. There's a lot going on in the very concept of SaaS businesses and business processes generally. Let's start at the very start. I think people know Atlassian. They know Jira. I started my career as a Trello person. Tell people what you think Atlassian is today. Speaker 5 (4:31) Atlassian is a... platform that enables businesses to collaborate and manage work across their teams. So we connect their business teams and their technology teams to handle the most challenging work. problems in a singular platform across any organization that is technologically driven. So any organization that has software and technology as its core competitive advantage, we make a broad platform that allows them to collaborate on content, manage projects, unleash the knowledge of their teams and organizations across their business, their strategy operations, all the way through to... their service teams in all areas of their business. So it's a very large platform now that we provide. Let Speaker 4 (5:20) me ask a question about that. Just in terms of what work is today and what it might be in the future as we add more and more AI to these enterprises. Maybe this is too reductive, but I have always thought that Atlassian is a company that makes tools to help teams figure out what they're going to do tomorrow. So Jira is a perfect example of this. You don't do the software engineering in Jira, but Jira helps you organize large teams of software engineers and file tickets and prioritize problems and tasks. I was a Trello person a long time ago. My goal in life now is to never use any enterprise software. I feel like that's a sign of true success if you're just like an iPad person in first class. I'm working on it. I'm not saying I'm there yet, but that's one of my goals. But there was a time Speaker 5 (6:03) when Speaker 4 (6:05) I was the managing editor of The Verge, and my job – straightforwardly, was to look at Trello every day and make sure everyone was doing the right thing at the right time. And I've always thought of Atlassian as that class of products, right? We're going to organize the processes of the company. There's something about AI that's changing that. Has that conception of Atlassian changed for you? And is it changing faster because of AI? Speaker 5 (6:28) Understanding what work you have to do at an individual level, like Trello, at a team level, like Jira. or at an organizational level like our strategy collection for large-scale strategy and operations that is definitely a big part of what we do right understanding where processes are at it's less about work to do than processes right if you think about a business as a system of processes that are put together everything in a business is some sort of system it's some sort of process and the collection of all these and how well we execute them is what your business is doing the Speaker 5 (7:01) Fundamentals of that haven't changed. The way those processes run, the number of them running, how to figure out what's going on hasn't changed, right? So we think about Jira as a human reference to work. When we say that, it's a really interesting term because, as you said, the work is not done in Jira. Developers don't live in Jira. Marketers don't live in Jira. Finance people don't live in Jira. What Jira is is a workflow engine. with highly collaborative parts that enables teams to understand what they, their colleagues, and their broader organization are doing. That's why agents and AI and other things, they're going to increase the speed of those processes. In a lot of ways, they will increase the reliability, the quality, the consistency of output of certain processes. And they also put more emphasis on where the humans, where the judgment, the intuition, the human bits that are unique, the initiation come from. And it's our job to make sure that that's all still understandable, right? So someone can just kind of look at any level of their business and know what the fuck's going on. What are people doing? Are we successfully doing whatever it is that we're trying to do? Whether that's service function in a finance, sales deal exception service desk to work out how many exceptions did we give out in sales this quarter? Whether it's an engineering team who's trying to work out, man, there's like stuff happening all over the place. What did we build this month? Or what are we going to build next month? All of those things are incredibly hard to do at scale and volume in a business. Speaker 4 (8:32) One of the more important features of the tools you've built is legibility. It's user experience, right? You have a big database of exceptions given out by salespeople, and you need to look at a dashboard and just see how the company's doing. Or you have a whole bunch of tasks, and Jira will let you see at various different levels of abstraction how many tasks are being completed at any given time. And that was something that was very important for... human managers, right? And a lot of the capability unlock of businesses as they added software, like the software Atlassian makes, is to just be able to see and coordinate more things at higher scale. The turn that's coming is that maybe those databases aren't going to be looked at by human beings anymore, or they're going to be fed into more synthesized databases, or AI is going to make some other kind of information at different levels of abstraction. I know you've got a product called Rovo, which... feels like the new face of Atlassian in some way. What's the path here? What does the end state look like? Speaker 5 (9:28) Look, there's no doubt AI is going to help with a lot of those processes, right? There's no doubt it's going