It has a double involvement for businesses

The issue of outsourcing has been a lot of ink. If some see panacea, others the committed to the same. In fact, there is a such profusion of recommendations for or against outsourcing that it becomes difficult to get an idea on the issue.

If one analyzes all of the research on this topic, three broad approaches seem however to detach: "resources and skills" approach, the "opportunistic" approach and the approach "flexibility" (1). As we shall see, these three approaches are partly contradictory. Business focus then more specifically on one or other of these approaches according to their priorities and characteristics of the activity concerned.

Today, innovation in the health sector is based more frequently on biotechnology. The three approaches will enable us to better understand why major laboratories outsource as much research in this crucial area for their future (2).

The approach "resources and skills".

This approach is based on the analysis of resources and skills underlying the activity that you wish to outsource. It has a double involvement for businesses. On the one hand, it suggests that outsourcing is a quick and inexpensive means of access to resources and expertise which are not available internally. On the other hand, it also promotes thinking in terms of competitive advantage.

Outsourcing is deprecated when resources and the skills in question are required to hold a competitive advantage. Indeed, a company who have no such resources and internal skills would quickly become a "business hollow." Longer term, it would be to disappear. Paradoxically, the resources and expertise are most likely to give rise to a competitive advantage are also the most difficult to acquire and develop internally!

In summary, a company can therefore use outsourcing to access resources and skills she needs... but only when they do not too strongly contribute to competitive advantage.

The approach "opportunism".

The main contribution of this approach is the consideration of opportunistic behaviour which may intervene in an outsourcing relationship. When the number of suppliers or service providers is limited, a company that uses outsourcing is heavily dependent on its regular claimant. Which can then take advantage of the situation to opportunistic behaviour. This situation "small number" may exist as soon as the origin of the outsourcing relationship. It can also occur when the partners realize specific investments. If these investments to improve the functioning of an outsourcing relationship, they cannot be used outside this relationship without losing much of their value.

In the case of a situation "of small number", an externalisatrice company will be forced to invest in contractual mechanisms to protect themselves from possible opportunism of his supplier or the claimant. When the costs induced by the implementation of these contractual mechanisms are too high, it is best to forego outsourcing.

Moreover, the situation will be all the more delicate that the activity is surrounded by a high uncertainty. Indeed, the uncertainty is high, more it is difficult to implement effective contractual mechanisms, and higher risk of opportunism of the provider or the claimant.

In summary, a company can resort to outsourcing when the number of suppliers or providers is high enough and that activity is not characterized by too high uncertainty.

The approach to "flexibility".

As we have just seen, uncertainty discourages companies resort to outsourcing, as it complicates the implementation of contractual mechanisms. However, uncertainty may also encourage the outsourcing. Indeed, it is preferable to a supplier or a service provider investments when they relate to assets which can quickly become obsolete or whose benefits are difficult to assess in advance.

In summary, outsourcing is a very significant flexibility when uncertainty is high. It can include spread risk between several suppliers or service providers rather than difficult reversing commitments.

Three approaches to outsourcing are summarized in the figure above.

An application to the case of biotechnology

Biotechnologies are more important in the health sector. It is estimated currently to 40 the proportion of new therapies from biotechnology. This figure should strongly grow in the years to come.

It is interesting to note that major laboratories frequently outsource research in the field of biotechnology to specialized companies. How to explain this In fact, everything depends on the importance of the above three approaches.

Approach "resources and skills". "Resources and skills", approach the large pharmaceutical companies seem to outsource research based on biotechnology, because they have rarely real expertise in this field. But this approach also suggested they take a risk. Indeed, a pharmaceutical laboratory without any expertise in biotechnology could jeopardize his future in reaching more to innovate.

Approach "opportunism". For major laboratories, the risk of opportunistic behaviour on the part of the biotech companies that work for them is not negligible. For a particular scientific issue, the selection is often limited. However, ways to control the risk of opportunism (taking of participation in the capital, long-term contracts, control of intellectual property...). Moreover, biotech companies have financial resources nor the necessary skills to compete with large laboratories in their field (clinical studies, production, marketing, distribution...).

Approach to "flexibility". The "flexibility" approach is particularly useful to understand the strategy of major laboratories in the field of biotechnology. Indeed, this recent activity is characterized by high uncertainty. Rather than focus on a limited number of projects (which are not safe lead) internally, major laboratories prefer to spread risk by developing relationships with a large number of biotechnology companies. Subsequently, it is perfectly possible to ride in the capital, or even to buy back those projects are the most promising