PeopleSoft: The Cloud Years
Workday, the seller of on-demand HR software over the Web, is moving toward a public offering. The enterprise-software firm, started by PeopleSoft's co-founders, could be worth $2 billion.
Wire services reported last week that closely held Workday, which sells on-demand human-resources software over the Internet, has hired Goldman Sachs (ticker: GS) and Morgan Stanley (MS) as lead underwriters for an initial public offering that could come this year. Workday didn't comment.
We aren't surprised at the news. In a Plugged In column last summer ("The Second Time Around," Aug. 1, 2011), we sat down with Workday Co-Chief Executive Aneel Bhusri, who told us then that his burgeoning software-as-a-service outfit could file for an IPO in the second half—barring unforeseen setbacks.
It isn't often that we meet with private companies, except when they have exceptional technology or are likely to go public. Or both. But Workday is a company with a blue-blood pedigree. The enterprise-software outfit is no gangly start-up—having racked up more than $300 million in billings last year—and could be worth around $2 billion. No wonder. The Pleasanton, Calif.-based company was founded by PeopleSoft co-founders David Duffield and Bhusri. The former PeopleSoft chairman-CEO and vice chairman, respectively, have built a company that mirrors PeopleSoft, except that the business-management software they have re-engineered is now delivered over the Web. You might call it "PeopleSoft Redux: The Cloud Years."
Of course, PeopleSoft was Oracle (ORCL) Chief Executive Larry Ellison's first major takeover target seven years ago, on his way to the biggest roll-up of tech companies in the history of Silicon Valley. PeopleSoft was the second-largest enterprise-software company in the world before being acquired by Oracle for $10.3 billion in January 2005. Duffield and Bhusri didn't want to sell; but after a bitterly fought battle, their shareholders eventually gave way to Ellison.
Workday was launched shortly after the takeover by Oracle. Bhusri and Duffield had so much fun the first time around building PeopleSoft that they said: "Let's do it again," Bhusri told Barron's last year.
The IPO should be one of the biggest for enterprise software this year. Recent listings include Jive Software (JIVE), which went public on Dec. 12. At around $24.77, its shares are trading 106% above their offering price. Early Workday backers include Duffield himself, as well as venture outfits New Enterprise Associates and Greylock Partners, where Bhusri is a partner. Greylock was also an investor in Facebook and LinkedIn.
As it turns out, Workday could be going public a bit less than eight years after enterprise-software-as-a-service leader Salesforce.com (CRM). But there are good reasons for that. Sales-automation software, which is the vertical application dominated by Salesforce, is a much more straightforward business. Human-resource management is much more complicated, having to meet widely disparate privacy, security, medical and government standards. For example, government employment regulations vary from state to state and country to country, making the tasks at hand more complex.
But Workday appears ready to ramp up its cloud version of PeopleSoft 2.0, and the prospects look bright for the enterprise SaaS (for software-as-a-service) offering. In an interview unrelated to the Workday news, Morgan Stanley software analyst Adam Holt said SaaS sales could more than double, to about $35 billion, by 2017. Says Holt: "Nobody is more bullish on the future of SaaS than we are." http://goo.gl/omMg8