Following weeks of speculation in the press, BT has finally confirmed that it has received a termination notice from Sandwell Council looking to end an IT and BPO partnership.
The council is only six years into a fifteen year agreement with BT, which began in 2007 and is valued at over £300 million.
Jon O'Brien at analyst house TechMarketView was the first to report the notice, but BT has since confirmed receipt of the termination request to Computerworld UK.
A BT spokesperson said: "BT received a Termination notice from Sandwell Council on 16 July to end its partnership. BT has throughout - and remains - fully committed to delivering the commitments it made through the Transform Sandwell Partnership.
"In the meantime, BT is reviewing the terms set out by the Council so it would be inappropriate to comment any further on the matter."
The contract covers IT, finance, HR, payroll and customer services and involved investing £50 million into the venture and committing to create 450 new jobs in the area.
TechMarketView's O'Brien believes that the termination notice is a result of the changing requirements of the council.
"Sandwell's concerns are largely around the annual charge it has been paying BT (c£15m per year), since demand for BT's services has reduced due to significant cut backs at the council. These concerns first surfaced last June, but clearly the relationship has got considerably worse since then. BT will now be doing all it can to salvage the situation and the potential reputational harm caused over the next month, prior to Sandwell bringing the service back in house," he said.
"This case shows the complexities of managing long-term IT/BPO deals, where client requirements can change so dramatically during the course of the programme. Local government will be particularly challenging right now because of the ongoing cutbacks to public spending."
He added: "Sandwell is one of many broad-ranging IT/BPO megadeals signed in the last decade and which helped build the local government BPO market for suppliers like BT and Capita. But such large, long-term deals are increasingly out of favour in local government today.
"Instead councils are moving towards smaller more select sourcing of services from a variety of suppliers, particuarly as their first generation deals come up for renewal"