Sheffield Council has confirmed that Insight, which markets computers and software, is not meeting its job creation targets.
Only 350 jobs have been created so far and the likelihood of the original target being reached by 2007 is remote.
Council leader Jan Wilson said the firm had been hit by a slump in the worldwide market for IT equipment and had gone through boardroom reshuffles. She said the firm was creating jobs in line with government grants, but added that the company was clearly unlikely to produce the number of jobs originally forecast. Coun Wilson said: "We are optimistic the project will continue, but clearly it will not produce the number of jobs we had wished."
She said she was tracking developments, because the deal was forecast two years ago to be one of the biggest inward investment deals Britain had ever seen.
Lib Dem leader Coun Paul Scriven called for more information from regional development agency Yorkshire Forward and Sheffield First for Investment, the local agency charged with attracting new jobs.
He said: "It is absolutely vital that we keep a track on projects like this. It's no use having a masterplan for economic regeneration in Sheffield if we do not see delivery."
The deal, heralded as a £83.5 million package of investment for the city, was called a triumph by Government Trade and Industry Secretary Stephen Byers when he unveiled it in March 2001.
Insight was to build its European HQ in Attercliffe investing £67 million with a £15 million Regional Selective Assistance grant from the Government and £1.5 million from Yorkshire Forward.
David Fletcher, of Sheffield First for Investment, said "There is still a reasonable chance the original project will happen but it is impossible to say when."