As part of the contract, which begins on 1 April, ITNet will be responsible for all IT functions within the council, initially supporting 4,000 users.
ITNet replaces existing IT supplier Siemens Business Services, in a move that Coventry Council hopes will save £600,000 a year on support costs.
ITNet has also promised to replace all IT hardware over the next three years, which made it a more attractive option, said Jack Harrison, cabinet member for service performance and support at Coventry Council.
"We could have just re-signed Siemens on 1 April, but we wanted to go through the quality process and ended up going with ITNet," he said.
ITNet will be charged with ensuring Coventry Council hits Tony's Blair's e-government targets for getting all services online by 2005, Harrison said.
"We are at about 65% [of services online] at the moment but we have slipped a bit in recent months," he said.
"I do not just want the forms online, I want real interaction with e-government, so that people can get their questions answered proactively."
The majority of staff working for Coventry Council at Siemens will transfer to ITNet under Tupe regulations.
Coventry Council's relationship with Siemens Business Services dates back to 1997, when the two organisations formed a pioneering joint venture company to run the city's IT and to win business from other local authorities.