First of all, don't use Excel, unless Excel is specifically required because part of the user's workflow is already in Excel and it cannot be changed. Even if this is the case, make sure you tried all the ways to get rid of Excel. Using MS Office in programming in is a big sign of low-tech; at the same time, it's not easy, rather wasteful. I already faced people pretending that Excel (a spreadsheet, first of all) is a database system. Better don't buy this fallacy. It can be connected as a database though, but why?
Now, there is a choice between XML and database. If database, it's the choice between different database systems. Here is the criteria for XML: you can use XML and get a lot of benefits from it (simplicity, lighter weight, and so on), only if you can meed two important criteria: 1) your whole data model is integral withing a single XML file, with no external XML documents (multi-file but single-document XML would be perfectly fine, say, you can have separate entities files, doctype, shared XML schema), 2) you are sure that all the XML data, the whole thing, when parsed, will always easily fit in the computer RAM. If this is not the case, especially second criterion, XML is not a good candidate for the replacement of the database.
An acceptable alternative to XML is JSON. But note that the Microsoft Data Contract, when used with XML, is fundamentally much more flexible than JSON. With XML, your data object graph can natively be any arbitrary graph, but with JSON it can only be a tree, unless you use some application-level (not contract-level) work around the problem, by introducing some special "structural" relationship keys; then you would have to maintain the data integrity by yourself. Please see:
Using Data Contracts,
DataContractSerializer Class (System.Runtime.Serialization),
DataContractJsonSerializer Class (System.Runtime.Serialization.Json).
What about the choice of a database management system? There are too many factors to discuss them seriously in one Quick Answer. You can start with reviewing the following lists and comparison tables:
List of relational database management systems — Wikipedia, the free encyclopedia,
Comparison of relational database management systems — Wikipedia, the free encyclopedia,
Comparison of object-relational database management systems — Wikipedia, the free encyclopedia.
One more warning against Microsoft products: in almost all cases, don't chose Microsoft Access. It's proprietary, not open-source, not free of charge, not lightweight but extremely weak in features, just not serious.
—SA
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