How Workday won the IPO

October 15, 2012, 11:01 AM UTC

FORTUNE — Going public may have proved a difficult but necessary ordeal for Facebook. For human resources software maker Workday, it has been anything but. The Pleasanton, Calif.-based company was one the most anticipated enterprise initial public offerings in years and was the largest venture-backed IPO since Facebook, raising $637 million. In its first day of trading Friday, October 12 the company’s shares soared more than 75%, closing at $48.69.

But this isn’t just a first day pop. Workday’s (WDAY) long-term prospects are also promising. While it has yet to turn a profit, it’s got an attractive, recurring revenue stream and is signing on a growing roster of large customers like Kimberly-Clark (KMB), Flextronics (FLEX), and Hewlett-Packard (HPQ). What’s more, it has — along with cloud vendor (CRM) — become the poster child for delivering software from the cloud. It also has one of the most well-respected management teams in the enterprise industry.

Unlike Facebook (FB), Workday had a lot to gain from going public. Consumers may not care whether a company is private or public but large corporate customers certainly do. Last week’s IPO gives the company more legitimacy in the eyes of its customers — the CIOs of large companies, who are in the position of signing multiyear contracts with Workday. “Customers do appreciate being able to look at us and have this transparency, because they’re making commitments to us that are long-term,” says Mark Peek, Workday’s chief financial officer.

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Workday’s founding team, Aneel Bhusri and Dave Duffield, are famous for their previous company, Peoplesoft, which was acquired by Oracle (ORCL) after an ugly hostile takeover battle in 2005. Now, Workday is recognized as one of the biggest, baddest threats to enterprise software giants like Oracle and SAP (SAP), despite the fact that its revenue, workforce and customer base are still a tiny fractions of those of its larger competitors. But while Workday is smaller, it’s also much more nimble and has the advantage of building its cloud-based software from scratch, with newer concepts like user-friendly design and mobility in mind from the get-go.

Of course, the IPO is just a milestone along a long journey for Workday, and it comes with some challenges — like keeping employees focused and attracting new talent. “There’s no doubt that an IPO is a great event and I’m sure people will be watching the stock,” says Bhusri, the company’s co-founder and co-CEO (who, by the way, opted for a suit and tie, not a hoodie, during the company’s recent pre-IPO roadshow with investors). “But as soon as we can we need to get back to work.”