Purpose – Seeks to explore how perceptions of an ERP system-requirement misfit in Taiwan have been construed as business opportuni4ties by domestic vendors in their response to competitive pressures from international vendors. Design/methodology/approach – Qualitative data were collected through interviews with three leading foreign ERP vendors, four leading domestic ERP vendors, the ERP trade association and a number of consultants in Taiwan to explore the perceptions of Taiwanese enterprise system providers and the business and design strategies through which such perceptions were enacted. Findings – In comparison with leading Western ERP providers, the software technologies, resources and global market experience of Taiwan’s domestic ERP vendors are weaker. Nevertheless, the analysis of the interviews and associated documentation shows that there are four areas in which domestic ERP vendors perceive themselves as having a competitive advantage over foreign vendors. The four areas are: the ability to meet special requirements, the ability to support the flexibility and speed of domestic small and medium-sized firms, the benefits of direct implementation, and the ability to learn from their engagement with local customers. Originality/value – While the literature on learning and innovation on East Asian manufacturing firms has stressed the important role of incremental improvement on borrowed technology, the role of government and the strategy and structure of domestic firms, there has been little research on the sources of competitive advantage of East Asian firms in sectors with services components. This paper contributes to one’s understanding of the development of technological capabilities by East Asian firms in services.