Microsoft is to debut its rights management system in Office 2003.

Microsoft has announced that the forthcoming Windows Server 2003 server operating system, due in April, would support XML-based digital rights management (DRM) as add-on capabilities.

DRM, christened by Microsoft Windows Rights Management Services (RMS) in Windows Server 2003, is a growing set of industry technologies and practices used to restrict the use of digital files.

Office 2003, due in the middle of the year, will become Microsoft’s first product to adopt RMS. Office 2003 will implement RMS as Information Rights Management (IRM), a set of customizable permission templates that let users attach access and reproduction rights to documents and other content in Office-based applications.

IRM, though, poses a potential headache for those enterprise customers who adopt Office 2003 while also running older versions of the suite.

Microsoft says Office documents with restricted permissions can only be opened in Office 2003 or later. Other users must install a planned Rights Management (RM) patch for Internet Explorer that enables them to read, but not edit or create secure documents. IRM will work across Outlook, Word, Excel and PowerPoint.

Amy Carroll, group manager for Windows trusted platform technology, acknowledged that upgrades in large organizations are a lengthy process but said customers could solve any organizational and interoperability issues by rolling-out Office 2003 selectively, across specific groups of users. These could be financial departments, human resources, legal and top executives.

However, IRM will prove a heaven-sent opportunity for competitors pitching rival office products, such as Sun Microsystems, which is pushing StarOffice as a low-price alternative to Office. Sun is particularly targeting Microsoft customers hostile to changes introduced by Microsoft last year to its software licensing model. Competitors will argue Microsoft is forcing them to upgrade for the sake of DRM, at a time when IT budgets are squeezed dry.

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