IT service innovation is often dependent upon the relationship with outsourcing vendors. In such situations innovation is a result of knowledge accessing and utilization between outsourcing provider and user. As a management thinking, the application of Lean principles can facilitate knowledge accessing and utilization to enable IT service innovation for the customer. Based on the knowledge-based view of the firm, we developed a conceptual framework to describe how Lean can drive IT service innovation within IT outsourcing relationships. This framework is used to analyze the use of Lean principles in an explorative case study of a service organization and its two IT outsourcing providers. The framework and the case study show that IT service innovation is an ongoing process. A clear strategic direction and learning environment are critical to achieve it. Applying Lean principles facilitates the learning behaviors and allows smooth communication on innovative ideas and in this way drive innovation.