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Workday: IPO or Acquisition by Salesforce?

Posted on Wednesday, Jul 4th 2012

According to a Gartner report, global spending on the Software-as-a-Service (SAAS) market is projected to grow 17.9% this year to $14.5 billion. The market is projected to be worth $22.1 billion by the year 2015. The North American SaaS market is projected to grow from $7.8 billion last year to $9.1 billion this year, while Western Europe will grow from $2.7 billion to $3.2 billion. Within the segment, analysts believe that human capital management (HCM) is becoming an increasingly effective way for on-premise vendors to make further inroads with their clients. HCM players chiefly offer services for recruitment and learning and development and are close to human resources functions like payroll that are already handled by on-premises enterprise resource planning (ERP) systems.

Some of the bigger ERP players have already started making their moves this year with big acquisitions. SAP recently spent $3.4 billion for SuccessFactors, and Oracle added Taleo to its portfolio for $1.9 billion. Many believe that the next possible big acquisition will be that of Workday by Salesforce. But news reports suggest that Workday may instead be looking to file for an IPO.

Workday’s IPO
SaaS-based human resources, payroll, and financial management solutions provider Workday has made big news in the industry by managing to successfully compete with Oracle and SAP in talent management. Reports suggest that Workday may be working towards filing for a $500 million IPO with the SEC by the end of this month.

Workday’s financials are not publicly known. Booking estimates range from AllThingsD’s estimates for 2011 bookings of $320 million  to Business Week’s projections of $500 million in bookings for the current year. For the year 2010, Workday is estimated to have booked $160 million in revenues. Analysts believe that the company is worth $2 billion.

Workday is expected to be filing for an IPO under the Jumpstart Our Business Startups (JOBS) Act. The JOBS Act simplifies the listing process for companies with less than $1 billion in revenues. The act exempts these companies from certain disclosures under the Dodd-Frank and Sarbanes-Oxley laws. Through such a filing, Workday will be able to maintain the confidentiality of its financials and will need to disclose them only 21 days before the road show for its IPO.

Workday has picked Morgan Stanley, Goldman Sachs, Allen & Company, and JPMorgan Chase & Co to lead their IPO process. It is expected to list on the exchange by fall of 2012.

Workday 16: Staying Organized While Mobile
Meanwhile, as part of its product enhancements, Workday released Workday 16, its newest update that improves user experience across all devices and brings in new features to their core offerings. As part of the new release, Workday 16 includes the launch of a new touch-optimized interface at for mobile platforms, including Android, BlackBerry, Symbian, and Windows Phone. The company has also improved the user experience for iPhone and iPad users by bringing in a sharper look, more sophisticated navigation, and improved offerings such as time-off balances, requests and approvals, and analytics.

Within financial management, the new release offers improved operational efficiency such as analytics that allow drill down and track spending against vendors and asset management functions to name a few. For HCM solutions, it has brought in features such as an onboarding process that allows organizations to automate new-hire paperwork and an enhanced merit and compensation management process. Workday 16 also includes the graphical visualization of business processes, electronic document distribution and recipient acknowledgement.

I am closely tracking Workday’s movements. It may file for an IPO, but I believe that Salesforce will be eying it closely as well to make its next big acquisition in the space.

This segment is a part in the series : Workday

. IPO or Acquisition by Salesforce?
. High Revenue Growth, but What About Profits?

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when did salesforce buy Success factors? may need to review your post……

Richard Wednesday, July 4, 2012 at 11:48 AM PT

SAP not Salesforce.

Sramana Mitra Wednesday, July 4, 2012 at 12:46 PM PT

Aneel and Dave will have majority ownership and won't sell. They learnt that lesson the hard way from the Peoplesoft days.

Bill Thursday, July 12, 2012 at 5:19 PM PT

Interesting post – there certainly has been a ton of consolidation in this HCM space, presumably with more to come. Salesforce has made some big announcements and has a plan to release soon as it's HCM platform.

alex1976raymond Sunday, August 19, 2012 at 6:30 PM PT