How does IT outsourcing affect firm performance? What is the role of internal IT experience in IT outsourcing? Prior research has provided different answers for these two questions. This study attempts to address the inconsistencies in the literature. We distinguish between knowledge intensive IT outsourcing (KITO) and infrastructural IT outsourcing (IITO) and suggest that these two types of IT outsourcing have different impacts on firm performance. Our analysis based on a panel data from the US economy shows that KITO has a negative effect on economic performance, while IITO may have a positive effect. Moreover, internal IT experience can mitigate the negative effect of KITO on economic performance. Therefore, strong internal IT experience can help firms to gain from KITO by leveraging the IT capabilities of external vendors.