A close military-civilian partnership is indispensable to ensuring technology capabilities are properly leveraged to serve the national defense. The military is challenged to work in complex and demanding operational environments, on a nonlinear battlefield with no defined frontlines.  To accomplish their mission the military relies on decision and information superiority.  This information is provided through the Global Information Grid, its networks and the devices, that collect the data, synthesize, transmit information and the hardware and the software programs that make this possible.

As part of its analytical work, CommerceBasix and its team provide in-depth financial and economic assessments relevant to the project or program under evaluation.  The work products can rangefor example from a classic analysis of a company’s financial statements to a far more sophisticated evaluation of regional, national, and global factors that are or will influence technologies and suppliers under consideration.

But why is this important to the Department of Defense client or supplier?

Globalization and the volatility of the financial and world markets directly affect the ability of the military to source and procure some of the most fundamental and critical technologies on which their systems depend. There will always be military specific technologies; however as the dependence ontechnologies that support sophisticated battle space awareness, command and control, and other C4ISR applications out to the edges of the network grows, the more interaction and dependency there will be with private sector innovation. There is more alignment with the technologies developed, built and deployed in the commercial market whose company’s ownership, technology development, financial stability, product cost and product price are driven by and dependent on the global market.This is a market where the norm is rapid response to rapidly changing market demand. These actions can occur in a few months or less than a year.

Why are the business and financial models of the market and its suppliers important, to the military? Because they have a direct impact on the strategy, survival, and product and market focus of these vendors.  The downstream effects for the military can be multiple: expertise, production and ownership can be located offshore; competition will drive down price; functionality will continue to increase; innovation will continue with rapidity; the demands of the commercial market may more closely align with the capabilities needed by the military.

In this market companies will be bought, corporate divisions will be sold; companies will be taken private; companies will expand their market focus through mergers and acquisitions and/or joint ventures; investors/shareholders will change the development focus or the company’s technology strategy, and in some cases, although their technology is promising it might not have a market or a big enough market and therefore the company is no longer financially viable.  This could have a direct adverse impact on a defense supplier or program.

To successfully compete in the global technology, large technology companies are fueling this activity by divesting a wide range of business activities deemed to be nonessential and by acquiring companies that are essential to their business activities. Market consolidation will continue with the thinning out of  “kind-of-lost” public companies that cannot compete nor afford to be public.  Mergers and acquisition professionals say that publicly held technology companies—unless they have extraordinary growth prospects—need at least $200 million in market value to justify remaining independent. This puts pressure on smaller companies lacking that critical financial mass.  Small to medium companies who focus on aerospace and defense are not immune to these market forces. In addition to being dependent on government contracts which can create interim or long term cash flow issues they also rely on credit from financial institutions all of which impact their survivability, technology development, ability to scale and to grow,

Knowledge of these market factors is essential to the military’s analysis of affordability, technology feasibility and schedule. It is not just development alone; this knowledge is critical to determining life cycle costs, upgrades and replacement of these systems, the supply chain from which these technologies are available and the forward costs of these systems.

Examples of these technologies are:  improved waveforms, Quality of Service (QOS) whether through improvements in hardware, software or waveform enhancements; continued development of wireless technology to address propagation and bandwidth issues in dense urban environments; development and deployment of standards based technology; the sophisticated handling of rich media and applications through the complete implementations of IP Multimedia Subsystem (IMS); the move to  “everything over IP and IP over everything” networking strategy; advances in semiconductor speed and functionality; continued reduction in size, weight and power consumption of semiconductor devices; continued increases in code execution speed through the use of multi-core processing technology; the development of Systems on a Chip (SOC) which continue to incorporate more powerful microprocessors, DSPs, cryptographic, anti-jamming and anti-tampering functionality, put into lower cost and lower power devices.