COTS suppliers calm despite big DoD cuts on the horizon

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February 01, 2012

Suppliers of Commercial-Off-The-Shelf (COTS) products are calm even thought they know big cuts are coming to the defense market.

Those I spoke with in January at the Embedded Tech Trends conference in Cocoa Beach, Fla., and AFCEA West event in San Diego see opportunities in unmanned systems, new radar systems and radar upgrades, surveillance, and major platform retrofits.

Their argument just as with those I heard from before the Congressional Super Committee missed its sequestration deadline for fixing the deficit in November. As the government eliminates major platforms, brings troops home, and eliminates civilian and uniformed staff, they will still need intelligence on what is happening in the world via payloads on unmanned systems, satellites, manned aircraft, etc., that perform intelligence, surveillance, and reconnaissance functions -- which is the bread and butter of military embedded electronics suppliers.

The missed sequestration deadline essentially means there could be across the board cuts to the DoD budget totaling as much as $600 billion -- unless Congress changes the law again or they accept President Obama's alternative budget plan which proposes to cut closer to $400 billion out of the DoD budget.

As the prime contractors cutback they will begin outsourcing more toward COTS suppliers to save costs and possibly replace expertise lost from workforce reductions.

One's first response when hearing that big DOD cuts are coming, would be that it is a sign of impending doom for defense COTS suppliers. However, if you remember, President Clinton's years in office did not coincide with increased defense spending, yet COTS suppliers saw growth during those years -- and that was when COTS was a dirty word among the prime contractors as they thought the government was shoving COTS down their throat.

So while the cuts will be deep, COTS vendors have a bit of history on their side along with a proven track record. It also helps that military leaders -- such as the Army Aviation commanders -- are coming out publicly and saying they want COTS and systems that do not require government investment up front.

During a press conference last fall at the annual meeting of the Association of the U.S. Army (AUSA) Maj. Gen. William Crosby, Program Executive Officer, Army Aviation said even better than just a PowerPoint slide, the military needs products and systems that meet requirements and can be put into a demonstration quickly for testing.

That's pretty much what COTS vendors have been doing for years.