Birmingham City Council has shortlisted Capita and IBM as potential strategic partners for a major business transformation and IT services outsourcing project.
Rival bidders EDS and Specialist Computer Centre have been dropped from the procurement process.
Stephen Hughes, the council's strategic director of resources, said, "There is still a long way to go before we can select who we would want to work with as a long-term strategic partner."
* Bradford Council has signed a contract with IBM to deliver the Bradford-i modernisation programme. Serco Solutions, formerly ITNet, will run the day- to-day IT service. A strike threat last month over possible redundancies was averted when Serco said council IT staff could either transfer under Tupe employment rules or remain employed by the council and be seconded to Serco with the option to transfer to the supplier at a later date.