The council will take the administration and management of the housing benefit service back in-house from 1 May though ITNet will provide backroom IT systems and support until 2005.
Terms of the settlement are confidential but Computer Weekly understands that the council will make two payments to ITNet, each of £950,000 in April and May, with two additional payments of £225,000, "in recognition of IT Net's commercial position".
These payments will be offset by £300,000 in penalties levied by the council against ITNet for failure to hit key performance indicators.
The Islington contract was renegotiated in 2001 after Bridget Blow, ITNet chief executive, admitted the firm had "not provided the service to which Islington residents are entitled".
Commenting on the decision to finally bring the service back in-house, council leader Steve Hitchins, said, “Our overriding concern has always been to improve the service. This is a significant step towards that.”
Blow said, “We believe that with this new arrangement we have found the right solution for both ITNet and Islington.”
ITNet last week reported pre-tax profits for the year to December 2002 up 29% to £16.4m.