to pick up some steps in a process. Most businesses at the moment, they have a process and they're using AI to like automate 80 % of this step, right? And it may not be 80 % of the distance. It can be the width. Right? So if you think about that sales deal exception process that you just mentioned again there, if AI can take 80 % of the exceptions, say this customer wants 45 days, not 30 days, and we can write a relatively readable document, AI is pretty good at reading a document and saying, yep, this one's fine. Right? But those are going to be a customer that needs a lot more complex exceptions. They have, well, I want to pay in 90 days in this way, and I want this thing and that thing. And that needs to go to a human for intuition and judgment. Speaker 5 (10:14) 80 % of those may be easier done with AI now because it's very capable at processing our rules and, you know, in this particular part of our business. And that's great. It'll increase the speed of the process, the quality of it. Speaker 5 (10:31) It doesn't take away the need to know what's going on. So someone in the business will still need to know, okay, cool. How many exceptions did we give? And what happens in most of these areas is businesses find way more ways to make themselves scale and efficient. And they find way more ways to make higher quality products and services with AI. I see this all the time where they are. utilizing AI in ways that people don't expect. It's not all about mechanistic efficiency. There's a huge amount about quality that is able to be measured, understood, that was never before, right? And the deal exception process is a good example because it's actually a very human process. It's not usually rule-driven. The rule-driven parts are easy. It's the non-rule-driven parts, right, that are more complicated and require judgment. Overall, the business still needs to know for that process, do we need to add more people to this process? Do we need to change it? How much is going through it? You still have a lot of work to understand the flow of work around an enterprise, which gets more complicated as the flow's volume goes up a lot. Speaker 4 (11:45) I'm obviously asking these questions because I'm headed towards a series of questions about the supposed SaaSpocalypse. And I'm very curious where you think tool providers like Atlassian fit next to, okay, the frontier models are just going to eat more and more capability. Eventually, Cloud will just do this for you. You'll say to Cloud, run my business for me. And in the back end, Cloud will burn a bunch of tokens and it'll just do it all for you, which is a promise that many, many people seem to believe in. And you're describing a somewhat different path, right? Where the tools get smarter or more capable because of AI, and you're still adding a lot of human judgment. but at no point is a frontier model just coming and running your entire business for you. Speaker 5 (12:25) I think if a frontier model is capable of coming and running the entire business for you, even assume four or five years worth of increase, you have a relatively simple business. Right. If it's truly running the whole thing. Most businesses aren't simple. They are global conglomerations of rules, compliance, laws, staff in different places, human inconsistency, which is the same way as saying human creativity, by the way. They're putting it all together to try to deliver products and services for their customers in their industry, healthcare, university, finance. automotive, whatever the industry is. They're trying to compete with some other business. They are still going to have a huge number of humans. I would argue more knowledge workers, more developers in five to 10 years time than today, because the ability to do tasks to compete will go up. The bar for competition will go up in almost all these industries. Speaker 5 (13:28) you will still have a huge amount of things to go do. Most of the things that we think are simple get done for you. That is the history of technology, right? I'm a big fan of saying AI is just technology. What we can do with spreadsheets, what we can do with the internet, what we can do with ordering goods online, right? You're like, oh, once Amazon arrives, we'll all just never have to go to the shops again. Like, it doesn't happen, right? If you think about... I had someone talking about bank branches as an analogy, which I thought was a really good one. Around 2000, when mobile banking came along, everyone thought bank branches were dead. Bank branches started closing down. Everyone wasn't going to go to their branch anymore. It was just, you know, it was a pretty negative place. At least it was in Australia. I'm pretty sure it was in America as well. If you look over the last 10 years, bank branches are increasing. And people are like, huh, this is a narrative violation. Why is this? And the answer is bank branches did close down. People did go to the internet banking. They did use their mobile app. They don't go into the branch anymore with a passbook to say, I'd like to send $100 to Nilay, please. Like, you know, here's his details and write them all down. But bank branches have adapted. The reason they're growing is there is a huge customer service element to a bank branch. The services they provide today are totally different than what they provided 25 years ago due to the technology of the bank and the availability of things that, you know, they are much more about helping you with higher level processes and services than they ever have been. And that turns out to be. presumably profitable for the banks, which is why they're opening new branches. So bank branches are going