Grover et al. [GrCT94] were among the first to specifically identify the resourcebased view of the firm as a theoretical basis for linking outsourcing to a firm's gaps in IS resources and capabilities. Their results provide support for the hypothesis thatOutsourcing is a generally accepted method for fulfilling an organization's information systems (IS) needs. A prominent motive for outsourcing is a desire to increase the organization's access to high-quality information technology and expertise. There is, however, little research that examines the connection between vendor capabilities and customer satisfaction. This paper addresses that gap by using the resource-based view of the firm to investigate linkages between vendor capabilities, IS quality, and customer satisfaction. A survey was completed by managers of outsourcing customer firms. The results were analyzed using Partial Least Squares (PLS). The results indicate that customers evaluate a vendor primarily in terms of technological capabilities, followed by relationship management capabilities. The vendor's understanding of the customer's business was not considered to be significant. There is a significant connection between the vendor's capabilities and the quality of the IS function, which in turn was related to customer satisfaction.