Why is LO making .odb files whenever I data merge in Writer? and can I make it stop?

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Registered databases are a user setting in LO. So every time you create a new one via Edit->Exchange Databases->Define, the list increases. And because the registration is a user setting mapping a name to an ODB, LO has to create a matching ODB file. You can delete entries from the list via View->Data Sources, Right click in the list->Registered databases...->Select the DB->Delete. But that won't get rid of the ODB file itself.

Since some versions (code is from 2015, AFAIK sponsored by Munich / LiMux), Writer documents can contain an "embedded database". Basically it's just a subdirectory in the ODT / ZIP, which contains the files normally contained in the ODB. Problem is, these are AFAIK just created if you add them via Tools->Mail Merge Wizard...->Insert Address Block->Select Address List->Add and select an ODS and Finish.

Then you'll see something like "vnd.sun.star.pkg://file:[path to your odt]/EmbeddedDatabase" in the "View->Data Sources, Right click in the list->Registered databases..." list. That entry is a fake registration and just exists for the ODT file.

So basically there is a solution, it works, but in the current UI it's IMHO impractical to use in a sensible way.

FWIW: the ODB file basically just contains a link to the ODS file and some XML headers.

Shameless plug: there is an completely different, free and easier to use mail merge solution for LO at https://wollmux.org.

Installing the extension will add an entry "WollMux Seriendruck" to the sidebar, where you can just select a ODS file for your MM ODT file. The extension can do much more, but a minor feature is the "simplified" MM. The text is still in German, even if I start my LO with English UI :-( "Datei..." lets you select the ODS file and "Drucken..." lets you print the result to the various formats supported by the LO MM. HTH.