According to The Australian, the decision to shift from IBM to Infosys could result in hundreds of job losses locally and in Bangalore, where IBM operates outsourcing centres.
IBM GS staff were told the scratching of the vendor's software support would represent about 50 per cent of its one billion dollar, six-year deal with Telstra, signed in early 2006.
Telstra's decision to drop IBM was a big surprise to IBM GS staff, who expected the contract to continue until 2012.
The deal was lost not because of performance issues but because Infosys low-balled the IBM offer, sources said.
Telstra has been reviewing its IT outsourcing contracts with Satyam, EDS, IBM GS and Infosys since last year, when the TELCO announced it would trim its list of major IT suppliers from four to two in an effort to reduce costs and streamline its providers.