Microsoft CEO Steve Ballmer said on Tuesday in the US that lines between on-premise software and Internet-delivered services were blurring, an industry shift the company was embracing.

Ballmer said in an interview with Gartner analysts at the research company's Symposium/ITxpo in Florida that many Web sites could be described as "click to run", where a service was 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 leader 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 intended to deliver software as a service to both consumer and business users, offering services over the Internet as well as servers behind company firewalls.

The company's chief software architect, Ray 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 was persistent, if not always first.

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.