Ray Wilkins has been left devastated by his surprise dismissal with immediate effect from the post of assistant coach at Chelsea.

The 54-year-old knew nothing about his sacking before being called to meet with Ron Gourlay, the chief executive, while watching Chelsea's reserves play a training-ground friendly against Bayern Munich at lunchtime today.

His contract had entered its final months and was up for renewal but Wilkins, who had stood alongside the manager Carlo Ancelotti while the second string took on the German team, did not see what was coming. Gourlay informed him that not only was his deal not going to be continued but that he would have to leave immediately. Sources at the club described the decision as "clinical", but characteristic of Chelsea's ruthlessness in decision-making at executive levels. Chelsea have stressed that there had been no major disagreements involving Wilkins and the other coaching staff or executives but the truth behind his departure lies less with what he did wrong and more towards what he no longer did right.

Wilkins had seen a fundamental part of his responsibilities disappear, or no longer carry quite the same value. When he was hurriedly appointed by the club in the wake of the former assistant coach Steve Clarke's departure to West Ham United in September 2008, he was seen as the man to help the manager at the time, the Brazilian Luiz Felipe Scolari, adapt to the demands of English football, particularly off the field.

As a former Chelsea captain and coach – he had worked under Gianluca Vialli – Wilkins had no little credibility but, moreover, it was his contacts within the English game and his knowledge of the authorities and their procedures – in short, who knew who and how things worked – that made him appear as the ideal sidekick for an overseas manager.

Wilkins served under Scolari, Guus Hiddink and Ancelotti, and he would even address the media at press conferences on occasion, to take the pressure off the manager, most notably when things began to go wrong for Scolari.

Yet this aspect of his employment had become less important, not least because Ancelotti has settled into England and English football so well – he has learned to speak the language – and, also, because he brought with him his long-time confidant Bruno Demichelis when he arrived from Milan. Demichelis, a sports psychologist who speaks fluent English, has the title of assistant coach but his role is as the club's scientific co-ordinator.

Although Ancelotti praised Wilkins highly in his recently published autobiography, going so far as to say that "without him, we couldn't have won a thing", the coaching dynamics have shifted at Chelsea.

Wilkins was a well-liked member of the staff but perhaps his biggest problem was that, in the eyes of influential members of the squad, he was not Clarke. The Scot was José Mourinho's assistant and he played a vital, if largely unsung, role in the club's Premier League title triumphs of 2005 and 2006.

Wilkins, though a good coach in his own right, lacked Clarke's panache and his input into Ancelotti's training sessions was moderate, largely because the Italian is such a hands-on coach. The bottom line, as Wilkins began his soul-searching, was that if Ancelotti, the club's Double-winning manager, had wanted to keep him then there is no doubt that Wilkins would have been retained.

With Gourlay firmly in control of the club's business plan, it is clear that Chelsea have decided to make an upgrade in the department. The search for a new assistant is now under way, with two early contenders being Filippo Galli, who was one of Ancelotti's assistants at Milan, and Paolo Maldini, the great ex-Milan defender.

Galli has been repeatedly linked with a move to Stamford Bridge and what would be a return to the south-east of England. He spent a season under Vialli at Watford towards the end of his playing career. Gianfranco Zola is currently available, having left West Ham, together with Clarke, at the end of last season. Paul Clement served as the assistant to Wilkins in the first-team coaching structure and, having already risen from the ranks of the academy, he is regarded as a star of the future.

Chelsea announced Wilkins's departure on their website early in the afternoon, with Gourlay confirming that the decision not to renew his contract would "take effect immediately".

"On behalf of everyone at the club," Gourlay said, "I would like to thank Ray for everything he has done for Chelsea Football Club. We all wish him well for the future."