up. The things those branches are doing are totally different to what they were 25 years ago. I think you'll see the same thing with knowledge workers and everything else, that it will still be incredibly important. I don't see that part changing. Speaker 4 (15:12) One of the reasons I'm asking all these kind of foundational existential questions is to understand how you feel about Atlassian's relationship. to businesses and how businesses might change as we add new technology. And I agree with your general framing, right? That automation technology arriving to a business is a pretty familiar phenomenon. But there's something else going on with AI that is either making that faster or more dramatic. And it's obviously happening to your business as well, right? You're the CEO of Atlassian and you've made some changes around AI. Speaker 5 (15:40) So Speaker 4 (15:41) I want to ask you the decoder questions now. How many people is Atlassian today and how is it structured? Speaker 5 (15:46) We are... I think publicly 12, 13,000 odd around the world. We are structured globally, I would say. So we're team anywhere. So employees have the choice to come into an office or not. About 60 % of people come in three days a week or more. About 25 % of people don't come in a single day per week. We run as a globally distributed company as we have done since the start. When you start in Australia and San Francisco, you... Kind of get used to the Pacific Ocean being a little bit distribution. This is before Zoom. We used to have these giant Polycom systems in meeting rooms. We don't have those anymore. Technological progress is nice. We have customers all around the world. We have staff all around the world. We are structured. Speaker 5 (16:37) functionally, I guess you would say, with a lot of matrices internally. I don't know if that's the answer you're looking for. No, that's Speaker 4 (16:42) absolutely the answer I'm looking for. What do you mean by functionally with a lot of matrices? Speaker 5 (16:46) So we have a CRO, we have a CFO, we have two CTOs at the moment. We have two large product groups, each of which has a CTO and a chief product officer, one in the enterprise and emerging side and one in the future teamwork side. Our products... are organized into collections so we have collections of apps that are all built on a single platform um well over half of our r d is on the platform um the apps are increasingly a smaller amount of the proportional total investment in building uh more and more is on the singular elastin platform right customers hire us as a as a platform across their business to get work done not for a single application that requires a matrix a matrix internally right We don't have salespeople per product, if you want to think about it that way. We have to have people who the sales, customer success, the FDEs, they're all customer-related motions. So they're organized as per the customers and their geographies and their size and scale. And then we obviously have to have designers, product managers on particular products who care about the purpose of a product. So you end up instantly with a matrix between how the customers are organized and how the products are organized. And then we have a giant platform. So we have... the technical platform that runs across all the products. So it's a very large platform team. We then have, you know, finance and talent and other things that are also broad processes. So naturally you end up with, you know, collaborative areas that you have to get together and we manage that through our operating processes. Do Speaker 4 (18:17) you use the Atlassian platform to run Atlassian? Speaker 5 (18:19) We do. We run entirely on the Atlassian platform. We're the... I used to say we're the number one user. We're not anymore of our strategy and operations products to understand what our business is focusing on, what our large-scale goals are, where the people, the investments, the technical systems, how they all come together, and what is going right and wrong across all of those. So we are a big believer in our strategy collection to operate a large-scale business. Speaker 4 (18:48) One of my favorite questions to ask enterprise software CEOs is how much they personally use the enterprise software. How much do you personally use your products? Speaker 5 (18:56) An awful lot. What's your number Speaker 4 (18:59) one feature request for your teams? Speaker 5 (19:01) Look, my number one feature request is usually continual UI congruence. I guess that's the category that people would put it in. I'm a bit of a stickler for design and consistency. We want to achieve eventual consistency in design, which we've come a huge distance in the last five years. In the last two years, we've been truly world-class at doing it. That's usually my biggest area where I... use a lot of our products on a regular basis. And as such, I'm moving around the platform and you're looking for ways where this thing over here happens this way. Hey, they do it better over there. And so we're trying to achieve that eventual consistency across a large product surface area. I use DRR web browser. I think it's like 96, 97 % of Atlassian now uses DRR on a regular basis. I mean, it's not going to daily basis. So I literally spend many, many, many hours of the day. We are building a web browser for ourselves because we've reached the point that we're like, man, this thing should just be better for knowledge workers. So we've built already, I would argue, the best browser for knowledge workers in the world. And it's getting much, much, much better. Keep watching this space. So yes, I would say there's no 24-hour period