Microsoft CEO Ballmer Talks Up 'Software + Services'

"The transformation -- which is going to happen to software as a business over the course of the next five to ten years -- is the transformation of software from a package business to a business in which we think about software and Internet services as one integrated experience," Ballmer said.

In order to bring customers that blended model, Microsoft will have to build out its software-as-a-service infrastructure, much of which is still in its infancy. "We are hard at work at Microsoft on building the platform that supports that transformation," Ballmer said. "Just as we built Windows as a platform for client development, Windows Server as a platform for customer premise development, Windows Mobile as a platform for mobile device development, so too we're building a platform in the cloud, our so-called Live platform."

As evidence of that, Microsoft showed off its forthcoming Live CRM product, which is expected to be released later this year as Microsoft's first fully hosted business application, one that reaches far beyond the basic customer information management functionality found in Office Live. The demo positioned Live CRM as just as customizable if it were a desktop app, showed how the software works from within Outlook as well as the browser, and demonstrated a mash-up with Microsoft's Virtual Earth mapping software that could help, for example, an events company figure out where to host a concert.

One of the keys to Microsoft's strategy at this point appears to be SharePoint, a server-based, Web-delivered collaborative application that includes content management, workflow, and document management, team spaces, blogs, and search, bringing in visual and search elements of Dynamics and Office applications as well as connectors to Web apps. "SharePoint is the definitive operating system or platform that brings the world of personal productivity and the world of line of business applications together," Ballmer said.

Ballmer's keynote wasn't all software plus services, however. Convergence is a business application conference, after all. Though the Dynamics line of business apps has long been targeted at the mid-market, Ballmer said it's now fit for the enterprise. "I can fairly say to you that I feel very enterprise-ready across our product line," Ballmer said. "That doesn't mean we're going to take on the supply chain of General Motors tomorrow morning, but we're just going to continue expanding our sweet spot."

In addition to the demo of Live CRM, Microsoft showed off a concept of a future workplace computer, built by the Microsoft Center for Information Work. The concept computer included voice-activation and a touchscreen that can handle multiple points of touch but no mouse or keyboard, a touch-sensitive "radial dial" of icons on the screen to act as a successor to Office's new "ribbon" interface that gets rid of pull-down menus and toolbars, and advanced graphical "what if" modeling for future ERP products. Ballmer said all of the demonstrated technology will find its way into Microsoft products in one form or another.

Ballmer also admitted that Microsoft's licensing schemes can be "convoluted," but said that there's a reason for that. Multiple licensing options gives companies an opportunity to get the lowest price. "Unfortunately, most of the things that we would do to change, many of them would actually wind up raising prices, which is a problem," he said.