"We really do see this as a very big milestone for all productivity workers," Gates said of the suite of products built using Extensible Markup Language (XML), the universal format for structured documents and data on the Web.
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The demonstration, one of 100 or so similar events unfolding around the world today, also heralded the software giant's shift toward offering subscription-based software and Internet-integrated applications -- even though its PC-based software licenses are still a major chunk of its revenues.
The roll-out (in 15 countries and 34 languages) is a key underpinning of its .NET strategy to charge fees for a variety of Web and Internet-based computing services, and diversify its licensing revenues from the shrink-wrapped software it has sold for over two decades.
The product demonstrations were for many the first peek at the software giant's strategy of building XML-based "smart tags" and Web integration into the Outlook, Word, Excel, PowerPoint and Access applications that millions of office workers use every day.
In one example, the smart tag feature enabled a user to connect to an external data source from within a Word document, pull real-time data off the Web right into an Excel spreadsheet.
Another networked feature is the SharePoint service, which enables teams of workers to collaborate and store information on their own internal Web sites using pre-packaged bits of HTML code, called Web Parts.
All of the Microsoft Office features are upgraded with multiple networking features. For example, the HTML editing program Front Page has features that can quickly publish images and photos on a Web site.
Across all the products in the Microsoft Office XP suite, task panes offer a Web style command area that carries out operations or options, a feature that essentially replaces the dialog boxes in applications; another new feature across the applications is improved data recovery if a program is lost.
At one point during the demonstration, the CEO of Amazon.com, Jeff Bezos, got up on stage with Gates and demonstrated Amazon.com's internal use of the product by ordering Office XP.
It was then "delivered" by an actor dressed-up as Paper Clip, the often-annoying Office assistant built into current Office products. In the latest Office release, the paper clip has been retired, joking that XP stands for Ex-Paper Clip. (The audience applauded the announcement.)
Some of the attendees praised the demonstrations and felt they were all major breakthroughs for Microsoft's products. Others questioned whether companies would be interested or willing to upgrade their network systems from current and prior versions.
Shing Cheng, an information technology employee of Barclay's Capital in New York, said he came to the demonstration to hear more about how the XML data tags will be structured among the products.
Although he said he was impressed with the demonstration, he said he was unclear about whether the XML tags that Microsoft uses as building blocks in its applications might be based on proprietary standards or open to other platforms.
Gates remarks earlier in the demonstration also appeared to approach the concerns among competitors and developers over whether Microsoft would embrace the same set of standards that the rest of the computing industry is embracing with emerging protocols.
"The computing industry's embrace of XML as a standard of exchanging data was something Microsoft believed in from the very start and has a profound effect on all of its software applications," Gates said.
"With office XP, I can tell you that we have very strong momentum, with partners and people building the XML extensions and smart tags... We're not even close to the pinnacle of what we can do."