REDMOND, WASH. - Microsoft last week indicated it is entering a new era that will be marked less by monolithic programs licensed to corporate users and more by the integration of client and server software with Internet-based services.

The company used its annual financial analysts meeting in part to lay out its plans for corporate software and services. It plans to spend $500 million in fiscal 2007, which began July 1, on R&D in the area of services.

Microsoft officials said that in addition to services, the company's enterprise focus will include evolving its high-performance computing platform, enterprise search tools, virtualization technology and security software for the edge of networks.

Company officials also hedged on the November release date they had set for Vista, saying development of the software was on schedule but that it would not ship until it was ready. Financial firm Goldman Sachs has already built a Vista delay into its earnings model for the company.

The biggest change was Microsoft's most detailed explanation yet of its software-as-a-service model, which company officials say will first appeal to consumers before branching out to small businesses and eventually large corporate customers. Microsoft is facing up to an emerging battle with Google, Yahoo and a host of start-ups developing services that could become alternatives to Microsoft's traditional platform and application portfolio.

"The world has evolved into one with amazingly powerful edge devices, amazingly powerful centralized services and high-bandwidth pipes connecting the two," said Ray Ozzie, who last month took over the role of chief software architect from Bill Gates.

"Rather than having to have a limited client and putting all the intelligence on the service, we can for the first time consider how to intentionally balance where to put the applications, where to put the data and how rich to make the user experience based on factors such as mobility, the nature of the device and the nature of the Internet connection."

Ozzie said Microsoft doesn't plan to turn its software portfolio into a lineup of service offerings, but will focus on an additive model in which enterprise users can complement client software such as Office and server software such as Exchange with services available over the Internet from Microsoft or third-party providers.