West Sussex County Council has brought in Capita to provide IT services in a seven year deal worth an "initial" £56m.
Capita and the council say the deal will provide a "flexible and sustainable IT service at significantly lower cost".
Jeremy Northeast, head of IT operations for West Sussex County Council, said, "Capita's solution maximises the investment the council has made in IT facilities and technology." He said Capita's involvement will "underpin wider organisational transformation and realise significant savings for the authority".
It's also an important new account for Capita, at a time when public sector IT budgets are being squeezed.
Some councils however may see further outsourcing as a possible way of cutting costs, although the outsourcers themselves may have to provide stronger guarantees about cost savings.
Central government’s IT suppliers are set to lose substantial revenue this year, as ministers cut projects and renegotiate contracts.
Analyst house TechMarketView is predicting up to a 7% cut - around £700m - in central government technology spending in 2010.