To move up the value chain, Chinese software and services outsourcing (SSO) providers will need to provide more value-added services by improving their organisational capabilities and innovative capacity. This paper reports on early findings on processes in which Chinese SSOs engage in order to move up the value chain, towards a transformative collaborative relationship with clients which is referred to as “collaborative innovation”. We provide a literature review on the concept of collaborative innovation and examine different aspects of organisational learning that occur in the interaction between vendors and clients. Data obtained from semi-structured interviews with 12 Chinese SSO providers supplies the basis for the findings which suggest that there are spaces of interaction between clients and providers which offer opportunities for better collaborative practices to emerge and consequently more innovative capacity.