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.
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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.