Microsoft CEO Steve Ballmer took the stage at the Software 2007 conference Wednesday to talk up the idea of "software plus services," new technologies such as Silverlight, and Microsoft's acquisition strategy -- which doesn't, he said, rule out acquiring large vendors.

Software plus services is what Ballmer described as the real evolution in the industry, and a little different than what Salesforce.com CEO Marc Benioff describes as software as a service.

"Marc has a high rhetoric way of expressing what's going on," Ballmer said. Software plus services, which Ballmer also talked about at Microsoft's Convergence conference in March, is a blended model that includes desktop software, the Internet, and data and applications on servers that can be delivered as services.

"At the end of the day, [Benioff] wants to be sure and we want to be sure that Office can be used as a front-end to something like Salesorce.com," Ballmer said. "We see a real opportunity to marry software as a service with popular applications like [Microsoft] Office on the desktop."

Microsoft's vision is different from many startups showcasing their offerings at the conference, which are based on a purely hosted, software-as-a-service model. But there's no denying that many businesses -- particularly large ones -- plan to continue using Office and would benefit from having a way to get desktop users linked into more types of business information and collaboration capabilities. "We won't think about Web sites and Web servers and software separately; these things will become intertwined," Ballmer said.

The evolution to the software plus services model, Ballmer said, includes online software, advertising-funded software, and the consumer electronics model, which includes smart phones and iPods. "As we evolve to a software plus services model, we'll continue to see an evolution not only in how we build software and deliver it, but in the ways in which we monetize it," Ballmer said.

One area of software plus services will be what Ballmer called the "ubiquitous Web." The roadmap includes Microsoft's Silverlight technology (its recently released Adobe Flash-killer), as well as ASP.net, Microsoft's Web application framework. Both will add "richness" to software services, Ballmer said.

But Microsoft's biggest bet on software plus services, Ballmer indicated, is in getting Office and SharePoint users to not only access information, but analyze and collaborate on it.

"There's almost a white space in the areas of analysis, teamwork, and collaboration," Ballmer said. "In the world of software plus services, there's a greater expectation than ever that these white space gaps will be bridged, and interoperability will be established."

Ballmer also pointed to Duet, Microsoft's collaboration with SAP to give Office users access to enterprise resource planning applications, as an example of software plus services.

More visually impressive, however, is some work Microsoft is doing with product-lifecycle-management software vendor Dassault Systems to create document mashups. A Dassault VP demonstrated how his company's software could navigate around a three-dimensional manufacturing part from within an Office document. Ballmer described it as running an XML rendition of the data within Office. Microsoft's other software plus services for business partners include application vendors Approva, Bentley Systems, Cartesis, Convergence, CorasWorks, and Epicor, Ballmer said.

Later, in a Q&A session with venture capitalist M.R. Rangaswami of the Sand Hill Group, Ballmer insisted Microsoft will be No. 1 in anything it sets out to succeed in. ("We just keep coming and coming and coming," he boomed, getting a chuckle from the audience.)

Ballmer also said that small acquisitions have proved best for Microsoft, at least so far. "We have not by default opted for large acquisitions as part of our strategy, but we don't rule them out, either."

In the coming year, Ballmer said the most innovative things to come from Microsoft will be in the areas of .Net and Silverlight. "If you're trying to build very rich software plus services, Web-style applications, I guarantee we have incredibly exciting stuff this year," he said.