Microsoft said Thursday that XML would be the default file format for three applications when it ships Office 12 late next year.

The company said its new Microsoft Office Open XML Formats would be supported in Word, Excel and PowerPoint. Those three applications will have new file extensions that end with an ‘x’ to designate they are XML-based: .docx, .xlsx, and .pptx.

The big picture for end-users is that Microsoft is trying to take the shackles off its desktop Office applications and use XML to open the data created within those applications to back-end systems, such as enterprise resource planning and customer relationship management applications, and to inject the data into business process workflows.

The XML file formats are the first announced changes that are related to “The New World of Work” strategy that Microsoft chairman Bill Gates laid out last month at his annual CEO Summit.

“They are kind of breaking down these historical things that were largely distinct applications and now looking at the Office engines, word processing, spreadsheets or forms generation and saying they should be components and services that can be used everywhere,” says Peter O’Kelly, an analyst with the Burton Group. “No longer do you need to have the full Word application or Word viewer to do something useful with Word documents. It opens up a new world of things for people who are tying applications that are based on Office into back-end systems. It’s not that you couldn't do it before but now it will be much easier.”

To sidestep the incompatibility problems Microsoft created in 1997 when it changed Office file formats, the company will offer free updates to Office 2000, XP and 2003 to support the new file formats. It also will offer a conversion tool that will allow users to update their files in bulk to the new XML-based format.

Office also will compress stored XML documents using the ZIP utility, including WinZip that ships with Windows. Support for ZIP means the XML files can be opened without the corresponding Office application. This also will reduce file storage issues.

For users who don’t want XML formats, the defaults in Office 12, the code name for the next version of the productivity applications, can be set to the original binary file formats.