When you’re as rich as David Duffield—the man has billions of dollars and even owns a fake town in Lake Tahoe—you can afford to experiment. One such experiment that’s been in place since 2006 is called the Workday 100, named after the software company that Duffield co-founded and co-runs as co-chief executive. Duffield has invested in every publicly traded company that is a Workday customer.
It turns out there are actually 236 companies on the Workday 100 list. Workday declined to reveal them all, but its website points to companies that include Yahoo (YHOO), Hewlett-Packard (HPQ), Morgan Stanley (MS), Netflix (NFLX), and Johnson & Johnson (JNJ) as customers and hence likely Duffield investments. As new customers sign up, Duffield buys in and then compares his overall performance with hypothetical investments in companies on the Dow Jones Industrial Average. “The Dow over this period of time is up 23 percent,” Duffield said during a Workday conference this week. “That’s not bad. … But guess what? Our customers are up 57 percent. It proves that our customers are smarter.”
Workday’s main business is selling human resources software as a cloud service. Customers sign up for Workday and can then log into a website or their mobile device to manage their hires, raises, assessments, and the like. The company also has a cloud suite of financial software. In most cases, it’s going up against traditional software sellers such as Oracle (ORCL) and SAP (SAP) and such fellow cloud players as NetSuite (N).
Duffield and his co-founder and co-CEO, Aneel Bhusri, know this business well, having run PeopleSoft before Oracle acquired it in 2004. (Here’s a pretty spectacular feature story that covers all the drama behind this acquisition, along with Workday’s founding and Duffield’s fake town.)
Duffield and Bhusri tout themselves as “the nice guys” of business software, and the Workday 100 thing fits into their pitch. By investing in the companies that invest in him, Duffield is banking on the idea that companies choosing Workday are more forward thinking, efficient, and successful.
As for Workday’s own results: Five years ago, it sold about $25 million in software and this year is on track to sell close to $440 million. Workday tends to sign customers up for multiyear deals, and companies in this part of the software market tend to renew their contracts rather than dealing with the horrors of switching all their data to a new platform. With that in mind, Workday just keeps tucking away one ever-renewing customer after another and should end up with more than 500 customers this year.
The big downside is that Workday is still not profitable—a condition that’s becoming known as Red Ink Cloud Syndrome because so many of the new-wave cloud players have failed to move into the black even though they’re selling lots of software. “Someday we will make money,” Duffield said. “We have so much market to grab.”