The paper discusses the process of externalization and the contracting out of R&D and technical activity. The focus of the analysis is on the outsourcing of R&D and technical activity undertaken by firms and now outsourced to companies and organizations which supply the Contract Research and Technology (CRT) market. The analysis highlights that not only is it important to understand the factors in the demand for such services but also in changing dynamics of the nature of the research and technical services supplied and the way they are supplied. The paper then investigates the implications of these dynamic trends for the conduct of the R&D function, particularly towards research externalization and outsourcing, via the use of firms and organizations involved in contract research and technology.