By Lyons, Dan
Newsweek , Vol. 159, No. 07
Byline: Dan Lyons
Forget Facebook: Workday may be Silicon Valley's next big IPO.
Everybody's talking about Facebook's initial public offering, but unless you're Warren Buffett, you're probably better off looking for a sleeper among the lesser-known companies set to go public this year.
One candidate: Workday, a small but fast-growing company in Pleasanton, Calif., that sells software to manage personnel departments, payroll, and other back-end chores. That sounds mundane, until you realize that every company in the entire world needs this stuff. Workday is, in fact, a major innovator in tech's latest craze: cloud computing. Before Apple, Amazon, and Google were putting music on the cloud, Workday was doing the same thing, only with business software. Last year the company doubled its sales to just more than $300 million.
"They are going to be an enormous company, and I do mean enormous, on the scale of Oracle or SAP or even bigger," says Scott Sandell, a general partner at New Enterprise Associates, a venture-capital firm that has invested $46 million into Workday and holds a 10 percent stake in the company.
Workday's cloud-computing model means companies don't have to install and maintain its software themselves. Instead, Workday runs the software in its own data centers, and users connect over the Internet. This makes life easier for customers and costs half as much as traditional back-end software programs.
"We're taking all of the innovations from the past 10 years in the consumer Internet and bringing those innovations to enterprise computing," says Aneel Bhusri, the company's cofounder and co-CEO.
Cloud computing doesn't get as much buzz as social networking, except for a few consumer products like iTunes. But the real money is in corporate clients. The migration of companies to the cloud represents one of the biggest shifts in the history of the HR industry. From 2010 to 2020 cloud computing will grow sixfold, to $240 billion from $40. …