While these studies provide evidence of the economic value of IT, and more broadly services, outsourcing, none addresses the heterogeneity in the value accruing from outsourced IT services, nor do they examine the sources of these gains. In contrast, Abraham and Taylor (1996) provide insights into the sources of potential gains in their examination of an establishment’s propensity to outsource. They argue that a decision to outsource may be influenced by wage and benefit savings, volatility in output demand, and a contractor’s specialized skills, which also results in heterogeneity in the value received by the establishments that outsource. Theyanalyze the contracting decisions of establishments in the time period 1979–1986 for a range of services, including computer services. Interestingly, the only correlate for contracting out for computer services is economies of scale in the provision of specialized services based on the finding that smaller establishments show a greater propensity for contracting for this service. On the other hand, more recent evidence (Knittel and Stango 2007; Levina and Ross 2003) suggests that larger firms are more likely to engage in the outsourcing of IT services. Nevertheless, these studies highlight the importance of the specialized skills of the external service provider.