Workday: Getting an $85 Million IPO Insurance Policy?

It’s been a big week for the cloud space.  First of all, Oracle’s (Nasdaq:ORCL) Larry Ellison agreed to shell out $1.43 billion for RightNow (Nasdaq:RNOW)

, which provides web-based customer service software.  It’s a validator that the cloud is the real deal.

But there was something else that was notable — that is, Workdayclosed a round of funding for $85 million.  Funny enough, the company’s founders — Dave Duffield and Aneel Bhusri — built the venture as payback against Larry.  You see, Oracle won a bitter hostile bid against their former company, PeopleSoft.

So once Duffield and Bhusri left the company, they saw it as a great opportunity.  Why not build a cloud version of PeopleSoft?  And that’s what they did in 2005.

Now, Workday is a full-blown enterprise resource planning (ERP) operator, providing must-have functions like human resources, payroll and financials.  In fact, the focus has been primarily on large organizations.  Yes, Workday has an unfair advantage since it has been picking-off former PeopleSoft customers!

So far, there are more than 230 customers, which account for over two million users.  Examples include Thomson Reuters (NYSE:TRI), Chiquita Brands, Time Warner (NYSE:TWX) and Toys R Us.

And the opportunity is massive.  Keep in mind that there are roughly 40,000 enterprises across the globe, which primarily use legacy technologies from Oracle and SAP (NYSE:SAP).

But nothing is assured in technology.  So Workday has also been savvy with maintaining its innovative edge.  For example, the company has a standout offering for the iPad.

With a valuation estimated at $2 billion, Workday is certainly gunning for an IPO.  Yet the timing can be tricky.  ”I think of our funding as an insurance policy for if the IPO market closes,” said Bhusri.  ”I also wanted investors who hold onto their investments for the long term.”

Consider that Workday’s backers include T. Rowe Price and Janus Capital Group.  They certainly “get” cutting-edge technologies — as seen with their investments in companies like Zynga and Facebook.  ”We want the kind of investors who will buy more shares when a company goes public,” said Bhusri.

Note:  For more on tech and IPOs, I have a free newsletter/blog called the IPO Playbook.

source: forbes.com

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Posted in: David Duffield,Oracle,Oracle Corporation,PeopleSoft,SAP AG,Time Warner,Workday