Microsoft has handed over early beta versions of Office 11.0 to a few thousand testers. The latest version of its suite of productivity tools is squarely focused at corporate customers.

Office 11.0 is being designed to include wide support for the industry standard data format XML (extensible markup language), said David Jaffe, lead product manager for Office. With this version users will be able to save Word or Excel files in XML, which will allow the data inside those files to be shared with any other software that also supports the standard file format.

Word and Excel will also be able to retrieve XML data from any number of sources, including the web and a company's internal data resources.

One new feature being added to Office 11.0 that makes use of XML is called Smart Documents. This is a programmable taskpane that can be customised to display information that is stored on the web or on a company's internal network. Similar to the Smart Tags feature included in Office XP, Smart Documents is context sensitive, in that it will display data that is relevant to specific information inside a document.

For example, a company could design an expense report template in Office 11 that employees would fill out, and then program the Smart Document task pane on that template to display information about filling out that company's expense reports.

Microsoft will release a software development kit that enables developers to program the task pane to pull XML data from various sources.

The move toward XML is part of a broader effort at Microsoft, embodied in its .Net initiative, to allow customers to access data, services and applications from disparate computer systems on a variety of computing devices.

Microsoft recently detailed a new application that will join the Office family called XDocs, which relies solely on the XML file format. That software is being designed for corporate users to build forms that collect and distribute data in XML. For example, it could act as a user-facing interface for inputting data into a customer relationship management database or other back-end computer systems.

Microsoft has not disclosed how it will sell XDocs. It will share the same user interface as applications in the Office suite and integrate with them, but it may be sold separately. Microsoft plans to release the software around the same time it ships the Office 11.0 suite. Both Office 11.0 and XDocs are expected to be available in the middle of 2003, Microsoft said.

A second beta version of Office 11.0 will be available in early 2003 and is expected to be distributed to a broader group of testers, Jaffe said. Pricing and naming were not disclosed.

One side effect of Microsoft's bet on XML is that it could give rise to "better or cheaper" alternatives to Microsoft Office, said Ted Schadler, group research director at Forrester Research.

Saving Office documents in XML will allow the data to be viewed and shared with any number of server or desktop software products that also support XML, Jaffe said.

"Saving a Word file as XML separates the data from the formatting... so someone can access that data regardless of whether they have Word," Jaffe said.

That could fuel more interest in alternatives to Microsoft Office, which currently enjoys roughly 95 percent share of the office productivity software market, according to industry research.

"By opening up the file format, they're essentially heading off at the pass any claims of anticompetitive behaviour," he said. "It's a huge risk for Microsoft, but I think the benefits are greater."