According to the Associated Press, Bill Gates recently warned his executive team of a massive and disruptive “Sea Change” due to the tech industry’s shift to an Internet-based software and hosted services model.

According to the AP report, in an e-mail to top executives, dated Oct. 30, Gates urged company leaders to "act quickly and decisively" to move further into the field of offering such services, in order to best formidable competitors. "The next sea change is upon us," Gates wrote.

"This coming 'services wave' will be very disruptive," Gates wrote. "We have competitors who will seize on these approaches and challenge us — still, the opportunity to lead is very clear."

Gates included a memo from Ray Ozzie, one of Microsoft's three chief technical officers, in which Ozzie recommends broad changes in order to remain competitive.

The AP reports that in the memo, dated Oct. 28, Ozzie concedes that Microsoft has not led the pack on Internet-based software and services, and now faces intense competition from companies like Google, Inc. Ozzie said Microsoft needs to focus on key tenets of the new model, including a shift toward offering free, advertising-supported offerings and more sophisticated, Internet-based methods of delivering products.