Other examples that have punctured my attention bubble in recent years are platform-as-a-service, infrastructure-as-a-service and storage-as-a-service, and there are probably many more. Then they get turned into ever-weirder acroynyms: Saas, PaaS, Iaas. You get the idea.

Today, Netsuite, the cloud player whose traditional approach is essentially to run your business from the cloud, today contributed its own new thing offered as a service: Commerce. (Cue the acronym: CaaS.)

One of the big things that businesses have to do is buy and sell goods and services from other businesses. The most basic example is that widget makers have to buy cardboard boxes from a supplier, because the goods don’t show up on the loading dock by magic. The same goes for every bit of physical stuff a business needs and also the services it pays for to keep its operations running smoothly.

Netsuite isn’t just managing the back-end business-to-business commerce, but also the direct-to-customer type of commerce. And the experience works pretty much anywhere a customer may be coming from: On a phone, tablet or PC, in a store or on social media.

As customers have essentially come to expect to be able to buy anything and everything online, the traditional back-end commerce engines like Microsoft Dynamics, Great Plains, Sage and even SAP were imperfectly combined with patchwork solutions for selling on the Web. And the bits of the system that faced customers have rarely if ever been unified with the ones that also face suppliers, which has a way of complicating things like inventory, the supply chain and everything else that stems from basic ebb and flow of supply and demand.

And things are getting even more complicated as machines are programmed to automatically buy things from other machines based on a pre-defined set of circumstances.

NetSuite has built what it calls a commerce engine — dubbed SuiteCommerce — that speaks directly to the core enterprise resource planning (ERP) and customer relationship management (CRM) functions that are already its bread and butter. In English that means that the new engine comes into the process already knowing what everything is, and also who everyone is. That makes it ready to wheel and deal not only with customers but also with suppliers. And when you get down to it, that’s a good way to reduce a lot of friction in any business, which is pretty much what cloud computing is supposed to be about.

The commerce service was probably the biggest news to come out of Netsuite’s SuiteWorld conference in San Francisco today, where CEO Zach Nelson (pictured) gave a keynote address. The company also announced a partnership with Square, the maker of little white credit-card reading thingies that you can insert into an iPhone or iPad for the purpose of accepting payment. Square’s Register application has been integrated with SuiteCommerce, so if you see more businesses using Squares, maybe this has something to do with it.

International Business Machines Corp. disclosed it will replace its Oracle/Siebel customer relationship management software with products made by SugarCRM, an eight-year-old San Francisco company backed by Draper Fisher Jurvetson and two other venture funds.

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But there’s another alternative, called SugarCRM, that has been gaining traction, and which positions itself as an alternative to Salesforce. It’s open source, runs both in the cloud and on-premise, and it has a million end users at 7,000 companies in 192 countries.

Today, SugarCRM announced that it had raised $33 million in equity and debt financing. New Enterprise Associates led the round, and Brooke Seawell, an NEA partner, joined Sugar’s board. Silicon Valley Bank and Gold Hill Capital joined as new investors, while prior investors Draper Fisher Jurvetson and Walden International also participated.

The company saw sales increase by 67 percent last year and added 2,700 new customer companies, making SugarCRM, by its count, the third-most popular CRM product in the world.

Today the opposite is true. Let’s put it simply: Salesforce killed it this quarter, and the shares are soaring after hours. As of 5:40 pm ET, Salesforce shares are trading at $146 even, up $14.23 or nearly 11 percent. That is what we call a bullish pattern.

So what happened? Results beat the consensus, for one thing. Earnings per share were 43 cents on a non-GAAP basis, beating the consensus of 40 cents. Sales were $632 million, knocking the consensus of $624 million on its hindquarters.

Then came the guidance, which was in truth a mixed bag. The revenue forecast stomped on the consensus: Salesforce said it expects revenue of $673 million to $678 million, well ahead of the $663 million consensus. But? The EPS forecast is a bit off at 33 to 34 cents, below the 36 cent consensus.

So what’s got investors so giddy? Maybe billings? Remember, Salesforce lives on subscription revenue, so while revenue on the topline is a good thing to have grow, the key metric is in the area of billings, which is a strong indicator of future business. And they’re up: Current deferred revenue is up by 41 percent to $1.3 billion. Unbilled deferred revenue, which represents sales for which there’s a contract but no billing relationship yet, is similarly up, to $2.2 billion up from $1.5 billion at the end of 2011.

Salesforce also raised its guidance for the full year (it’s now in its fiscal year 2013) to as high as $2.95 billion. It was just a few years ago that Salesforce had its first billion-dollar year. Now it’s knocking on the door of its first $3 billion year. If that seems like it should have some sort of significance, it probably does. This cloud can float.

Earlier today, Salesforce’s stock price was up by more than 3 percent, though it has now settled a bit, and is up a more modest 1.3 percent, to $127.24 as of 11:30 am ET.

In a note to clients today, Mark Murphy of Piper Jaffray said that Salesforce closed on a deal worth $140 million with a customer in the financial services and insurance industry. Additionally, social network giant Facebook has made what is being described as a “material commitment” to Salesforce recently. “We simply do not observe any Cloud competitors closing $140M transactions, drawing in 10,000 attendees at regional conferences, and winning as much crucial platform business with internet leaders,” Murphy wrote.

Analyst Brendan Barnicle of Pacific Crest Securities, writing in a research note issued to clients today, said he saw similar trends. “Salesforce.com had a very strong finish to its fiscal year,” he writes, adding that it “closed several very large deals with major corporate accounts, including its largest deals ever in the U.S. and Europe. In some cases, these large deals were only Sales Cloud deals, and we see further opportunity for upsell. More importantly, the strength of the corporate business refutes the bear claim that Salesforce has penetrated its opportunity.”

One point of weakness, Barnicle says, were the small and medium businesses, who pushed back against a Salesforce move to transition them to an annual billing cycle. “It sounds like Salesforce was somewhat flexible on billings terms after stating its initial goal of putting most SMB customers on annual billing,” he wrote. “However, the drive to annual billings certainly made it more difficult to close and renew SMB deals.”

And while the strong finish to the quarter is great to have now, it’s going to set up a tough compare with the quarter ending in April, Barnicle writes. In the April quarter last year, billings — a heavily watched Salesforce metric that’s tied to future revenue — grew 57 percent. This year, Barnicle expects only 19 percent growth. “We are a bit concerned that the deceleration in billings will be negative for Salesforce,” he writes. “However, the comparisons get easier in Q2 (July) and Q3 (October), and we are concerned that if investors wait to move past the difficult FQ1 comparison, they may miss the opportunity to buy CRM at current levels.”

Barnicle also raised his revenue forecast on Salesforce to $625 million, and his EPS estimate to 42 cents a share, and reiterated a target price of $157. Salesforce reports earnings on Feb. 23.

Sales grew by 53 percent over the year-ago period to $22.5 million, which beat the average estimate of analysts by more than $1.5 million, while Q4 billings of $36 million were up 40 percent. Plus, the IPO raised more than $180 million in cash.

