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Shares of Workday Inc soared 72 per cent in their market debut on Friday, as the market for enterprise software grows.

The Pleasanton, California-based company, considered a leader in the cloud computing sector, opened New York Stock Exchange trading at $48.05 (U.S.) and reached as high as $49.21 after pricing shares above the expected range at $28.00. It sold 22.75 million shares, raising $637 million.

Earlier in the week, Workday raised its price range to $24 to $26 per share from $21 to $24 per share.

The IPO values the company, founded by ex-PeopleSoft executives David Duffield and Aneel Bhusri, at almost $4.5 billion. Duffield and Bhusri left PeopleSoft following its acquisition by Oracle Corp in 2004.

Workday shares were up 67 per cent at $46.76 around noon.

Workday, whose software helps companies manage resources like employees, will have a dual class voting structure, with Class B shares worth 10 times the voting power of Class A shares.

Companies like Workday and Cornerstone OnDemand Inc are grabbing market share from larger tech players like Oracle, SAP AG and International Business Machines Corp as they digest recent acquisitions in the human resources software sector.

These companies are trying to tap into a market estimated to be valued at $9.5 billion, according to Forrester Research. Gartner research firm estimates the market has a $7 billion value and will grow at a healthy rate.

"There's millions of small companies who need a systematic way to manage human resources," said Charlie Smith, chief investment officer at Fort Pitt Capital Group in Pittsburgh, Pennsylvania which manages $1.3 billion. "As long as Oracle and others don't have the specific modules that a smaller business might need, there are going to be niches for players like Workday."

Gartner analyst Thomas Otter said Workday was the first real challenger to SAP and Oracle and it forced the two established companies to invest in new products.

Workday has over 340 customers including American International Group Inc, Flextronics International Ltd and Kimberly-Clark Corp.

Workday's business model, which relies on selling its software to customers on a subscription basis, means the company has visibility into its future revenue.

This allows potential investors to better predict growth.

"A customer will sign a three-year deal with Workday and they're going to get a monthly or annual payment for the next several years," said John Jarve, a managing director at Menlo Ventures. "The attractive thing to an IPO buyer is a recurring revenue stream."

The company's venture backers, Greylock Partners and New Enterprise Associates, are not selling any shares in the offering. Workday will use the IPO proceeds for expansion and working capital.

Workday's revenue nearly doubled in 2011 to $134.4 million. Its net loss widened to $79.6 million from $56.2 million.

Workday's IPO is the largest in the tech sector this year besides Facebook Inc. It is also one of a slew of recent IPOs from cloud-based companies including ServiceNow Inc , Demandware Inc and Guidewire Software Inc .

These companies have all seen their shares jump in the last year, as consumer-oriented companies like Zynga and Groupon have struggled.

Gartner's Otter anticipates that there will be other companies in the tech human resources market that may now consider an IPO after Workday's success.

"The Workday IPO does create something of a beacon in the market," Otter said, adding that the industry will likely draw interest from private equity as well.

He expects there will be further consolidation in the market too. In less than a year SAP, Oracle and IBM have all made major acquisitions in the industry.

SAP bought SuccessFactors for $3.4 billion in cash last December, Oracle followed by acquiring rival Taleo Corp for about $1.9 billion in February and IBM snapped up Kenexa Corp for around $1.3 billion in August.

Cloud computing technology, which lets customers access their data from remote servers, is thought to be faster and cheaper than traditional methods.

Morgan Stanley and Goldman Sachs were the lead underwriters for the Workday offering.

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