I’m a little disappointed in both Microsoft and Adobe on this topic. On the one hand, Microsoft has answered the requests of many of its customers in adding the feature to the current Word 2007 beta 2 release. On the other, you have them also adding their new XPS document format – a competitor the PDF format that we all use.

Adobe, is threatening Microsoft in statements about how Microsoft’s history of “embrace and extend” has destroyed other products and markets, in essence absorbing the market to the point that there is no point in competing. Of course Adobe does keep pointing out that their PDF format is an open standard and is the “de facto standard” for portable documents.

The disappointing part is that Adobe simply doesn’t trust Microsoft on this, and Microsoft has done nothing to make anyone believe that it isn’t after conquering the portable document market. The same behavior has been seen before on numerous occasions and Adobe has every right to be worried – Acrobat & PDF are one of its most visible brands that define the company.

So how do these partners move forward? How will they resolve this in the best interests of the customer? Microsoft’s Word development team had the right idea in making it easy for their customers to create PDF documents from Word documents. The XPS document format is interesting, but why create another portable format when PDF is already entrenched? What “enhancements” could Microsoft bring to the table in a service pack and render the Adobe Acrobat unable to read the new file format? Who’s to say that’s what would happen? Why wouldn’t it?

The simple thing for both companies to do is for Microsoft to abandon its XPS format in this case, actually enter into a licensing agreement with Adobe with verbiage to explicitly accept that Adobe is the sole developer of the PDF format. Adobe would generate royalties from licensing and both companies customers would gain from the agreement.

Of course the reality is that PDF may be an open standard, but Adobe’s Acrobat Pro is a $125 shipping product, and simply having PDF creation capabilities in Word virtually eliminates the need for this product, regardless of who develops the file format going forward. Add to that – if Word usurps Acrobat’s creation abilities, what incentive is there for Adobe to expend resources to develop and distribute a free reader for it?

Also, don’t forget that competition is the lubrication of innovation. Interesting stuff will develop because of this little riff.