Oracle's (NASDAQ:ORCL) brash CEO, Larry Ellison, recently declared that on-demand software doesn't make money. Perhaps he hasn't heard of Taleo (NASDAQ:TLEO), which provides on-demand services for employee recruiting, screening, and tracking. In yesterday's third-quarter report, the company reported a GAAP profit of $2.2 million, or $0.08 per share. 

It helps that the company continues to post strong revenue growth, with a 36% increase to $33.7 million in Q3. Taleo added 208 customers, bringing the total to 1,380. Some of the new ones include Abercrombie & Fitch (NYSE:ANF), LM Ericsson Telephone (NASDAQ:ERIC), and Tesoro Corporation (NYSE:TSO).

Taleo is also getting traction with its small-to-medium-size business (SMB) segment, which surpassed 1,000 customers in Q3. The company estimates this market at 226,000 customers, with a value of about $1.4 billion.

To further bolster its product offering, Taleo acquired WetFeet's Web-based recruiting product, WetFeet Recruiter, for an undisclosed amount. This product is focused primarily on the retail vertical.

But perhaps the most important initiative is Taleo's new product, Taleo Performance. I had a chance to see it, and it's definitely compelling. In fact, the interface looks more like Apple's (NASDAQ:AAPL) iTunes than a crusty enterprise application. The software helps with career plans, goal management, and employee succession. There is also integration with common productivity applications, such as Microsoft's (NASDAQ:MSFT) Outlook.

With all the momentum, Taleo has upped its full-year 2007 guidance to between $126.8 million and $127.2 million, which is up from the prior forecast of $124 million to $125 million. According to the company's CEO, Michael Gregoire, there are no signs of a slowdown, and he intends to keep the growth profitable. And as seen with today's move in the stock, which is up more than 15%, Wall Street likes the strategy -- despite what Ellison might think about the prospects for on-demand operators.

For more Foolishness:

Microsoft is a Motley Fool Inside Value recommendation. Try this market-beating publication free for 30 days.

Fool contributor Tom Taulli, author of The Complete M&A Handbook, does not own shares mentioned in this article. He is currently ranked 7,115 out of more than 70,000 players in CAPS. The Fool has a disclosure policy.