Microsoft released its first beta of Office 11 this week, bringing a few surprises to the table, despite months of public and private previews of the upcoming office productivity suite, which will ship in mid-2003. Office 11 features extensive support for XML as a native data format, a major shift for the software giant, which had previously leveraged the success of its proprietary Office data formats as a competitive advantage. By embracing an open standard like XML, Office will be more interoperable with heterogeneous systems.

"The key word to describe Office 11 is 'connected,'" says Joe Eschbach, the vice president of the Information Worker Product Management Group at Microsoft. "It's about connecting people with all the disparate sources of information in their work environment, with the processes necessary to complete their jobs, and with the other people they rely on to complete projects and make decisions. In short, it's about making them more productive by removing unnecessary barriers to success."

A new Office 11 feature called Smart Documents makes its debut in Beta 1. This feature lets users link data in Office documents to one or more back-end data sources, without having to leave the Office application. Smart Documents are based on technology from XDocs, which Microsoft revealed earlier this month at the MEC 2002 trade show. The suite also includes new versions of its core products, such as Outlook, Word and Excel. Outlook 11 has been significantly redesigned with a new three-pane UI that lets users view an entire email message, vertically. New offline features lets Outlook 11 users cache email and other information so they can work more effectively on the road.

The stakes are high for Office 11. Though the Office suite still accounts for a huge percentage of Microsoft's revenues, the product has seen sales slow in recent years due to high prices, few exciting new features, and suddenly surging competition from rivals such as Corel WordPerfect and StarOffice. Microsoft group vice president Jeff Raikes, who oversees Office development, has openly stated his goal to increase Office revenues from $10 billion annually to $20 billion.