Essex County Council has chosen IBM as its preferred supplier for a major transformation project that aims to save £200 million over four years.
The council earlier this year ditched a multi-million pound outsourcing deal with BT three and a half years early, prompting BT to threaten legal action.
Leader of Essex County Council, Lord Hanningfield said of the IBM deal: "This is the most ambitious project that the Council has undertaken and it was important from the start that we work with the right company to help us deliver it. Today’s decision is an important step in realising our objectives."
The council insisted that it wanted its new partner to bring “expertise, additional capacity and resource” to drive down costs in the county.
The transformation programme is not a direct replacement for the cancelled outsourcing contract with BT, the council insisted.
Essex has not put a price on the potential deal with IBM, but in its initial tender documents it estimated a cost of between £2.3 billion and £5.4 billion over eight years with a possible four-year extension.
With a final deal set to be signed in the autumn, the council and IBM are getting down to serious contract negotiations.
“We have learnt from previous contracts that we need flexibility and suitable break points,” a council representative said.
The Essex decision will be a boost to IBM which is caught up in controversy around the South West One contract in Somerset. Initial problems at the giant West Country shared services centre have become part of a political battle in the region.
Essex says that the business transformation project will make sense if the council can meet its savings target, though the project, which mirrors those in Somerset and Birmingham, is clearly aimed at providing services for local district councils and other public sector organisations.
Commenting before the Essex decision was announced, IDC analyst Douglas Hayward said, “From the government's perspective, the Essex project (along with related projects such as the Service Birmingham initiative) is a litmus test of wholesale service-delivery outsourcing.
“From the perspective of the IT services, consulting, and BPO industries, this initiative will be a huge test of these industries' claims to deliver quality of service and value for money that is clearly superior to that of in-house organisations."