Fujitsu has dumped its £896m contract with the NHS after disagreement over how much it should be paid to revamp the UK's health IT systems.
Negotiations between NHS Connecting for Health (CfH) and Fujitsu broke down over how much it would cost to alter the systems it has been deploying in the south of England.
Fujitsu had been installing Cerner Millennium electronic care record systems and the NHS was demanding it tailored systems for local NHS trusts.
But after Fujitsu walked away from the renegotiation of its 2004 contract the NHS had no choice but to terminate the deal.
BT or CSC is thought to be favourite to take over responsibility for the National Programme for IT (NPfIT) in the NHS in southern England but Fujitsu will continue to run the existing systems until its successor is appointed.
A spokesman for CfH said: "Regrettably and despite best efforts by all parties, it has not been possible to reach an agreement on the core Fujitsu contract that is acceptable to all parties."
CfH said it was "acting to protect the interests of the taxpayer" and had to preserve the basis of "payment on delivery".
A spokesman for Fujitsu said: "Fujitsu Services can confirm that we have now taken the decision to withdraw from the National Programme for IT contract and reset negotiations with NHS Connecting for Health as we did not feel there was a prospect of an acceptable conclusion."
The Cerner Millennium care record system deployed by Fujitsu recently went down twice in one month, leaving NHS staff in the south of England without access to patient details.
Concerns about the effectiveness of the Cerner software expressed by clinicians at Worthing and Southlands NHS Trust were also recently raised in Parliament.
Accenture also walked away from its contract to deliver part of the NPfIT in 2006.