It’s certainly been a red-hot year for cloud IPOs as seen with offerings like ServiceNow (NYSE:NOW), ExactTarget (NYSE:ET) and Eloqua (NASDAQ:ELOQ). But all of these deals pale in comparison to Workday (NYSE:WDAY), which hit the market today. The company priced its offering at $28 — above the $24 to $26 range — and, so far in today’s trading, has seen shares jump a sizzling 65%.
Why all the interest? First of all, Workday focuses on enterprise resource planning (ERP), which is software that handles the core functions of a company’s financials, inventory and human resources.
By putting ERP in the cloud, Workday’s customers have seen big-time benefits since there’s no need to have major upgrades and scores of expensive consultants. As Aneel Bhusri, co-founder and co-CEO of Workday told me when I spoke to him this morning,“We make the upgrade process easier and less expensive when compared to on-premise solutions.”
At the same time, data-centers keep all information centralized and in sync. “The cloud allows us to provide our customers with powerful analytics,” said Aneel. “We also make it easy to access the information, such as with the iPhone or iPad. We are a ‘mobile first’ company.”
In light of all this, it should be no surprise that Workday is growing at a torrid pace. From fiscal 2009 to 2012, revenues have gone from $25.2 million to $134.4 million. Yes, that’s more than a 400% increase.
But something also sets Workday apart from typical cloud companies: It focuses on large enterprise customers. For example, the company’s biggest deployment has a global workforce of over 200,000 people and the applications are in 21 languages.
Another boon for the company is the fact that there is an ongoing upgrade cycle. “Several thousand companies a year look to change their ERP systems,” said Aneel. “It’s a time for them to consider the cloud.” And once an enterprise customer installs an ERP system, it can easily take over a decade until there is a search for an alternative. In other words, this type of customer is usually a valuable ongoing annuity of revenue.
No doubt, the opportunity is still in the early stages. The global ERP market is about $39 billion and, more importantly, dominant players like as Oracle (NASDAQ:ORCL) and SAP (NYSE:SAP) are just starting to move to the cloud while Workday continues to bolster its lead.
Tom Taulli runs the InvestorPlace blog IPOPlaybook, a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of “How to Create the Next Facebook.” Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.