Exeter, Teignbridge and East Devon councils hope to save £6 million over 10 years by sharing their ICT through a standalone company.
The company, called 'Strata Service Solutions Ltd', will be wholly owned and controlled by the three councils.
The councils' ICT staff will transfer to the new company under TUPE when it goes live on November 1, 2014, along with all ICT assets owned by the councils.
All three councils currently run their ICT services in-house, with individual aspects provided by a range of suppliers.
For example, Kelway provides portable hardware, IT consumables, peripherals and servers to Teignbridge. Teignbridge also uses customer relationship management and electronic document management software from Civica and fixed line broadband from Virgin/Daisy Group.
East Devon uses Capita's income management software, Microsoft servers and enterprise tools, customer relationship management software from Kana and Citrix software.
Exeter City council runs "a primarily Microsoft centric systems platform, with HP server hardware and a Nortel data network", according to its latest ICT strategic review. The authority also uses Citrix thin client desktops.
East Devon's ICT manager Chris Powell will serve as interim chief operating officer of Strata from August 1, with plans to recruit a permanent head for the new shared service, according to Teignbridge council documents.
The recruitment process will be "conducted through an internal and external campaign starting in September", the report explains.
A 'Joint Executive Committee' and 'Joint Scrutiny Committee', comprised of leaders and chief executives from the three councils, will be set up to oversee the shared service.
The three councils will put in £2.2 million to set up the company, with each contribution calculated by the size of each authority's revenue budget.
Upfront costs will include a new data centre in Exeter and additional software upgrades, the council documents explained.
The councils expect to save £8.3 million gross and £6.1 million net, with Exeter and East Devon expected to receive £2.2 million each and Teignbridge due to get £1.7 million, in accordance with their share of the start-up costs.
East Devon's Cabinet and Exeter's resources scrutiny committee approved the implementation plans at separate meetings on July 2 with Teignbridge's overview and scrutiny committee discussing the proposals at a meeting on July 7.
Members of Teignbridge's cabinet are due to vote on the proposals during a meeting on July 31.
The three councils approved the plans in principle in November and December last year. Since then the authorities have produced a full business case and implementation plan which has been scrutinised by councillors from each of the three organisations.
A growing number of local authorities are looking to share services such as ICT in order to save money in the response to cuts in central government funding.
The announcement from the south west councils follows news last week that three councils in Cambridgeshire have voted to share ICT and legal services, a move they claimed could save £500,000 on the £6.1 million the authorities spend on ICT every year.