• CNNMoney.com, Wednesday, November 15, 2006 11:30 AM

Microsoft CEO Steve Ballmer says online services like search, email, blogging and mapping technology will be the most important technological developments of the next decade, yet Microsoft's Web division perennially loses money, while Google's rival business thrives.

But Ballmer points out that just because Google is winning that battle doesn't mean it has the best model. Microsoft's vision for the future of Web services involves software, the company's core business. Ballmer says Web services will work in tandem with PC-installed software, whereas Google thinks that everything will be Web-based, eliminating the need for software.

Microsoft has also invested heavily on expanding its data centers to house servers and provide the infrastructure to host blogs, email services and a slew of other new services as part of its "Live" strategy, which has made few in-roads against Google since its September launch.

Google's onslaught of Web based services are aimed squarely at Microsoft's software business. For example, Google Docs & Spreadsheets, a free ad-supported Web application, encroaches on MS Office, the company's most successful software product.

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