The company responsible for collecting the fines from London's congestion charging scheme is to be given a #424 million contract to run Birmingham City Council's IT and administrative functions.
Capita Group, which also collects the BBC licence fee and is involved in partnerships with several Government agencies, believes it can deliver #1 billion of savings to the council within ten years.
Up to 450 city council staff will be seconded to a joint venture company, to be run by Capita.
The council will not have a controlling interest in the new company.
Capita, which beat IBM to get the contract, has promised to create at least 500 jobs in Birmingham outside of the joint venture company.
Council leaders made it clear last night that the decision will lead to wholesale change in working methods. The local authority's 35,000 non-teacher employees have been told they must be prepared to switch jobs within the organisation, if necessary.
The intention is to sweep away the silo mentality, where departments operate individual fiefdoms, and institute instead a single IT and human resources function.
The efficiencies planned by Capita will not lead to compulsory redundancies, insisted Stephen Hughes, the council's interim chief executive.
However, Mr Hughes said staff would have to embrace a "culture change", which could mean being re-trained for different jobs.
A briefing note prepared for the council cabinet states: "Whilst purchase and installation of new technology is relatively easy, ensuring it delivers quality services that are both more efficient and more effective is not.
"Success requires the technology to be implemented alongside new ways of working and redesigned processes and this is only ever achieved where there are significant changes in organisational and individual behaviours.
"The most effective way to implement such change successfully and thereby achieve the council objectives is to work in collaboration with a private sector partner."
Deputy council leader Paul Tilsley said the business transformation project, to be led by Capita, would enable Birmingham to deliver #137 million of savings in three years - a target set out in the Government's Gershon review of local authority spending.
In the longer term, #1 billion of savings would be realised over ten years. The council's annual budget is #3 billion.
Coun Tilsley (Lib Dem Sheldon) said he wanted Birmingham to regain a reputation as the "best run city in the world which it enjoyed when Joseph Chamberlain led the council in the second half of the 19th Century".
"At the heart of this partnership is the delivery of excellent IT services to the council, which will be a catalyst for change. We have to work far smarter and Capita will help us to do that."
A statement issued by Unison members accused Capita of planning to outsource hundreds of council jobs - a claim denied by the company.
The deal with Capita, which was announced to the London Stock Exchange yesterday, will be ratified by the council cabinet on December 16.