Microsoft adopts web file styles
The decision marks a big change to Microsoft's existing proprietary file formats that can be hard to work with.
Microsoft said the changes should make it much easier for companies to do more business via the web.
XML stands for Extensible Markup Language and it allows you to explicitly specify the structure of data. This is important when firms want to use information in spreadsheets or databases in web-based applications.
XML is also important because it means that the data structures it captures can be presented in many different ways. This is likely to prove vital to firms keen to do more with e-commerce as it will make it much easier for a firm's trading partners to get at and use the data they need.
By contrast the more widely known and used HTML (Hypertext Markup Language) struggles to capture the relationships between chunks of data in any useful and meaningful way.
Mike Pryke-Smith, Office marketing manager at Microsoft UK, said limited support for XML started with Office 2003. This under-the-hood change made it easier for developers to get other programs working with the Office software suite.
The new format changes the way data is saved
Mr Pryke-Smith said it made it possible to get at web-based information, such as searching the Amazon bookstore, directly from Word.
The wholesale adoption of XML for file formats goes much further than this, he said. It should make it much easier for developers and programmers to link Office programs with core business applications from the likes of SAP and Oracle.
The changes should also make it easier for Microsoft rivals to get at and use the data in files saved by Microsoft users.
The XML style formatting will be introduced with Office 12 which is due to be released in the second half of 2006.
However, Microsoft is due to start giving developers more details about the changes this year. Attendees at the Tech-Ed 2005 conference will be the first to get more information.
Microsoft has supported XML in Office since 2000 within the HTML formats in Word, Excel and PowerPoint.
Some of Microsoft's competitors, such as Sun's StarOffice and the open source project OpenOffice, already support XML.
The change to file formats will largely be invisible to end users, said Mr Pryke-Smith. Though when people use the "Save As" option files in the XML format will have an "x" added to the usual suffix. For instance Word documents saved in XML format will be labelled "docx".
Files saved in XML will be smaller than Microsoft equivalents and should be easier to recover data from in the event of a crash.
Mr Pryke-Smith said Microsoft was working hard to ensure that the new formats worked with the older style of saving files. Microsoft will update Office XP and 2000 so they can convert XML style files back to older formats.
XML is an established open standard driven by the Worldwide Web Consortium. Microsoft is basing its file formats on the XML 1.0 specification. Each component in the formats is described with XML.