Outsourcing is defined by some as a division of labor. It is the act of subcontracting certain aspects of business operations, to another company. It is generally intended to save on time and resources, thus saving costs.
In the biotechnology industry, many small startups don't have the resources to perform all aspects of their business, so a request for proposals (RFP) will be made, inviting other companies to bid on the contract. Even mid- or large-size companies don't always have the personnel, equipment, space, or technology to carry out every step in the research, development, processing and marketing chain that is required to take a new drug from early concept stages to licensing to the sales shelf. There are many outsourcing options for companies to fill the gaps in the chain, rather than invest the money it would take to do it alone. When certain tasks are outsourced to other companies specializing in those operations, a startup is free to focus on it's own areas of strength.
There are also many different ways responsibility can be shared between two companies when tasks are outsourced. Sometimes a so-called outsourcing agreement is more of a partnership, depending on who is making all the decisions and how much the ownership of proprietary IP is shared. The degree to which information is shared must be carefully considered and should be outlined in the RFP.
With approval of their new drug application, the startup chose to outsource manufacturing to a CSO, because it would save the cost of building a production facility.
