C&W told IBM earlier this month that it would be cancelling IBM's provision of support for the telco's IT infrastructure and customer and billing systems at the end of this year.
The two companies are in dispute, with C&W suing IBM for £128m which, it claimed, it was overcharged for IT provision in the US and UK. A hearing is scheduled for later this year.
Around 1,000 C&W staff transferred to IBM after the deal was struck in 1998. They were informed of the C&W decision last week . It is unclear whether the staff will be re-employed by C&W or whether it will outsource to another supplier.
The company recently announced it was engaging in a sweeping restructure which included a complete withdrawal from the US market and a reduction of UK staff by 1,500.
With C&W going from being an £8bn business with 20% operating margins to a £4bn loss-making business it has abandoned its strategy of being a global telecoms and networks provider.
The restructure will cost £800m and 3,500 jobs and will see the company will cut its data centres from 42 to 23 worldwide, with most closures occurring in the US, Japan and continental Europe.