The BBC is planning to sell its technology arm in a move that leaves a question mark over the future of the 1,400 staff employed by the division.

The sale would net the corporation tens of millions of pounds and would save up to £300m in costs over 10 years but will be seen in some quarters as a failure of Greg Dyke's vision.

The director general decided in 2001 to spin off a number of the BBC's in-house technical units, which offered a variety of services including website support and IT. He hoped the expertise would attract lucrative IT contracts from the private sector and help supplement licence fee income for the corporation.

But today he admitted the BBC could not compete effectively with commercial giants such as IBM and EDS and it would be cheaper for it to contract out the services.

The corporation will re-tender the £2bn contract to provide technical back-up to all its operations and as a result will put BBC Technology up for sale at the same time.

The technical services contract was originally due to be re-tendered in 2006, but the BBC finance director, John Smith, said it had been brought forward because the prospect of making £20m to £30m a year in potential savings unearthed by an internal review "couldn't be ignored".

He also announced the new contract would last for an extended period of 10 years.

Mr Smith said the sale was the best way of securing jobs and would put BBC Technology, which is a minnow compared with its likely buyers, on a firmer footing.

The wide-ranging internal review found that for the unit to remain competitive in the commercial market, significant cuts would be required that would have resulted in "substantial job losses".

"This way the staff will continue working on BBC business but at the same time BBC Technology, which has been very successful at winning outside contracts, will get the capital injection it needs to expand further albeit in someone else's ownership," he said.

"We are making it a requirement of the tender that the whole thing goes, lock, stock and barrel, including the staff," he said.

Mr Smith insisted the decision to sell up did not point to a flaw in Mr Dyke's original blueprint and said the BBC had to evolve as part of its duty to use public money as efficiently as possible.

Corporate giants including IBM, BT, EDS and Accenture are among those likely to be interested in acquiring the unit, potentially putting hundreds of jobs at risk.

The assets of the business are thought to be worth around £50m and the corporation expects to see annual savings of between £20m and £30m a year by farming out its support contracts.

"By taking our technical support contract to the market and selling BBC Technology we can achieve significant savings over a sustained period of time," Mr Dyke said today, adding that the decision was a "win-win" situation for the BBC and the division's staff.

Mr Dyke also said the sale was a key part of achieving the additional £1.1bn in savings over seven years earmarked by the then culture secretary, Chris Smith, when the BBC's licence fee settlement was agreed in 2000.

The company supplies technology services to all of the BBC's television and radio operations as well as the technical backbone to its websites.

It has also won several key contracts from outside companies including Hutchison's 3G mobile service 3, US sports channel ESPN and Rupert Murdoch-owned satellite giant DirecTV.

The group sits under the BBC Ventures umbrella, formed last year and comprising BBC Technology, BBC Broadcast, BBC Resources and BBC Vecta.

It delivered £19m in profits and cost savings back to the BBC last year, but an internal review headed by the BBC Ventures chief executive, Roger Flynn, concluded that the corporation could save an extra £20m to £30m a year by selling it off.

The sale and tender will be conducted through the European Union procurement process, with the winning bidder taking over the company's existing contracts and its 1,400 staff based in west London and other sites across the UK and the US.

While BBC Technology turned in a profit for the first time last year, reporting an operating profit of £6.8m on turnover of £220m, most of its revenues still come from its internal contracts with the corporation which are thought to last until 2006.

BBC governors today approved the sale of the division, but it also needs to be rubber stamped by the culture secretary, Tessa Jowell.

Mr Dyke said the corporation would consult fully with broadcasting union Bectu and employees over future pension arrangements and staffing levels. The process, which will be overseen by the BBC chief technology officer, John Varney, is expected to be completed by next summer.

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