And while that’s all good, on an old-school GAAP basis, Jive finished the quarter with a $12.7 million loss that was roughly twice the size of the loss in the year-ago period. While that may seem at first to be kind of a bad thing, it’s not. Since Jive sells subscriptions, it defers a lot of its revenue to later periods, so the revenue it does book doesn’t readily outweigh the costs it incurs to get the sales growth done. This is common with SAAS companies like Salesforce.com and NetSuite, who also tend to run net losses on a GAAP basis, but focus on their non-GAAP results, which are more indicative of the state of the business.

I talked briefly with CEO Tony Zingale about this and other things, after he finished up his conference call with analysts. A summary of our chat is below, and below that is an interesting infographic that Jive’s PR team included with the earnings release. I thought it was a nice touch, so I’m sharing it here.

AllThingsD: Tony, for those who don’t know, walk us through the key metric in your results that, in your mind, made this a good quarter for you.

Zingale: Growth. Growth in revenue. It’s further amplified in a new market where growth is the paramount metric, and of course it’s measured against a path to profitability. And we communicated that in our guidance to the analysts. But it’s all about growth. If you can’t capture market share as measured by deals with large enterprises and paying customers, then the profitability metric comes into greater play. Plus, in SAAS software companies, profitability always lags because of the ratable revenue model.

How are you finding life as the CEO of a public company? I know it’s not new for you, specifically, but it’s new with this company.

I think it is a testament to social becoming viable and real in the enterprise. You’ve been following the story for more than a year. You can’t go public without recurring, substantial growth, and the kind of customers and the kind of growth as measured by the repeatability of the model. All at the same time, you have to continue to innovate, fend off the competition and deliver that value. It feels good to have cleared the bar of going public, but otherwise, it’s back to work.

Let’s talk about the competition. Are you seeing certain people out of deals where they show up against you?

We do exceptionally well in a head-to-head competition, especially when we see a request for proposal. We’re seeing more of those as we go into 2012. It lends credibility to the social business space, as corporations are thinking of social software as a line item in their budgets. The competitive landscape hasn’t changed. It continues to be the large enterprise software players like Microsoft and IBM. And certainly Salesforce.com shows up when we’re competing for business in the sales department, and a little bit in the marketing department. Salesforce is very well-entrenched in these situations. But we coexist with them all the time. But the landscape hasn’t changed much. It’s competitive in the early part of the process. But when it comes to competing inside and outside the enterprise — the flexibility of our delivery model and the strength of our reference customers — the competitors tend to fall away.

One highlight, Keirstead writes, appears to be Salesforce’s Service Cloud, the service that companies use to track customer complaints on the Web and social media sites. Meanwhile, the average size of deals is climbing as large companies are buying incrementally more expensive versions of different Salesforce products.

And even though Salesforce missed on billings last quarter, prompting a nasty selloff of its shares the next day, Keirstead is unconvinced that was called for. “While the bear case is rooted in a view that the modest October quarter billings miss was a harbinger of slowing momentum, we just don’t see it,” he wrote. One source told him that Salesforce’s reps pushed the social products like Chatter a little harder to the detriment of other core products.

He expects Salesforce to make up for that billings miss this time around: He looks for unbilled backlog to grow 40 percent to $2.1 billion and for operating cash flow to grow by 20 percent, which is good, but still below the previously forecast range. All things considered, Salesforce, he says, may be undervalued. It’s currently trading at less than six times projected sales in fiscal 2013. He rates it with an “outperform,” and gives it a $150 price target.

The new release will support the iPhone, iPad and Android devices, as well as BlackBerry and Microsoft’s own Windows Phone operating system.

“In today’s hyperconnected world, customers need to be able to access their business-critical data on the device of their choice from wherever they are,” Dynamics CRM General Manager Dennis Michalis said in a statement.

The release continues a Microsoft trend of developing mobile apps for the competition’s platforms. In December alone, Redmond added iOS support for Kinectimals, SkyDrive and Lync, along with an iPad version of OneNote.

Of course, the big question is whether Microsoft will bring full-blown Office to iOS.

For the fourth quarter, sales were $64.1 million, up 23 percent over the prior year, led mostly by growth in subscription and support revenue. Non-GAAP profits were 5 cents per share or $3.4 million. Sales for the year were $236 million, up 22 percent year over year. The EPS number beat the consensus of analysts by a penny. Shares are up by 4 percent in after-hours trading, having risen 4 percent already during the regular session.

I’ll be talking to CEO Zach Nelson (pictured) within the hour and will be adding a comment or two from him.

Update: I just got off the phone with Nelson and we had a quick chat about the results. Here’s a summary.

AllThingsD: Zach, the results were pretty positive. You grew revenue 23 percent year on year. What’s driving the growth?

Nelson: It’s really about the acceleration of cloud computing. There no other way to say it. Cloud computing is now moving to mission-critical functions. In 2007 I said we were reaching a tipping point with the cloud, and now the market has tipped. The new generation of companies like Square and Roku think of the cloud first as they build their operations. They’re not going to build the big IT staffs that other companies have. They’re going to skip that entirely.

What kinds of headwinds are you seeing and where?

Nothing significant. We grew by double digits in Europe, Asia and the U.S. There’s been a lot of discussion about IT spending shrinking. I think that’s a tailwind for us because we help companies cut their IT spend. We help them eliminate costs.

What are you seeing in 2012? What kind of guidance did you give?

We said we see revenue in the range of $295 million to $300 million and earnings per share of 19 to 21 cents non-GAAP. We’re going to continue to grow the top line and we’re going to hire 500 people this year.

After SAP acquired SuccessFactors and Oracle bought RightNow, people started saying Netsuite is one of the cloud companies likely to be acquired soon. What do you think?

We’re a public company, and so if anyone came along with a serious offer we’d have to consider it. But our whole mission is to build the next great software company.

SAP and IBM and Oracle and Microsft have the cloud religion these days, too. They say they can deliver their apps in the cloud just as you do. What about that?

I love it when SAP and Microsoft talk about the cloud. All they do is talk, and all they do is create more demand for Netsuite. They give credibility to the product we have built over the last decade. They may try to build a product that looks a lot like Netsuite. We’ll gobble up the demand they create along the way. It will take them a decade to do it because there’s no shortcut.

NetSuite’s press release is below.

SAN MATEO, Calif., Feb. 2, 2012 /PRNewswire/ — NetSuite Inc., the industry’s leading provider of cloud-based financials / ERP software suites, today announced operating results for its fourth quarter and fiscal year ended December 31, 2011.

Total revenue for the fourth quarter of 2011 was $64.1 million, representing a 23% increase over the prior year. Subscription and support revenue for the fourth quarter was $54.2 million, representing 23% growth over the same period in the prior year. Total revenue for the year was $236.3 million, a year-over-year increase of 22%.

Calculated billings, defined as revenue plus the change in deferred revenue, were $78.8 million for the quarter, a 36% increase over the fourth quarter of 2010. For the year, calculated billings were $266.9 million, an increase of 32% over 2010.

