Military Electronics, Networks, aka C4ISR, Seen As Industry Lifeline
It happened in the post-Cold War defense downturn, and it is happening now: Companies in the defense industry are trying to reshape themselves to be less “platform-centric” and more “C4ISR-centric.”
Translation: Pentagon suppliers anticipate that the Defense Department will not be buying many new aircraft, ships and armored vehicles, but will continue to update the information-technology and networking systems that are essential to military operations, regardless of how tight budgets get.
A desire to put more emphasis on C4ISR — which stands for command, control, communications, computers, intelligence, surveillance and reconnaissance — is the running theme across recent high-profile corporate restructurings in the defense industry.
The president of ITT Corporation’s defense sector, which was spun off and renamed ITT Exelis, said in an interview this week that the company intends to focus on “C4ISR and networking.”
“When you look at the Department of Defense’s priorities, it is the areas of C4ISR, data fusion, networked intelligence and electronic warfare … that have been espoused, whether it’s for new platforms or for upgrading existing platforms,” said David Melcher, former president of ITT Defense and Information Solutions and now the CEO of ITT Exelis.
The scope of the coming reductions in procurements of military equipment is still unknown. But defense spending is in the crosshairs of federal budget negotiations, and big-ticket weapon systems are expected to bear a disproportionate share of the cuts, analysts predict.
Companies like ITT are not taking chances, and are positioning themselves to be more about the software and less about the hardware.
“What is at jeopardy in a period of constrained spending?” Melcher asked rhetorically. “Bigger platforms, things that are more expensive, exquisite solutions” are going to lose funding, he said.
Another tactic for weathering the downturn is spreading the company’s business across a large number of projects, to avoid being at the mercy of one large cash-cow program.
At ITT Exelis, said Melcher, “Not one program constitutes more than 7 percent of our services.”
The largest is a 15-year, $1.8 billion deal with the Federal Aviation Administration to provide new technologies for the FAA’s next-generation air-traffic control system.
Pentagon work includes a Kuwait-based operations and support services contract. Hardware programs are primarily night vision goggles, combat radios and electronic jammers for the military services.
Now the company is trying to break into the potentially lucrative military smartphone market. It recently introduced a secure GhostRider smartphone and GhostWarrior smart tablet that are targeted at military customers.
Melcher said that commercial smartphones have the benefits, features and capabilities desired by Defense users but lack the level of security required to protect secret information. ITT is offering a cryptographic chip that is embedded in the phone battery and could be added to any commercial device.
Another segment of the military C4ISR market where ITT plans to participate is the effort to equip armored trucks with advanced communications suites. The company has teamed with truck manufacturer Navistar to offer a light tactical vehicle that could compete with Humvees.
Further proof of industry’s concentration on information-technology is The Boeing Company’s announcement this week that it is establishing a new business division focused on, yes, C4ISR.
In March, Northrop Grumman rattled the industry when it its CEO Wesley G. Bush announced it was selling off its naval shipbuilding business in order to refocus the company on electronics, robotics and cybersecurity.
Industry analysts read that decision as a sign that building military hardware is a losing proposition for investors.
Melcher said the industry indeed is making adjustments in response to budget churn, but that the defense business is hardly a loser.
“At the end of the day, this is still going to be the biggest defense budget in the world, and there’s going to be a lot of procurement and a lot of modernization that is going to be happening in these budgets,” said Melcher. “I only see [the downturn] as a natural evolution of DoD, with increased calls for more discipline in spending. As a citizen, I welcome more discipline.”