Software-as-a-service based enterprise business services provider Workday is expected to hit the market with an IPO this year. A few analysts believe that Workday’s IPO may be more worth their while than that of other Internet giants like Facebook. I certainly believe this is an organization to watch. Workday operates in the cloud computing and SaaS markets, which are both high-growth areas. According to Forrester Research, cloud computing is projected to grow to $240 billion by 2020 from $40.7 billion in 2010. Gartner estimates the worldwide SaaS market will grow 17.9% this year to $14.5 billion and to $22.1 billion by 2015.
Pleasanton, California–based Workday was founded in 2005 by PeopleSoft’s former founder and CEO, Dave Duffield, and vice chairman and head of product strategy, Aneel Bhusri. Workday offers SaaS-based solutions for human resources, payroll, and financial management. By offering enterprise service solutions on the cloud, Workday is able to lower operational costs and increase agility of the businesses of their customers. Their flagship products include Workday Human Capital Management and Workday Financial Management, which offer talent management, accounting and finance, and payroll solutions to clients. As I discussed with their CIO, Steven John, in my interview, many believe that these operations cannot move to the cloud. But Workday has proved otherwise.
With customers such as Time Warner, Flextronics, and Thomson Reuters, to name a few, the company now has more than 280 customers, including some Fortune 50 clients. Bookings grew from $160 million 2010 to more than $320 million last year. They are, however, still not making money and were expected to have reported a break-even last year.
To date, Workday has received funding of $175 million from investors, including founder Duffield and venture funds Greylock Partners, IndoUS Venture Partners, New Enterprise Associates, T. Rowe Price, Morgan Stanley, Janus Capital, and Bezos Expeditions. Their latest round of funding, $85 million in 2011, pegged their valuation at $2 billion. Their $500 million IPO is expected later this year.
Workday and Oracle
Workday’s founders and Oracle have bad blood between them. In a hostile takeover in 2004, Oracle bought PeopleSoft in a move that Duffield wasn’t pleased about. He joined forces with Bhusri to launch a PeopleSoft solution catered to the modern technology of cloud computing. Of late, Oracle has been scouting for talent management companies, and acquired Taleo.
Through an IPO, Workday plans to make their big acquisitions this year. They have not named prospects, but they are looking for companies in technologies that include analytics, personnel and finance, and collaborative social media. They believe that by acquiring these technologies, Workday will be able to become the “backbone” for organizations.
The enterprise SaaS market has seen big acquisitions recently. In late 2011, SAP bought over SuccessFactors, another big player in the talent management SaaS field. Oracle also strengthened their talent management offering with Taleo. Considering the strength of these aggressive acquirers, it will be a tough fight for Workday to remain independent. For now, with their innovative offerings and a growing customer base, they do seem to be on the right path.