Cash flow from operations was $11.7 million in the fourth quarter of 2011, an increase of $7.1 million, or 156%, over the same period last year. Cash flow from operations was $36.3 million for the year, an increase of $18.0 million, or 99%, over the prior year.

On a GAAP basis, net loss for the fourth quarter of 2011 was $7.6 million, or $(0.11) per share, as compared to a net loss of $6.4 million, or $(0.10) per share, in the fourth quarter of 2010. GAAP net loss for the year ended December 31, 2011 was $32.0 million, or $(0.48) per share, as compared to a GAAP net loss of $27.5 million, or $(0.43) per share, in 2010.

Non-GAAP net income for the fourth quarter of 2011 was $3.4 million, or $0.05 per share, as compared to non-GAAP net income of $2.8 million, or $0.04 per share, in the fourth quarter of 2010. Non-GAAP net income for the year ended December 31, 2011 was $10.8 million, or $0.15 per share, as compared to non-GAAP net income of $8.5 million, or $0.13 per share, in 2010.

“NetSuite’s Q4 showed the benefit of being the disrupter rather than a disruptee, as our Cloud Computing suite continued to take market share from traditional mid-market and enterprise ERP vendors. The acceleration of our business that we saw throughout the year continued into Q4, and we turned in a Q4 that could be considered our best quarter ever as a public company,” said Zach Nelson, CEO of NetSuite. “As we enter 2012, I believe we are the best positioned company to benefit from the shift to the Cloud as customers abandon aging mission critical systems designed before the Web existed and move to NetSuite.”

Basically, the argument goes like this: Since the protestors in Egypt organized and collaborated via Facebook and Twitter against a government that didn’t understand the tools, companies that don’t embrace social enterprise and collaboration tools like Chatter will wind up like Mubarak — overthrown, or rather defeated by their competitors.

Yes it’s a stretch, but you certainly can’t fault Benioff on the passion and enthusiasm of his delivery. And since it’s a Salesforce.com event — Cloudforce New York — there’s no one to yank him off the stage.

There will also be news. Benioff will talk about a new mission for Radian6, the social media monitoring outfit that Salesforce acquired in March for $326 million. Expect to hear him talk about the “social marketing cloud” quite a bit.

What does that mean? Radian6 will be getting some new features around engaging and messaging sales leads and contacts on Facebook and Twitter and Web forums, and so on. It will have some powerful tools for filtering all the junk that people post and look for places where people are expressing clear sentiment or intent to buy, asking for guidance, or maybe looking for a deal.

In an example Salesforce showed me in a demo yesterday, if someone is looking for an online stock broker and asks their Twitter friends for a recommendation or about a specific broker they’re thinking of, that company’s social media team will see the message, classify it as a sales lead, and can reach out with special offers. The same thing goes for customer service messages. When someone is unhappy about something — say, their cable service — those posts can be automatically assigned to the right person for a follow-up, a special offer, or whatever the case may be.

People so often turn to Twitter and Facebook to give feedback or to express outrage about products these days, and companies are still figuring out how to respond and work with those platforms. It’s all about protecting brands.

Benioff’s talk takes place against the backdrop of a lot of uncertainty around Salesforce’s share price, valuation and growth prospects. Salesforce stock has been slapped around a bit following an earnings report that analysts didn’t exactly love, yet you can’t deny its revenue growth rates are impressive: Salesforce is on its way to being a $3 billion company next year.

The problem with Salesforce is how the market should calibrate its valuation. The shares have traded as high as $160 and as low as $109 this year, and closed yesterday at $110.58. Premarket sentiment this morning shows Salesforce stock headed up about 3 percent as of 8:08 am ET. Some people — namely hedge fund manager Whitney Tilson — have argued that Salesforce is fairly valued at about 75 percent lower than where it’s trading now. Expect Benioff’s comments today to give the shares a lift. But given how volatile the shares have been, don’t expect it to last.

That represents a drop in value of nearly 10 percent from the start of the year, but it has been an up-and-down-and-up-again ride. During the year, the shares have traded as high as $160 and as low as $109. In a word, it’s a volatile stock. The reason is that investors can’t seem to settle on what Salesforce is, and how to value it. The stock was killed yesterday — especially in after-hours trading, when it fell by as much as 10 percent — on disappointing quarterly results. And, frankly, management isn’t helping to clear up the picture one bit. More on that in a minute.

There was good news and bad news, but confusion appeared to reign over the minds of Salesforce investors, who couldn’t seem to get their heads around what’s going on with the company, and so assumed the picture must be bad. Because if it was good, it would clearly be unambiguously good, right? Today, they’re shaking it off: Credit Suisse lowered its price target on Salesforce from $140 to $135, but maintained a “Buy” rating. Deutsche Bank also maintained a Buy rating, and raised its target to $205, from $200. “Buy on the weakness,” argues RBC Capital Markets.

The Salesforce story is tricky. Revenue is growing, forward guidance is up; yet billings growth is slowing and cash flow from operations was down. As Brian Schwartz of ThinkEquity put it:

Salesforce reported mixed Q3 results as revenue, EPS, cash flow beat Consensus while billings growth of 29 percent missed both Consensus and our prediction for accelerating growth. The good news is that FY13 revenue guidance and Q4 billings guidance are well-above Consensus, which suggests strong business momentum, in our view, and should reverse a two-quarter slide of decelerating billings growth. However, billings grew slower than revenue for the second consecutive quarter and Q4′s guidance assumes this trend could continue for at least another quarter, with tougher comparisons ahead.

So, what is a Salesforce investor to think?

CEO Marc Benioff took to CNBC after yesterday’s results, appearing, as he often does, on Jim Cramer’s investor-tainment show “Mad Money.” Cramer — who has been known to admit on the air that, where Salesforce is concerned, he’s “drinking the Kool-Aid and likes how it tastes” — did his best to pepper Benioff with reasonable questions, which Benioff tended to dodge. Kicking into “master salesman” mode, he stuck to his well-worn argument that Salesforce is a company that has to spend money to keep growing. “We’re trying to aggregate market share and revenue, and we’re totally focused on top-line growth,” he told Cramer. “If we were a company focused only on earnings, we wouldn’t be growing as much as we are.” That, he said, would be “the wrong thing to do in our life cycle.”

Benioff also managed to lob a little grenade at his former boss, Larry Ellison, the CEO of Oracle. Cramer mentioned the September kerfuffle, during which Benioff was pulled from giving a speech at an Oracle customer event in San Francisco. Benioff instead crowed about winning videogame concern Electronic Arts as a new Salesforce.com customer, replacing Oracle.

So, then, how should investors evaluate Salesforce’s prospects going forward, using, say, a once-reliable metric like the number of customers, Cramer asks. That’s no longer a good indication, Benioff says. After all those acquisitions that Salesforce has made in the last year — Heroku, Radian6 and Manymoon — Salesforce’s base of customers is vastly different. Instead, he says to rely on the company’s guidance.

