As part of the deal, PeopleSoft will bundle IBM’s WebSphere middleware products with its own applications free of charge. The two companies have also agreed to invest $1 billion during the next five years to jointly develop industry-specific software that will use IBM’s WebSphere products.

In addition, the partnership will involve collaboration on pre-integrated industry packages and establish a “business process interoperability lab”.

According to Craig Conway, CEO of PeopleSoft, the agreement is the result of a deal that was already in the pipeline when PeopleSoft acquired JD Edwards in July 2003.

Conway said that over the next year, PeopleSoft plans to deliver more adaptable applications to let customers use Web services to build service-oriented architectures.