Aerospace & Defense: The Challenges Ahead
Author:CSC Town Hall
The aerospace and defense industry has reached a pivotal point - as it faces program cancelations, the impact of sequestration on defense spending and modest market growth in aerospace. While companies of all sizes are still experiencing cutbacks, the industry is focusing on growth through product innovation, joining with new partners and suppliers, and attracting a new generation of skilled workers, according to the 2013 A&D Market Survey sponsored jointly by CSC and the Aerospace Industries Association (AIA).
- Christian Marrone, Vice President, National Security & Acquisition Policy, AIA
- Tim Ellis, A&D Industry General Manager, CSC
- Jeff Caruso, Senior Managing Editor, CSC
Aerospace and Defense: The Challenges Ahead
The aerospace and defense industry (A&D) has reached a pivotal point as it faces program cancellations, defense spending sequestration and only moderate market growth in aerospace. Companies of all sizes may be cutting back - but they're still focusing on opportunities for growth.
This CSC Town Hall discussed these and other major trends reported in the 2013 A&D Market Survey sponsored jointly by CSC and the Aerospace Industries Association (AIA).
This year's survey highlights the difficulty companies will face in addressing a growing knowledge gap. Tim Ellis, general manager for CSC in aerospace and defense, says the issue is twofold. "The average age of the workforce in aerospace is increasing dramatically. It's also difficult to attract people to this industry because this industry is viewed as stodgy compared to tech companies like Apple and Google," he says.
The effect of a combined $89 billion sequestration cut in defense spending over 2013 and 2014 will be felt most acutely in the thousands of small companies that comprise the nation's industrial base. Christian Marrone, vice president for national security and acquisition policy at AIA, says that will play out in the workforce. "Not only will you have to lay off people today, but that's also going to make it harder to attract the workers you need to build that next generation of capabilities our service members rely upon," he says.
Indiscriminate cuts to defense spending will have a significant impact in the long term, Marrone says. "Our industry has always been at the cusp of these emerging technologies. Fifty percent of federal research and development spending comes from the Defense Department, and that area will be significantly affected by continuing sequestration cuts," he says.
While the cuts are painful, the pause in programs is creating an opportunity for companies to undertake modernization efforts in all aspects of the business. Ellis says the survey reveals that some trends like cloud computing will take time to sort out. "There's some confusion about the different types of cloud infrastructure and as-a-service models, but they're seeing how the ability to scale these services up and down is a big benefit in a cyclical business climate," Ellis says.
The report shows that companies are searching for ways to grow, too. One strategy is a new emphasis on product innovation and design. "3D printing was kind of a science project, but now we're seeing some amazing developments like a 3D-printed car. That could be a huge disruptor in product innovation," Ellis says.
Commercializing defense technology is another important trend. "GPS started as a military system, and receivers were once the size of an engine. Now you carry several with you. Heads-up displays are moving into the medical industry,” Ellis says.
Survey respondents say that establishing new relationships with suppliers and customers will be a key strategy in the effort to pursue new business opportunities. "The supply chain is becoming ever more complex, and it's clear there's value from managing it well,” Ellis says. Doing so requires a deeper relationship and more trust. "You have to open up and share some sensitive information. If you do that in a trusting way, you can crack the code and gain significant value out of your supply chain," he says.
Marrone says companies can respond to these challenges by getting engaged in the political process. "We're at a key moment where House and Senate budget committees are putting together recommendations. Companies need to share their issues with sequestration with their members of Congress. The most powerful voice is the workforce itself."
Ellis agrees. "There are some amazing innovations coming out of this industry. It's one of the strongest parts of our manufacturing capability. It would be tragic for us to lose the investment and lead we have technologically."
Other topics discussed during this Town Hall include:
- Disruptive potential of Big Data in the A&D industry
- Security needs in a world of growing connectivity
- Benefits and challenges created by globalization
- Pricing pressure and buying behavior changes in commercial and defense sectors
- Hottest opportunities for expansion in commercial aerospace
- Opportunities for mergers or acquisitions