And that guidance is pretty good. Salesforce expects to bring in $3 billion in sales next year. Impressive, for sure. But with that sales growth comes growth in operational expenses, and a lot of effort and muscle are being put behind products with uncertain prospects — like Chatter, which Benioff routinely portrays as strategically important, but which has many competitors, including Yammer and Jive Software, to name but two.

Trust the guidance, Benioff says. Okay, but that’s another way of saying “trust me.” If that makes you feel a little uncertain, you’re probably not alone. The video clip of Benioff’s 10-minute TV appearance is below:

Excluding charges for compensation and other items, Salesforce reported earnings of 34 cents on sales of $584 million, up 36 percent. The problem was the quarter’s billings — the sum of revenue plus the change in deferred revenue was $567 million; 3 percent, or nearly $20 million, off the consensus.

But never fear, says CEO Marc Benioff. The company is well on its way to breaking the $2.3 billion revenue barrier, and it would be the first cloud software company to do so. The company also said it expects fourth-quarter sales in the range of $620 million to $624 million, which would be ahead of the consensus of $610 million. And it said that its expects earnings of 39 to 40 cents, which is lower than analysts had expected by a penny. One the brighter side, guidance for the 2013 fiscal year, which starts in February, was ahead of the consensus by 4 percent.

The larger question is the size of the cloud opportunity, for which Benioff is the ultimate salesman, spokesman and advocate. As successful as Salesforce has been in disrupting the traditional software model and giving companies like Oracle and SAP the occasional headache, what remains unclear is how much new services like Chatter.com — the social enterprise and collaboration features that Benioff can’t seem to stop talking about — are contributing to the top line, and whether they will justify the cost to build them.

Then there’s the valuation. Salesforce finished the regular session trading at a valuation of 615 times its trailing earnings, and it has been in sky-high territory for some time. Last month, Salesforce stock nose-dived after comments from hedge fund manager Whitney Tilson on CNBC that Salesforce might be due for a 75 percent drop, a la Netflix. Salesforce shares fell nearly 5 percent that day, to $123.

As I write these words, it’s trading six dollars lower than that, at $117. Tough day.

Revenue grew by 23 percent year over year to $61 million, while earnings per share on a non-GAAP basis were five cents. The results beat the consensus of analysts by a penny on earnings and $1.5 million on sales — just two of the eight records that NetSuite set in the quarter. Recurring revenue — a key metric that combines both subscriptions and ongoing support — was $51.3 million, also up 23 percent. Cash flow from operations was $9.4 million.

Looking ahead, NetSuite said it expected to earn four cents a share in the current quarter, a penny below the consensus, but that it expects to finish the year with earnings of 15 cents a share, which would be in the upper range of its prior guidance of 13 to 15 cents a share.

NetSuite, which last year did $193 million in sales, has already done $172 million for the first nine months of the year; it said it expects to finish the year with sales in the range of $235.2 million to $235.7 million, slightly ahead of its prior guidance, which topped out at $234 million. It also said it expects sales in the range of $290 million to $300 million.

I had a chance to talk with CEO Zach Nelson about the results and the state of NetSuite’s business. And as usual, he had a lot to say — especially about his biggest competitor, SAP. NetSuite started small, but as its software has grown more complex, its customers have gotten bigger and bigger, lured by the promise that they can not only run their expensive enterprise resource planning (ERP) software cheaper in the cloud than in their own data centers, but do it better.

AllThingsD: Zach, NetSuite is setting records on a lot of fronts this quarter. What’s driving the business? Is it companies swapping other stuff out for yours?

Nelson: In our case, because we do all the back-office stuff, someone is always swapping something out for NetSuite. And what’s changing is the profile of what they’re swapping out. In the old days, when we were getting started, it used to be QuickBooks. Today, it’s SAP and Great Plains and Infor, the very large, midmarket and enterprise ERP. We also set a record for average selling price, and that’s because we keep selling to larger and larger companies.

It’s funny you should mention SAP. I visited with its co-CEO Bill McDermott the other day, and he was talking about SAP’s new cloud-based offerings. What kind of a threat do you see there?

I think when SAP talks about the cloud, it’s enormously helpful to our business. We are the only pure-play cloud-based ERP solution out there. For SAP to be giving it credibility only helps us, because they having nothing to back their claims up other than desire. No traditional software company has successfully made the transition to the cloud, and there are a whole bunch of reasons for that. So it’s great that they’re talking about it. It’s just driving our business more. They have a low-end cloud product called Business ByDesign that doesn’t have much functionality. But we saw more competition from their traditional on-premise product than we did from that. So we’re getting sucked into these deals because SAP is telling the customer they should be looking for a cloud solution, and they really don’t have much to offer in that regard.

You’ve tended to stay away from business functions that aren’t transaction-driven. I’m thinking a little about something like Workday, which does a lot in the human resources area. Do you partner with other companies to shore you up in areas you don’t tend to specialize in?

We have a platform like Salesforce.com does with Force.com. We call it SuiteCloud. So as we go to a lot of these larger companies, it’s important that we augment in areas we haven’t built in, where we don’t have domain expertise. We work with Box.net, for example, on file storage and collaboration, and with SuccessFactors in the human capital management area.

Everyone’s worried about the world economy, especially Europe. Are you?

We aren’t that exposed to Europe. We do some business in the U.K. But Asia has been strong all year. And with regard to the world economy, its important to understand that moving to the cloud is a massive cost reduction for these companies.

You once told me an interesting metric about the costs of on-premise software. It was about how much companies spend to support and run their software.

Every SAP customer I’ve ever talked to tells me that they spend about 2 percent of their revenue getting it running and keeping it running, after you add up all the consultants and other things you need. That’s not just their problem, it’s the customer’s problem. If you’re competing with a company that’s running NetSuite and you’re running on-premise software, you’re at a competitive disadvantage. People are realizing that it’s not just saving them money but it’s also helping them do things better. Disruptive technology doesn’t just help enable you to do the things you’ve always done cheaper than before, but it helps you do them better; and it also helps you do new things that you couldn’t do before. Improving the cost model gets you that 2 percent back, but the real payoff comes from the productivity gains that come on top of that.

How else to explain the weird kerfuffle that exploded like a firecracker last night at Oracle’s OpenWorld conference in San Francisco? Benioff has delivered keynotes at OpenWorld before, in 2009 and 2010 and probably earlier than that, though I didn’t conduct an exhaustive search.

As we all know, Ellison ordered Benioff yanked from the OpenWorld speaker’s roster yesterday. Officially, his talk was moved from 10:30 am today to 8:30 am Thursday, the final day of the conference, when no one but the stragglers are likely to be in attendance.

“At 3:30 today [Tuesday] we were notified we were cancelled,” Benioff told me by email last night. “Then we were told we were moved to Thursday morning when there are no other presentations. We view this as a cancellation.”

His response was to schedule a speech at an alternative venue, the Ame restaurant inside San Francisco’s St. Regis hotel, for the same time slot. (See the press release here.)

