Microsoft is moving beyond its current operating system and application environment and has set its sights on becoming a significant player in the Web Services, online advertising and device markets. 

"There is big disruption going on in our business," Microsoft CEO Steve Ballmer told a financial analyst meeting yesterday.
"The  transformation of software to be software plus services is a phenomenon that we are embracing, we need to embrace – and, frankly, any company who thinks their core competency is software better get to getting on this dimension."
Ballmer explains that the way software is created is set to change over the coming years and will contain client, server and services components that will be managed and orchestrated out of a cloud infrastructure.
"We're not moving towards the world of thin computing," he adds. "We're moving towards the world of software plus services. And the software plus service model will bring the best of the desktop, the best of the Web, the best of the enterprise, and the best of devices together."
Ballmer adds that Microsoft already has a number of offerings that fit into the software plus services category, including Windows Live, Office Live, Popfly, MSN, Live Search and Virtual Earth. In addition, there's managed communications and collaboration for an enterprise account, small-business capabilities in Office Live, CRM Live product and new "Titan" development facilities.
Microsoft has also announced Silverlight Streaming and has a BizTalk Services product in beta that will enable enterprise-to-enterprise communication, queuing and relay.
Significantly, Microsoft has decided to invest in two new capabilties, Ballmer says.
"We are going to be an advertising company, and we are going to be a devices company.
"Being an advertising company means learning about online and operational efficiency.
"On the devices side, we need to embrace retail, hardware and hardware design."