Ballmer was interviewed Tuesday by Gartner analysts David Smith and Yvonne Genovese at the corporate technology research company's Symposium/ITxpo, under way in Orlando, Fla.

During his talk, Ballmer said many Web sites can be described as "click to run," where a service is delivered via a Web site but runs on a PC.

"I do think that we're in a transition where software goes from something that's in its pre-Internet day to something we call Live (Microsoft's hosted services), where you have click-to-run capability on a Web site... But software will still execute on a PC," Ballmer said in response to questions.

A powerhouse in desktop and server software, Microsoft has not embraced hosted services as extensively as other application providers such as Salesforce.com or search giant Google.

According to Ballmer, Microsoft intends to deliver software as a service to both consumer and business users, offering services over the Internet as well as servers behind company firewalls.

Services that reside in the Internet "cloud"--including commerce, community and search--will be have an "an analog that will affect our servers… and this is driven by Ray Ozzie."

The company's chief software architect, Ozzie wrote a widely distributed memo describing what he called the"Internet services disruption," a major technology shift in the IT industry akin to the move to PCs.

Last year, Microsoft consolidated its Windows and developer tools divisions with the groups responsible for MSN Web properties in an effort to combine on-premise software with online services. It is currently building a line of Live-branded hosted services, some of which are meant to complement its on-premise software.

"The difference between software plus a service and software as a service is whether people will want to use the local intelligence in their phones, PCs," Ballmer said. "Even if you look at some Internet services today, they all use power from the client… AJAX uses the power of the client and the Instant Messenger clients from us and Yahoo and Google use the client."

In this services push and other efforts, Ballmer said that Microsoft is persistent, if not always first.

"The bone doesn't fall out of our mouth easily. We may not be first but we'll keep working and working … and it's the same with search … We are irrepressible on this," he said.

In addition to reiterating that security was Microsoft's top priority, Ballmer fielded questions regarding how long it has taken Vista to ship. Ballmer responded with a discussion of how reinventing Windows from the ground up required both innovation and integration, a situation that produced a bit of engineering chaos for Microsoft.

Regarding Microsoft digital music player Zune, Gartner's Smith noted that Microsoft had gone from running an ecosystem that encourages third-party participation to one that looks like it will mimic what Apple has done with its iTunes Music Store and its iPods -- a system which is entirely closed and controlled by a single vendor.

Ballmer responded by saying that a closed approach is a bad idea and that a very open experience is sometimes accompanied by a lot of chaos. He cited Microsoft's XBox game console as an example of the sort of ecosystem that Zune might follow, where third parties can create add-on products, but where Microsoft will do a great deal of monitoring and certification.