HR Software Vendor Workday Going Public
The human capital management technology darling wants to raise $400 million in a stock offering that's the latest sign of how high profile—and competitive—the market has become.
Before the month is out, Workday Inc. could be a publicly traded company. The pioneering maker of enterprise resource planning, or ERP, software sold as a subscription over the Internet filed regulatory documents on Aug. 30 to raise $400 million by selling its shares to the public, a move that had been widely anticipated for months.
It's the latest sign of just how high profile—and competitive—the market for human capital management, or HCM, software is getting, and the role Workday is playing in making it that way.
Since former PeopleSoft Inc. chairman Dave Duffield and a handful of other former PeopleSoft executives launched it seven years ago, Workday has become an HCM game changer and arguably the No. 1 threat to entrenched ERP players Oracle Inc. and SAP. Since the beginning of the year, both have acquired cloud-based human resources software vendors to stay competitive, setting off a flurry of HR technology mergers and acquisitions.
Competitors will have their work cut out for them. In relatively short order, Workday has amassed a stable of 325 top-tier clients, including Fortune 1000 companies such as Chiquita Brands International Inc., Four Seasons Hotels Inc., Kimberly-Clark Corp., Mohawk Industries Inc. and Tyco International. One of the latest: Google Inc., which is replacing an internally developed HCM system, according to Bloomberg Businessweek.
The Pleasanton, California-based Workday is operating in the red as it pours money into sales and marketing, and research and development. Officials expect losses to continue for some time, according to the 47-page S-1 filed with the U.S. Securities and Exchange Commission. Those investments are paying off, however, as revenue for the six months ending July 31 more than doubled from the same period from the previous year to $119.5 million, according to the filing.
Workday has long been an HR technology industry darling, in part because the company built from scratch an HCM suite covering everything from time and attendance to workforce planning to payroll to reflect how companies operate today, including providing employees with more access to HR data. Older-generation HCM and ERP systems "were great for the back office to get wider access to the data, but didn't empower the enterprise to get wider access to the data," Workday chief technology officer Stan Swete told Workforce prior to the prospectus being filed. "We're hoping that we're writing enterprise systems that are useful to the enterprise."
That's in direct contrast to competitors who are hurrying to reinvent systems originally built on processes held over from the days of "big iron" and client-server software.
Analysts' overwhelmingly positive reviews also are a testament to Duffield, who came out on the losing end of a hostile takeover when Oracle bought PeopleSoft for $10.3 billion in 2005. "What pleases me not only about Workday but about some other bright software spots in HR technology is that we're now reinventing on every level: business model, deployment approach, development methodology, operational technology, user experience, configuration frameworks, applications architecture, object models, and so much more," HR tech analyst Naomi Bloom wrote on her blog.
The company fast-tracked its public offering under a provision of the Jumpstart Our Business Startups Act, known as the JOBS Act, passed last spring to encourage U.S. small-business growth. Under the guidelines, "emerging growth companies" with revenue of less than $1 billion can share their initial public offering prospectus with the SEC for advice and approval before disclosing it to the public. Companies can start selling shares 21 days once the filing has been approved and announced.
That means Workday's IPO could happen as soon as Sept. 21. The exact timing will depend on market conditions and other factors that companies take into consideration when timing stock offerings. Morgan Stanley and Goldman Sachs are lead underwriters for the offering. Once it's public, Workday stock will be traded under the symbol WDAY.
Workday declined to comment for this story citing the quiet-period requirements of launching an IPO.
Michelle V. Rafter is a Workforce contributing editor. Comment below or email email@example.com.