Gallardo gives the Orioles a frontline starter (MLB.com)
It seemed like the Orioles were content to roll out last year's team minus Wei-Yin Chen, which didn't look promising given that a) Chen was their best pitcher and b) they finished .500. But after shelling out $161 million to keep Chris Davis--more money than they'd ever paid anybody before--there wasn't much wiggle room left in their budget to upgrade elsewhere or re-sign Chen, who landed a five-year, $80 million payday from the Marlins.
In Gallardo, however, they essentially replaced Chen at a fraction of the cost. Both are 30 and have produced almost identical results since Chen made his major league debut in 2012:
Chen 2012-15: 706.2 IP 3.72 ERA 110 ERA+ 4.14 FIP 1.25 WHIP 7.0 K/9
Gall. 2012-15: 761.1 IP 3.69 ERA 108 ERA+ 3.94 FIP 1.34 WHIP 7.3 K/9
Chen's the better option because he has more strikeouts, fewer walks, and pitches from the left side, but not so much better that he deserves a substantially better contract. The Orioles shouldn't feel bad about letting him walk, as they got a great consolation prize in Gallardo.
They also have to be encouraged that Gallardo made a smooth transition to the American League last year, compiling the best raw and adjusted ERA of his career despite making half his starts in the brutal Texas heat. Camden Yards is also tough on pitchers, but that shouldn't be a problem now that Gallardo's thrived in two difficult parks to pitch in (the other being Milwaukee).
What the Orioles should be worried about, however, are Gallardo's poor peripherals. He had the worst WHIP of his career in 2015 and his xFIP was 4.31, nearly a full run higher than his ERA and also a career-worst. In addition to getting lucky on his strand and home run rates, he posted a career-low 5.9 K/9 rate--the third straight year in which his strikeout rate declined. That, combined with his pedestrian walk rate, resulted in a career-low 1.78 K/ BB ratio. Those are the numbers of a bad pitcher, not a good one earning eight figures a year.
That said, Gallardo's track record suggests he'll be a good bargain for the O's as long as he stays healthy, which has never been a problem for him in the past (he's started at least 30 games in each of the past seven years). His durability and consistently above average results (only once has he had a below-average league and park-adjusted ERA) have helped him exceed two fWAR every year dating back to 2009. That may not seem very impressive, but dollars-wise it's worth a lot. Gallardo has provided well over $11 million (his current salary) of value every year of his career but one; 2008, when he made just four starts. As long as he keeps converting half of balls put in play against him on the ground, he'll be fine (Baseball-Reference has him pegged for a 3.68 ERA in 171 innings next year).
Gallardo doesn't have the ceiling of a David Price or even a Chen, but he does have a very high floor, and that's what the Orioles are paying him for.