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Experts say Microsoft's XML play won't backfire

XML-based file formats for Office may make it easier for customers to choose rival software, but analysts don't see an exodus just yet.

Microsoft's move to create new XML-based file formats for three of its flagship Office products may make it easier for customers to consider rival software, but industry watchers aren't predicting an exodus just yet.

Conventional wisdom has long held that if Microsoft were to embrace XML as its default file format for Office and discard the proprietary underpinnings that have ostensibly handcuffed customers to its products, businesses might jump at the chance to move to other software providers, or at least start using rival offerings alongside Office more frequently.

And now that Microsoft has announced it will employ XML formats in the versions of Excel, PowerPoint and Word included in its upcoming Office 12 package, the issue is front and center.


What's new:
Microsoft's move to create new XML-based file formats for three of its flagship Office products may make it easier for customers to consider rival software, but industry watchers aren't predicting an exodus just yet.

Bottom line:
Bottom line: Analysts say customers will probably wait to see what the new Microsoft products can offer. Also, the software giant's XML move could rob rivals of one of their main attacks on Microsoft software. Plus, the move could deprive clients of a key bargaining chip in licensing negotiations.

More stories on Microsoft and XML

"It has to be one of the first questions you ask when you see (Microsoft's) XML plans: Will this encourage people to look at new products, especially open source?" said Forrester Research analyst Bob Markham.

But Markham and others say the predictions of a mass departure won't likely be proven correct, at least not right away.

Markham said customers in Europe and Asia may start more seriously considering alternatives such as the open-source software made by OpenOffice, but he believes most businesses will wait to find out how Microsoft's new designs could help them achieve existing goals with XML before they start looking for help elsewhere.

One of the most compelling elements of Microsoft's new allegiance to XML is that it should let customers and other software developers more easily integrate their IT systems with the company's dominant Office product line, a longstanding pain point for both camps.

An example of the gains that could be achieved via such XML tie-ups was recently displayed by enterprise applications specialist SAP, which has an ongoing project with Microsoft, code-named Mendocino, that uses XML-based middleware to pull together the two companies' products into a unified interface.

In a recent post to Microsoft's Web site, the company 's XML guru, Jean Paoli, said customers are only just beginning to understand the manner in which the open standard will change the way they view all kinds of technologies, and that Microsoft would be foolish not to further expand its XML strategy.

"Right now there's so much coalescence around XML, within individual organizations and entire industries, that I am convinced a new wave of XML-related content, applications and servers is just on the horizon," said Paoli, whose official title is senior director of XML architecture. "The ubiquity of XML will result in far more sophisticated ways of doing workflows between workers and business processes. We're really just at the tip of the iceberg."

Paoli is predicting that by more fully embracing XML, Microsoft is in fact making it less likely that customers will move to other software providers, as businesses will need more sophisticated tools to generate, store and analyze content created in XML-based programs, and he believes the software giant is positioning itself to help deliver those capabilities.

Still, it remains true that the same flexibility and openness that will supposedly allow for better integration between Office and corporate systems could let rivals make their Office alternatives more competitive.

But Markham said Microsoft is certainly not blind to that fact. The company fully recognizes that by introducing a file format based on a published specification, it's giving rivals a chance to create Word equivalents that mirror its software's functionality. However, Markham said, Microsoft is counting on the fact that creating such products may not be as easy as it sounds.

In fact, rather than giving rivals ammunition, the XML move could steal it away.

Peter O'Kelly, analyst with Burton Group, said the XML formats introduced in Office 12, which is due out sometime in the second half of 2006, could detract from the arguments Microsoft's rivals have been able to pitch to potential customers regarding the software maker's existing applications.

"Microsoft has surely raised the level of debate, as no one can accuse them of having an XML format with technicalities, as they could before when the formats were incomplete and not well documented," said O'Kelly.

And Microsoft said the transition to XML formats in Office eliminates one of the chief complaints about its products: that they lock in customers by failing to allow people to integrate them with other tools.

The potential benefit for Microsoft doesn't stop there. Customers will also lose some ability to use the rise of open-source Office alternatives as a bargaining chip when negotiating licensing fees with Microsoft, O'Kelly said.

"Many organizations have used alternatives as a tool in negotiating contracts with Microsoft, and that probably gets toned down with this," O'Kelly said. "So Microsoft has figured out that this is good for themselves as well as their customers."

Another important aspect of the file formats in Office 12 could be the creation of opportunities for third-party software providers looking to tap into demand for new applications made possible by the XML design.

Forrester's Markham said it's likely that a new software segment could evolve from the demands created by businesses embracing Microsoft's new strategy, including companies making conversion tools for translating documents and data in and out of XML, and companies looking to address compliance issues raised by more flexible document access.

"Microsoft already has a whole industry in open source that supports variants of their products and documents created from those products," Markham said, "and this will just accelerate that."