IT outsourcing typically leads to a readjustment in terms of size, roles, and responsibilities of IT employees in client firms, referred to here as IT resizing. In this study, we focused on the usage of three common approaches to resizing—downsizing (layoffs), outplacement (transferring employees to a vendor), and inplacement (internal transfer)—and the impacts of these approaches on retained IT workers. We apply the concept of “psychological contracts” to highlight the issues that arise in executing these three approaches. Based on our study of 12 firms, we provide guidelines for IT managers to help them not only achieve their IT resizing goals, but to restore and renew their psychological contracts with their retained IT employees.