South Tyneside Council has signed a £184 million, 10-year IT services deal with BT.
The deal aims to save the council £28 million over the period, by improving IT efficiency and self-service.
Under the plans, a shared services centre will be built to cater for public services. BT South Tyneside, a new BT subsidiary that is handling the project, will create up to 1,250 new jobs.
The council said the project will play a part in the regeneration of the area, through new job creation. BT will also set up its new local government headquarters for the UK in South Shields.
Councillor Iain Malcolm, leader of South Tyneside Council, said: “The ultimate objective of this partnership is to set about the sustainable development of a knowledge economy in the area. This would not be possible without the full range of measures proposed by BT tailored to the local economic and demographic requirements of South Tyneside.”