Disclaimer: I'm the author of an open source bug tracker, BugTracker.NET, a sorta hobby project that got better over time and sorta, kinda, "competes" with FogBugz. Also, I receive money from Atlassian to display their ads on my website, but other than that, I know nothing about their business. So, I'm not any sort of insider. But I do pay attention to the space, and here's my two cents.

Some of the income for these companies comes from the hosted versions of their apps. I think free and somewhat viral services like GitHub put a lot of pressure on Atlassian and FogCreek. 1) Downward pressure on what they can charge. Consider Atlassian's recent price drop. and 2) Classic Joel "Fire and Motion" pressure to match the competition's features. Kiln is FogCreek returning defensive fire.

Not to mention less viral players but really nice playes in the hosted space like Unfuddle, Assembla. Christ, even Google.

So, along with hosted apps, some of the income comes from installed software. There, both companies compete against open source, like Trac, Redmine, and even my own BugTracker.NET. Traditionally some stodgier companies have tended to be fearful about running open source alternatives, but there might be a generational change going on. There could be a tipping point where open source developer tools start being perceived even by the stodgier companies as being the more comfortable, safe, mainstream choice. Safer than commercial. That might already be happening with version control.