Microsoft is to deliver versions of its leading software products over the internet in what senior executives at the company say is the "biggest announcement we have made in a decade".

At a presentation in San Francisco, Mr Gates, the Microsoft chairman, outlined his plans for a next generation of "live software" services, which will make personalised software packages accessible on demand over the web.

"This is a big change for everybody," Mr Gates said. "It is employing every part of the [software] ecosystem."

The technology will allow users to access personalised features, such as address books, from any computer or handheld device that is online and supports Microsoft's Windows platform.

The services, which will be aimed at businesses and individuals, will be introduced through a "rolling thunder" scheme over the next 12 months.

Analysts said the move had been expected because of increased competition from companies such as Google. Industry watchers say the internet search company has outmanoeuvred Microsoft by offering a string of competing products over the internet.

Microsoft "clearly gets where the focus of the competition needs to be," Tim O’Reilly, the publisher and software design guru, told Reuters.

"There are going to be some fabulous new services. But whether they are built by Microsoft or by Yahoo or Google or Salesforce remains to be seen," he added.

Competitors who already provide web-based software services branded the move inevitable. Marc Benioff, the chief executive of Salesforce.com, a leading web-based software provider, said: "Bill Gates is still trying to prove Microsoft’s relevance in the age of the internet.

"The real innovators ... have all succeeded because Microsoft has let us down on innovation," he told Times Online.

Groups such as Salesforce.com have grow rapidly by providing business owners with internet-based applications for tracking customer relationships and managing back-office functions.

"It’s the Day of the Dead," Mr Benioff said. "Bill Gates and Ray Ozzie announced a series of 'internet-based software services' with 'Live' appended to some familiar names: Windows Live, Microsoft Office Live, Windows Live Messenger, and so on.

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