So what’s the wrangle really about? On the surface, it’s a difference of vision, a geeky technical debate. What exactly is cloud computing? To Benioff, the cloud is something that can’t be delivered to the customer on a forklift because it’s a service delivered via the pipes of the Internet. Everything that makes it go lives in one or more remote data centers that the customer never touches and rarely, if ever, thinks about. Just like Salesforce.com, where the customer needs nothing more than a browser running on an Internet-connected computer or iPad or smartphone to get started. Or Amazon Web Services. Or Google Apps. Customers pay for what they use, have nothing to manage, install, maintain or upgrade, and stop using it when they no longer need it. Easy, economical, cheap and accessible to everyone.

To Ellison, the cloud can be a hybrid. Certain customers — like the many large companies that are Oracle’s stock in trade — fundamentally distrust the notion of handing their data off to a third party. They run software applications on hardware that’s installed on their own property, or in combination with hardware that Oracle runs for them. On this side of the debate you’ll find not only Oracle, but also other companies with established IT hardware businesses, IBM and Hewlett-Packard among them. Expensive and time-consuming it may be, but real companies doing real things traditionally own their own assets, the argument goes.

As Benioff tells it, this is the “false cloud.” He’s been using that phrase incessantly for some time, and he seems in recent weeks to have deliberately stoked the controversy. At a follow-up panel to his OpenWorld keynote in 2010, he was more direct. Hardware of the type that Oracle sells can be eliminated entirely in the age of the cloud. Fighting word for Oracle, especially when uttered in front of Oracle customers.

And Benioff isn’t the only one throwing punches. In 2009, Ellison described Salesforce as an “itty bitty application” that happens to run on Oracle databases.

But as is always the case with public grudges, it’s more complicated than it seems. There is a personal element to it all. Before starting Salesforce in 1999, Benioff was Oracle’s star employee. He spent 13 years at Oracle. At 23 he was named the company’s Rookie of the Year, and at 26 was the youngest person promoted into the VP ranks. He was in many ways Ellison’s star student. Charles Babcock, writing in Information Week, remembers an Oracle event where Ellison tapped Benioff to address a customer question, and he commanded the stage in a manner one could describe as Ellison-esque.

When Benioff left to start Salesforce, Ellison was an early investor and sat on the Salesforce board until a falling out — spurred largely by Ellison’s backing of Netsuite, another cloud outfit started by two other Oracle alums, Evan Goldberg and Zach Nelson, whose offerings overlap competitively with those of Salesforce.

Obviously Benioff learned well from the master. A classic tactic from the Ellison business playbook is to prod or cajole your quarry into a public PR fight. Look at all the times where Ellison has been brazenly outspoken: Defending, then hiring Mark Hurd after his sudden resignation from HP last year; publicly chasing Hurd’s replacement Léo Apotheker out of his office on his first official day on the job by attempting to serve him with a subpoena; squabbling with Autonomy CEO Mike Lynch.

So who won this round? The conventional wisdom has to give this one to Benioff. With the cancellation of his speaking gig, he’s attracted more attention than he would have otherwise saying whatever he wanted from Oracle’s stage, a fact about which Benioff crowed to the New York Times last night, calling it the “best possible outcome.” It does look like Benioff planned for this result.

However, this long-simmering feud, now that it has boiled over so publicly, is far from over.

It was a pretty fast turnaround for Hurd, who resigned at HP following an unpleasant flap. But at the time, Oracle was in the process of acquiring Sun Microsystems and adding a sizable IT hardware business to its portfolio. Hurd, having earned a reputation for running a tight operational ship during five years at HP, was available and had already built a friendship with CEO Larry Ellison, who had publicly castigated HP’s board for acting rashly in dismissing Hurd.

Hurd has been quietly working away inside Oracle since then, getting to know its business and regularly speaking at small Oracle customer events, like one in New York in March. He’s also been a regular on Oracle’s earnings conference calls.

Now Hurd’s public profile at Oracle is about to rise considerably. With Oracle set to hold its annual Oracle OpenWorld conference in San Francisco next month, Hurd will be delivering a keynote address of his own and will from here on be taking on generally more public roles at Oracle. Make no mistake: He won’t be standing in for CEO Larry Ellison — what mere mortal could? — and Ellison will be doing two keynotes of his own at the Oracle event. But Oracle customers and investors will be seeing more of Hurd than they have before.

Hurd today granted AllThingsD his first on-the-record interview since joining Oracle. (We published a few highlights earlier today.) It comes on the heels of last week’s surprisingly strong earnings report by Oracle, which is what we talked about first. Hurd declined to offer any good-natured advice to Meg Whitman, HP’s newly named CEO, and also declined to answer any questions whatsoever about the circumstances surrounding his departure from that company 13 months ago. (I did ask, I swear!).

He also sort of diplomatically avoided naming competitors, so I’ll do that on his behalf. When he mentions database and middleware competitors, he means IBM. When he refers to “point products” and “boutique companies,” he’s referring to Salesforce.com and Workday, both cloud-based applications that compete with Oracle offerings.

The full transcript of our conversation is below.

AllThingsD: You had a pretty good quarter, in a tough environment. What in your view is going well at Oracle, and what could be better?

Hurd: Well listen, we released a quarter, that I think was a great quarter, that had 17 percent new license growth which is outstanding. In Q1 of 2011 we had 25 percent license growth. The good news is that it was 25 percent, and the bad news was that it was this year’s comparison, so when we grow 17 on top of 25 it’s just outstanding license fee growth. When you remember that last year we had 33 percent revenue growth and 33 percent earnings growth, these numbers we just posted are coming against a really good 2011. So they’re just outstanding. Also, we had Exadata growth that was just outstanding. We talked about that on the conference call. We had a good launch for Exalogic during the quarter. We had a growth in the T-series and M-series, which are the traditional Sun servers, during the quarter. Then I’d add that our industry verticals grew faster than Oracle overall. That’s an important strategy for us. We get deeper into these industry verticals, and they solve our customers’ most difficult problems. They’re very industry- and business-specific, and when you add to them the rest of our portfolio, it made for a strong quarter all the way around.

The other thing about the quarter is that you were strong in Europe at a moment when Europe seems to be melting down. Why is Oracle so strong when others would be seeing weaknesses? What is Oracle doing differently in Europe that others aren’t?

I wouldn’t comment on what others are seeing, because I only know what Oracle is seeing. It may be that it’s just Oracle-specific momentum more than anything else, but when I look at each segment of our business in Europe, if I actually read to you the growth rates of each of our product segments, it would sound very consistent. We didn’t have any one big deal in Europe, no big transaction. We didn’t have any one country that stood out. It was just broad-based, across-segments, across-countries performance. And the performance in Exadata, Exalogic, overall hardware growth, all very strong in the quarter. So forgetting the macro environment, Europe was a bright spot for Oracle last quarter and very strong. Also one quick note: Whenever you have a quarter in Europe where the applications growth in the quarter was 63 percent — when you grow like that it’s just great stuff.

