The trend of contracting out activities will continue to grow to cover a much wider network of sub-contractors and become more complicated. Effective partnership development through scientific techniques has to be developed to overcome the sub-optimal approach of the traditional partnership development in an ad hoc manner. This research links daily information generated in the ERP system to optimal strategies using artificial intelligence technology and knowledge management technique to support a scientific and objective approach to partnership development. It forms a regenerative feedback loop for a partnership development that maximizes benefits to both parties. The new partnership is developed through a strategy that involves close monitoring, and a set of scientific and transparent assessment, plus most important of all, feedback from reliable knowledge-based ERP generated data to push the collaboration forward. The main contribution of this paper is in the new model for ERP assisted partnership development in outsourcing which focuses on the knowledge-oriented methodology. It discusses the application of knowledge-oriented methodology in the different models of partnership development through case studies. It points out the differences between the traditional partnership information and the knowledge-oriented partnership information, and how they contribute to the new knowledge for enhancing the value of partnership development © 2005 IEEE.