Speaking at the Web 2.0 conference in San Francisco, Microsoft chief executive Steve Ballmer claimed that the software company will acquire 20 companies a year for the next five years, in the range of $50 million to $1 billion.

Google has also acquired many technology companies over recent years — at least 10 companies in the past year, compared with Microsoft’s four. Yahoo has also acquired four. The stage seems set for an open season on new and exciting start-ups.

Unfortunately, Microsoft made a reputation during the 1990s for negotiating with start-up outfits only to pull back and launch its own competitor. Now, it’s said, with less time on its hands to keep abreast of nimble competitors like Google, developers may believe the software giant has changed its spots and needs them more than they need Microsoft.

We shall see.

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Microsoft CEO, Steve Ballmer, signalled another step towards a dramatic change in the software giant’s business model.

In London on a whistle-stop tour, Ballmer said, “We are a software company, and yet in a sense, the very form of our core capability is changing. We need to change our capabilities so that we are not just good at writing bits that you put out on CD and deliver, but rather writing this thing that is a living, breathing, dynamic, organic thing.

Ballmer says that CTO Ray Ozzie’s vision of software as a service, or software plus services as Microsoft prefers, will eventually overtake shrink-wrapped software sales.

“It’s not in the next two, three, four years, but in the long run it’ll happen. Some of that money will come through subscription revenues, some will come through transaction revenues and some will come through advertising revenues. The average consumer really doesn’t like to pay for things. And anything that can be ad-funded sensibly for the customer and sensibly for the provider will be. Will online publications be largely ad-funded as things move from the physical world to the online world? I think the answer to that is yes.

“I think there will be some subscription businesses, and yet I think the rest of the group will be either ad-funded or essentially not for profit.”

Ballmer also drew attention to the dangers of Google’s dominance in online advertising, “It could be quite an economic problem for anybody who wants to offer an ad-funded experience on the internet, or anybody who wants to buy advertising,” he says. Predictably he put Microsoft forward as “the most sensible, credible alternative to Google”.

On Windows Vista and its critics he said, “The uptake on new computers has been very good amongst consumers. We’ve a little bit more work to do to resolve some issues that are slowing acceptance in smaller businesses and, as always, it takes longer to get things through the approval process of larger businesses.”

Is Microsoft interested in buying a stake in social network site, Facebook? “Sure they are an interesting internet property. They have a lot of growth, a lot of page views, a lot of users and we want to make sure that their stuff runs on our advertising platform, and we are excited to be there. We will make acquisitions where they make sense. Our strategy is to be strong in the areas of communications and social interaction; to be strong in the area of search, portal and information management; to be strong in advertising platforms. And if acquisitions will accelerate that as Aquantive did, we will make more acquisitions.”