Let’s talk about the hardware business a bit, which is still relatively new. You talked on the conference call last week about how you’re focusing more on hardware with higher content of Oracle intellectual property, and less on commodity stuff, what we often call the x86 servers that use chips from Intel and are less distinguished from what other companies offer. Where are you in that process and how long do you think it will take to get where you want to be?

I think you’ve got it right. We’re very focused on growth in Exadata and growth in Exalogic. You know this but it bears repeating, Exadata is a combination of server and storage and software technology integrated into a single solution that we think gives our customers a better total cost of ownership, or TCO. Some of the performance gains our customers are seeing are 30 or 40 or 50 even 70 times the performance improvement. Not 30 or 70 percent performance gains, but 30 or 70 times better than before. On top of all that we support them remotely, diagnose their problems remotely, sometimes before they even know they have them. And so growing that Exa line is very important to us. Now, next week at Oracle Openworld, we’re going to release more Exa lines and more technology than you’ve ever seen from the company at any one time. Last week we introduced an Oracle database appliance, which is very much an Oracle intellectual property stack focusing on mid-market and departmental solutions. While it’s not as big a system as an Exadata, it’s a manifestion of the same strategic directions we’ve had before. They’re integrated systems where we can bring a stack of value to our customers.

Your CEO Larry Ellison made a comment on the conference call last week that got a lot of attention: Essentially that Oracle would be okay with the x86 business going to zero. Now I know it’s a little more complicated than that. Would you care to revise and extend his remarks on that subject a bit?

What I would say is that we don’t have interest in selling products where there’s no Oracle intellectual property. We’re very focused on adding value to customers. If there’s no Oracle intellectual property in it, then you ought to buy it from someone else. We’re very focused on getting our technology into the market. We think we can do two things. All of our products are designed to be the best-of-breed, the best in the markets they serve, to work in heterogenous environments, to be open. That is clearly our strategy at every layer of our architecture. In addition to that, we vertically integrate some of these systems like we do in Exadata and like we do in Exalogic and like you’ll see in other manifestations over the next week, where we think we can deliver extreme performance, extreme TCO and extreme serviceability. If there’s some product that comes from a third party that just comes through Oracle where we add no value, that’s the stuff we have no interest in. If we add no value to it, you ought to buy it from someone else.

So that doesn’t mean you intend to get out of the x86 business entirely, only that you’ll want to sell hardware that is sold in combination with Oracle IP whether it’s software or something else.

Yes. We still have an x86 line. But Larry was trying to make a point.

Let’s talk about competitors. Who do you see showing up on deals you’re competing on? Who keeps you up at night?

We have competitors in the industry vertical markets that are really point products, and horizontal apps, there are some that are boutique companies that provide certain functional applications whether it’s in HR [Human Resources] or something like that. We certainly have competitors in database and middleware.

So it’s been a year since you joined Oracle. What’s it like working with Larry Ellison?

It’s great. It’s just great.

What defines success for you at Oracle? If we talk at this time next year, where do you want Oracle to be?

We’re releasing a whole new set of technology next week. Our opportunity is to drive that into the market and increase customer awareness of the portfolio. You’ve got all these smartphones running around the market. They’re basically computers in people’s hands, and they’re begging for data from enterprise applications, and those applications need to be modernized to make that happen. We can help our customers on innovation whether it’s e-commerce or any other environment they want to innovate in and at the same time we get the opportunity to make them more efficient. These engineered systems solutions deliver tremendous performance that help our customers server their customers better and help them get better efficiency at the same time. So we’ve just got a tremendous hand to play and that’s what we’re going to do.

You’ll be speaking at Oracle Openworld in San Francisco next week. What’s on your agenda?

I’ll be doing a lot of stuff. Larry has a keynote Sunday, and he’ll do another Wednesday, and I’ll be doing one Monday. But they’ll all be centered on our innovations and systems and software that we’re bringing to market, so that will be the primary agenda for the week.

Will we be seeing you in a much more public role at Oracle generally? Are you going to be more of a public face of Oracle going forward?

I have a job to do, so it won’t be to the exclusion of that. I spend most of my time working on customers and making sure we have the best team in the industry. Last year I’ve spent time on customers, people and products. I don’t see that changing. To the extent that we have things to announce I’m clearly going to be doing all that in addition. I’ve been seeing lots and lots of customers, and will be continuing to work on building our team and making sure I’m participating in the product process in every way possible. That’s what I’ll be focused on.

What are you hearing from those customers? What are they worried about? What are they telling you about their business?

They love our products, they love our people and want to get more deeply engaged with Oracle. It’s a huge opportunity for us, but it’s also a challenge, because frankly there’s a lot to be done. And frankly we can’t do everything, so we have to pick our spots to engage properly. It’s important for us to focus.

The two most obvious examples are NetSuite, where Ellison was a founding investor, and Salesforce.com where CEO Marc Benioff is an Oracle alum — and where, come to think of it, Ellison was a founding investor, too. When you start considering the numerous Oracle alumni who have gone on to other things, Ellison’s reach becomes longer still.

The graphic below comes from the folks at Software Advice and aims to illustrate via these numerous connections the impact that Ellison and Oracle have had throughout the tech and software industry.

The top half represents independent companies where former Oracle execs either run the show or are in senior roles, while the bottom half shows companies that Oracle has acquired — and, let’s admit it, there have been a lot of them — where Oracle alumni in senior roles have found themselves re-integrated back into the mother ship.

While I can’t help but think the graphic is incomplete — it sure seems like there must be other companies that could be on it — it sure is interesting to look at.

Of course, if Ballmer’s exhortations aren’t enough, here’s another enticement: Cold hard cash. Microsoft said today that it has committed $5.8 billion in incentives, training and tools for members of its Microsoft Partner Network to get accustomed to the new products and services and to encourage them to sell them to their customers.

One big place where it’s putting that cash is behind messaging. It’s an area where Microsoft’s Exchange platform and Outlook desktop software has been under attack lately from the likes of Google Apps, and it’s a key component of Office 365, the new cloud-based version of Microsoft Office. Partners can train up in the newly created Messaging and Communications competencies and learn all about deploying Exchange and Office 365 and its video conferencing software Lync.

In August, Microsoft says it will offer new services in software assurance and planning, essentially paying partners to help their customers deploy Microsoft’s private cloud, and its Azure public cloud service, which competes with, among others, Amazon’s Web services and IBM.

Another area of focus: Dynamics CRM, an area where there’s stiff competition from Salesforce.com, plus longer-term CRM players like Oracle and SAP. Partners are being offered 40 percent of the sale of each new subscription to Microsoft Dynamics CRM. Microsoft is just a bit player in the online CRM world for now, but as history shows, it rarely stays in that position for long.

For example, last week on the day of a big Salesforce conference in New York, Microsoft tried to steal some of its rival’s thunder announcing that a customer it wooed away from Salesforce in 2009 had already saved money since making the change.

