The 10-year agreement will see the global technology giant manage the government's computer system that contains provincial budget, procurement and payroll information.
Under the deal, 75 government employees including 60 unionized workers would be offered jobs with IBM. The unionized workers would also have the option of returning somewhere within the civil service, but the non-unionized employees would not.
Another 21 would have an opportunity to work with the Finance Department.
"Their livelihood has been sold to IBM with no guarantee of job security," said Joan Jessome, the president of the Nova Scotia Government and General Employees Union.
She said the government's decision has driven a wedge in its relationship with the province's largest union.
"I believe it certainly will shake the support," said Jessome.
"We are kind of walking around in disbelief that for the promise of new jobs they were willing to call into question one of the principles of a labour party, and that's public services belong in the public sector, not in the private sector."
The IBM announcement has caused another fault line between the NDP and public-sector unions, which have criticized the government in recent years for cutting spending, particularly on education.
But Premier Darrell Dexter said the IBM deal offers "the best of all possible worlds" for the workers.
"They can choose if they like to go to work and to have a career with a global leader in IT, or they can choose to stay with the public service," Dexter said.
He bristled when asked why an NDP government would outsource government jobs to IBM, saying the province took advantage of an opportunity that would generate high-paying jobs.
"Contracting out is a philosophy that tries to cut government costs by trying to run down benefits and wages of workers," he said.
"This is the farthest thing from that."
IBM Canada president John Lutz said the workers would be offered two-year contracts at pay comparable to what they are getting now. It's not known what would happen after that.
The government is not expecting to save money under the arrangement because it would cost about $8.4 million annually — about the same it does now — not taking into account inflation.
The government said it has also entered into an eight-year agreement that would see one of the world's most profitable companies get a $12.2-million payroll rebate if it creates 500 new jobs at a new data analysis centre at a yet to be determined site in Halifax.
Liberal Opposition Leader Stephen McNeil said he has reservations about the deal, despite Dexter's assurances that the information would not be compromised in IBM's hands.
"What is the benefit to the taxpayers?" McNeil said. "There's no financial savings and on top of that, we're having an outside firm handle the private information of Nova Scotians that should be held by government."
But Progressive Conservative Leader Jamie Baillie said he was somewhat supportive of the agreement.
"We need to do this to make the government more efficient and actually create real permanent jobs around the province," said Baillie, though he added it would have been better if it saved costs.
IBM is to take over management of the government computer information system on March 1.