Increasingly, the major players in federal information technology and defense technology services, or government tech services, are the aerospace and defense primes. This government services component represents about 15 percent of revenue for this group, and roughly one-third of its collective $50 billion defense market revenue. Compare this aggregate government services element with six of the major technical services companies in the government market: Affiliated Computer Services Inc., Electronic Data Systems Corp., Computer Sciences Corp., Science Applications International Corp., DynCorp and CACI International Inc. These companies produce government services revenue in the range of $12 billion to $14 billion out of total revenue of approximately $40 billion. This is 30 percent to 35 percent of total revenue.
Based upon these estimates, the six aerospace and defense primes have greater government services revenue then the six technical services providers. The increased presence of major aerospace and defense primes in the government services sector reflects industry trends, current and projected.
Most significant among these trends are:
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The emergence of systems integration of off-the-shelf components in place of milspec |
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manufacturing; |
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Continuing emphasis by the Defense Department on deploying high technology in all |
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phases of defense and intelligence activity; |
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Sluggish demand for major weapons platforms, such as planes, ships and armored |
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vehicles; |
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Full life-cycle support as a critical customer requirement; |
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The interplay of emerging complex technologies with support services requirements |
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beyond government user capability, adding to the momentum of outsourcing and |
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privatization. |
While there are other factors involved, such as contract bundling, these attributes of the market are most important. Analysts estimate that non-government research and development expenditures are five to seven times the level of R&D spending for government and defense markets. Accordingly, it is essential that companies serving defense markets fully leverage commercial R&D when designing and building products for defense markets. By nature, many government technical service companies have developed and applied the skills necessary to succeed in systems integration work. In addition, these service companies are populated by thousands of experienced analysts, logisticians, program managers and other technical support personnel who understand the defense domain. Increasingly, Defense Department customers want to buy products and support services in one integrated package, a “life-cycle support” concept. The typical technical support services components include installation, testing, training, maintenance, spares, field upgrade and modifications. In this context, the imperative for aerospace and defense primes to build and buy technical services components is very clear. |
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