Being behind in a market is a good thing for Microsoft, says Mike Ehrenberg, who as a Microsoft Technical Fellow, who leads the work on long term product roadmap for the entire Microsoft Dynamics Group. Microsoft has lately turned to one of its favorite competitive weapons, aggressive pricing, to try and erode Salesforce’s lead. Until June 30 Microsoft is offering $200 to new customers who dump Salesforce or Oracle for Dynamics CRM online, its cloud-based CRM software. And it’s also pricing the service far below the month rates that its competitors charge.

It’s a good time to be aggressive. A recent Gartner survey declared that spending on CRM software would account for the largest share of enterprise software spending in 2011.

During my recent lightning-fast trip to Seattle, I sat down with him to talk mostly about Dynamics CRM and its place in this fast-moving market.

NewEnterprise: What’s it like competing with Marc Benioff?

Mike Ehrenberg: It’s fun. There’s no shortage of excitement. He’s a colorful guy. Nothing ever gets stated in gray areas. Its usually really bright white, and dark black. Microsoft is always good at competing when there’s a named competitor. We think a lot about SAP and Oracle in that space as well, but they’ve both come out with Cloud-based CRM recently. They’re not in the forefront. We think we’re the competitor that Benioff thinks about most often.

So let’s size up the competition. What are your strengths and weaknesses, and what are the strengths and weaknesses of Salesforce?

I’ll talk about our strengths and you can draw the rest from there. I think we just came out with a release that we’re really excited about, CRM 2011. The online version was released last month, and there are a number of things outside the product itself that we’re excited about. For the first time, we shipped online first. CRM was a product we built from scratch but built as an on-premise product. Now we’re at the point where we shipped online first. We have parity between everything we can do in the cloud and on premise, including the full aspects of customization. We’ve also transformed our cadence. We’re off the old three-year delivery cycle. We’re refreshing that service pretty much every six to nine months. But we’re also maintaining the on-premise product and syncing innovation in the online environment into the on-premise one. Choice is something that no one else has. We have the same experience whether its on-premise or in the cloud or hosted by a partner.

I’m hearing a lot about hybrid environments lately, some combination of hosting an application on-premise and in the cloud. Can you handle these mixed environments?

We see a lot of places where people have deployed CRM on-premise, and we’ve now opened up a lot of capabilities for them to customize and extend out of the Azure cloud. Let’s say they want to put a custom portal that puts a different face on the data and functionality they can build that using tools that we give them and run it Azure. The hybrid is going to be the way of the world for everyone for a long period of time. So the ability to extend an on-premise application via the cloud is something we’re really focused on right now. Also the same thing is true with CRM online. You can develop a large custom application on Azure. We think the hybrid capability and the ability to have Azure with its elasticity, is a tremendous advantage for these things.

So is it easy or hard to dislodge installations of the older CRM systems?

It’s funny because Microsoft was one of the very large Siebel installations. Our CRM product was born because our own salespeople just weren’t going to use a product that required them to be sitting at their desk logged in to their PCs. All the thinking about being available through a browser, and through Outlook. And so over time we started winning deployments within Microsoft, and so group by group, people started using CRM instead of Siebel. And then finally a few years ago, we saw a path to decommissioning Siebel, and now we’re just a couple months away from turning off the last Siebel user internally.

What are customers saying they need right now?

Time to value. That’s what’s driving the decision process to deploy CRM. They have to see right away. It used to be that customers paid more attention to the total cost of ownership. But if I have to go into a cave for two years to get to good TCO, the project is going to get killed.

So what kind of time to value are you seeing?

Incredibly rapid on the CRM side. We can provision you a minute. We see people up and operational in days and weeks.

Why would customers be coming to Microsoft versus anyone else for CRM?

This is true not just for CRM but across all of the Dynamics group is that we feel like it’s our role to take all the technology from all the other parts of Microsoft and make them work in the context of the application. We don’t leave it up to a new CRM customer to figure out how to manage all the documents associated with their prospects in Sharepoint. We just do that. If you want to work with a contact, and call them in Lync, it helps not to make the customer be the integrator. It just works.

Salesforce.com is New York this week for its Cloudforce 2011 event tomorrow, and it has come armed with some news: An update to its Service Cloud customer service application that will give companies better tools to pay attention to how people talk about them on Facebook and Twitter and other social media sites.

It’s called Service Cloud 3, and–as the name suggests–it’s a cloud-based way to keep track of customer service complaints.

Kevin Smith’s diatribe against Southwest Air on Twitter is a good example. But, there’s also countless Web forums, discussion boards and blogs to follow as well.

No company wants to be on the wrong side of a customer complaint spreading at retweet speed.

Agents can work from any mobile device, including the iPad 2, as well as a new app in the Salesforce AppExchange from Radian6, a social media monitoring platform.

Salesforce already has 15,000 customers using Service Cloud, including KLM Dutch Airlines, Ally Bank and Nikon.

This is just one part of Salesforce’s New York visit, which comes at a relatively bullish time for the company.

Its stock more than doubled from $70 to more than $150 a share over the last year, before heading south for a cooling off period. It closed at $128.32 Wednesday.

When it reported earnings last week, Salesforce said its sales would be in the range of $480 million to $482 million, topping the estimates of analysts who reckoned sales would be closer to $470 million.

But not everyone is applauding. The Wall Street Journal’s Brett Arends raised some interesting questions about Salesforce, especially in how it is spending its cash, in a column last week, including $278 million for land to build a new campus?

And how about that $212 million for Heroku?

In fact, John Dillon, a former Salesforce CEO himself, said the company paid way too much for Heroku, a hosted service for building applications written in Ruby on Rails, the open-source Web-development language.

What does current Salesforce CEO Marc Benioff think of all this? Check back later, since I will be talking to him Thursday afternoon about this and more.

Microsoft on Thursday reported earnings and revenue that topped expectations and rose significantly from a year ago amid strong sales from its Xbox unit.

For the three months ended Dec. 31, Microsoft earned $6.63 billion, or 77 cents per share, on revenue of $19.95 billion. The per-share number is up from 74 cents a year ago and ahead of the analysts’ average prediction of about 68 cents per share.

“We are enthusiastic about the consumer response to our holiday lineup of products, including the launch of Kinect,” CFO Peter Klein said in a statement. “The 8 million units of Kinect sensors sold in just 60 days far exceeded our expectations,” said Peter Klein, chief financial officer at Microsoft. “The pace of business spending, combined with strong consumer demand, led to another quarter of operating margin expansion and solid earnings per share growth.”

Not only were the results ahead of estimates financially–they were also ahead of estimates chronologically, as the company accidentally released the information before the end of regular trading on Thursday. Results were expected to be released after the closing bell.

“A preproduction draft of our earnings release was discovered by one or more media sources who then published our results to the web before market close,” Microsoft said in a statement. “After consulting with NASDAQ, we have posted our official numbers. We apologize for any confusion and will review our procedures to ensure this does not happen again.”

With the results from the past quarter, Apple passed Microsoft slightly in quarterly revenue, but did not–as some analysts thought might happen–surpass Redmond in profits as well. The company also noted it bought back $5 billion in shares during the quarter and handed out $1.3 billion in dividends to shareholders.

