This article describes the collaborative innovation practices used by outsourcing clients and their suppliers, based on insights gained from 26 organizations with a mature sourcing capability drawn from Europe, the U.S., and Asia/Pacific. We present a collaborative innovation framework comprising the four practices (Leading, Contracting, Organizing, and Performing) that these client organizations have adopted to achieve the “step-change” in outsourcing maturity that is needed to make collaborative innovation a reality. Three cases of information technology (ITO) and business process (BPO) outsourcing arrangements are described to illustrate these practices. The article concludes with lessons that emerged from our multi-year study that can be used to achieve the step-change needed to move to collaborative innovation in outsourcing.