The gaming unit wasn’t the only part of Microsoft going strong. Redmond said its Office unit also had a big quarter, growing 24 percent from a year earlier, and that Windows 7 license sales have now passed 300 million.

“Business demand for our productivity and infrastructure products and cloud solutions is strong,” COO Kevin Turner said in a statement. “Office had a huge quarter, exceeding everyone’s expectations, and our roadmap for cloud productivity with Office 365 makes products like SharePoint, Exchange, Lync and Dynamics CRM even more attractive to our customers.”

The company noted in a PowerPoint presentation accompanying its results that nine out of 10 businesses have now started their formal migration to Windows 7. Turner also pointed to Microsoft’s longer-term move to bring Windows to ARM-based processors.

“Windows 7 continues to be the fastest-growing operating system in history, and our recent system-on-a-chip announcement demonstrates our commitment that Windows will have the power and flexibility to run everywhere and on every device,” he said.

The company also said its online advertising sales were up 23 percent during the quarter.

However, Microsoft’s outlook was limited, offering guidance only for what it expects its operating expenses to be. In the PowerPoint, Microsoft offered a bit more information, detailing its unit-by-unit expectations relative to their markets. For example, the company said that Windows growth should roughly track the PC market, adjusting for some boost the company got a year ago from the launch of Windows 7. Server sales should also track the hardware market, with long-term licensing and services revenue growing in the high single digits for the current quarter and low double digits for the full fiscal year, which runs through the end of June. The company said the entertainment unit should enjoy year-over-year revenue growth of 50 percent for the current quarter and 40 percent for the full fiscal year.

Here’s a full look at the company’s segment-by-segment results (click to enlarge):

SMS GupShup (a Hindi word that translates to “chitchat” in English) is a 200-person start-up that has created a host of SMS-based services that, all told, account for more than 1.5 billion text messages a month.

The company’s biggest service is a text-message-based social network that lets individuals or companies send text messages to large groups of followers that want the updates. The service has taken off with 100 of the most popular feeds topping 100,000 subscribers to things like jokes, religious messages, sports scores and other information. Smaller groups might have as few as 10 or 20 followers. The service is somewhat similar to GroupMe, a U.S.-based group messaging service.

One tribe based in Northeast India uses the service to allow its 65,000 members–some of whom live far away from the area–to keep tabs on tribal goings-on.

“If someone has a child, someone gets married, someone dies, it all goes up there,” said CEO Beerud Sheth, who recently moved to Bombay after spending many years in Silicon Valley. His past work includes launching Elance, a company that matches freelance talent from around the world with people who need to hire for projects.

SMS GupShup has become a significant player in the text message market in India, accounting for roughly 5 to 10 percent of all SMS traffic, Sheth said.

But, while there is money to be made in text messages, SMS GupShup is not exactly raking it in. Some standard industry metrics on how much a company could make off text messages would suggest that the company is on pace to bring in about $10 million a year in revenue.

“That’s in the right range,” Sheth said.

Nor is the company yet profitable, but Sheth said the company hopes to turn the corner sometime in the first half of next year. Among the company’s costs is buying the bandwidth needed for all of the text messages sent by its users. Although it pays anywhere from a quarter to a tenth of what consumers pay for text messages, that still adds up. Fortunately, India is one of the cheapest places in the world to send text messages, with consumers typically paying anywhere from half a cent to a penny per message and bulk users paying far less.

To help recoup the costs, the company limits message length so that the last little bit of space can be used for sponsorship or advertising.

While SMS GupShup is the largest purely SMS-based service in India, Sheth said he does find himself competing with Facebook and Twitter in India and elsewhere, but said the strength of his service is that it is built around SMS, rather than using text messages only as a basic option for status updates.

“For them, SMS is sort of a stepchild experience,” he said.

Sheth said the company isn’t limiting itself to the social networking service. Among its other products are bulk SMS services for businesses. Companies can use the service for everything from messaging to customers to managing inventory. A text-message-based CRM application is in the works as well.

The company is also working directly with carriers in several countries to create a “reply all” feature that would allow people not only to send bulk text messages, but also to reply to a group of anywhere from 7 to 10 people, depending on the country. That’s particularly useful in small groups that may want to schedule events or do other tasks via text message, Sheth said.

“One way to think about text messaging is it is the Internet in the developing world,” Sheth said. “In this part of the world, that is a big part of how people communicate.”

As luck would have it, Salesforce.com has long been running on what’s now called Database.com, and the company describes it as one of the world’s largest enterprise databases, containing 20 billion data records and serving up about 25 billion transactions a quarter.

Salesforce’s plan calls for Database.com to be a standalone product in 2011. And it will be free to get started. Developers will be allowed to write applications in pretty much any language they’re comfortable with including Java, C#, or PHP, and they can run them wherever make sense for them including on Amazon EC2, Google AppEngine or Microsoft Azure. It’s also mobile-ready: Apps can run on Apple’s iOS, Google’s Android or Research In Motion’s BlackBerry.

The opportunity is potentially huge: Research firm Gartner estimates that companies spend more than $20 billion a year on database software, which implies that they also have to spend on hardware on which to run it, people to set to configure and maintain that hardware, and so on. Salesforce excels at giving companies reasons to dispense with costly hardware and software that they run on their own systems. Database.com could have a similar effect.

As part of BoomTown’s duty as internal jobs board for Yahoo, here’s another departure: CIO Michael Kirwan (pictured here).

A terse email went out yesterday about Kirwan’s leaving.

According to his Yahoo bio, he had “global responsibility for Yahoo!’s Corporate Systems group, which includes the IT Infrastructure, Corporate Applications, CRM and Premium Services Infrastructure teams. These teams ensure Yahoo!’s internal systems and billing/anti-fraud services are available 24/7.”

In other words, the guy who keeps the lights on at the Silicon Valley icon!

Kirwan reported to David Dibble, EVP of Service Engineering & Operations at Yahoo.

Kirwan previously worked at VeriSign, as well as at Bank of America, Bank of California and Union Bank of California.

“Patent trolls are part of the industry today; that’s just the way it is,” he said. “We’ve dealt with them before and we’ll deal with this situation in the same exact way. I’m just very disappointed in this, from a former leader of our industry, that they would do this.”

Benioff’s remarks today echo those he made during a May 20 earnings call, though this time he exercised a bit of restraint and stopped short of decrying Microsoft (MSFT) as a bunch of “alley thugs.”

His message, I suppose, is that Salesforce.com (CRM) isn’t much worried by Microsoft’s suit–though perhaps it should be, given the limited patent portfolio in its defense arsenal and Microsoft’s endgame here. As analyst Rob Enderle wrote last week:

Microsoft wants to set an example and losing isn’t an option. In addition the patents in question are key to being able to defend Microsoft’s existing market making the combination into one of the most important legal efforts that Microsoft is likely to undertake. This means they probably won’t settle, will fund the effort fully, and will do whatever it takes to make it successful. ?