Affiliations are key to future growth. (President's Perspective).

My report to NDIA members this month focuses on an important topic that has long-term implications for the health of our association: the acquisition of affiliated, defense-related, non-profit organizations. As many of you may already know, during the past several years, we have engaged other associations to figure our appropriate ways to work together and find common ground for corporate affiliation.

The purpose of these efforts is twofold. The first is to help grow the association in an environment where the defense industry--after a decade of nonstop mergers and acquisitions--has become much smaller. The defense sector only has a handful of major defense companies. Meanwhile, we see a growing number of small companies entering the market to fill specific service or product needs.

Secondly, we want to expand our coverage of the industry in areas where niche associations have grown to fill a need and a void. Both of these goals aim to better serve the industry by providing one association that covers most--if not all--of the issues and competencies of the defense industry.

Our approach could rake one of two directions: either create internal organizations, which we call "divisions," to address areas we don't currently cover, or to seek affiliation with other associations that focus on a particular area. We have selected affiliation as the more efficient path both for industry and the associations themselves.

Some of the turbulence in the industry is underscored in our membership statistics. For the past two years, NDIA experienced growth in total membership. For every two new member companies we add, we lose one through a merger or acquisition. Further, the wave of consolidation in the corporate world does not seem to end. Our big companies are getting bigger, while we see more and more small businesses being formed by people forced our of jobs as a result of mergers.

And as the industry reshapes itself, we are working hard to keep up with these developments to ensure that we provide the services our membership demands.

The ongoing efforts to expand NDIA by affiliating with other groups began in the mid-1990s, when one of our heritage associations, the American Defense Preparedness Association (ADPA), took on its first affiliate--the National Training Systems Association (NTSA). While it was a total acquisition, NTSA kept its own board, officers and staff--setting the pattern for the affiliations that followed and are underway as we speak.

The affiliations allow the various associations to share common facilities, equipment and staff while retaining their independence to conduct the business for which they were formed. At the same rime, NDIA expands its scope and the ability to provide a wider range of services to its members and the government.

The condition that all members of the affiliated associations also become members of NDIA makes sense, given that the affiliate organizations are, in one form or another, in the national defense business. However, this in no way restricts the functioning of the affiliated association. Its staff conducts the business at hand under the direction of an independent board. Usually, the chair of that board sits on the NDIA board of directors, ensuring cohesiveness in policy, guidance and direction.

One of the unanticipated benefits of affiliation has been a recognized synergism between associations--both in terms of governance and economic operations and efficiencies, Sharing services (legal, financial, office space and equipment) significantly reduces the cost of operations, especially for smaller associations.

I would like to point out that the success of the program has helped convince many that it's a win-win proposition. Several associations that had not at first supported affiliating with us are reconsidering their position. In addition, the working agreements between NDIA and its affiliates provide for an amicable dissolution, should things not work out. To date, none of our affiliates has even come close to contemplating this option.

Having said that, however, I wish to assure you that affiliation is not for everyone. We conduct a very thorough "due diligence," to be sure that a proposed affiliation is not only consistent with the mission of both organizations, but also provides "value added" to the parties involved. Not all proposed affiliations have met those criteria.

The affiliations we have undertaken to date clearly emphasize the win-win aspects of the program. For example, the annual NTSA symposium in Orlando is not only our biggest draw in terms of attendance, but it also showcases NDIA before some 15,000 people whose primary focus is training and simulation. Women in Defense (WID), has been successful in recruiting members and starting new chapters in places where we have no NDIA chapter. We are now working to capitalize on these developments. The affiliation of the Precision Strike Association (PSA) has proved to be a success, and became a catalyst for the recent affiliation of the National Correlation Working Group (NCWG), whose mission is to help improve the war fighters' access to battlefield intelligence.

Further, the affiliation of these groups has attracted several other niche associations whose membership will help us fulfill our vision-- "To be the leading defense association promoting sound national security policy while advancing the interests of the industrial base."

The affiliate program is ongoing. We are conducting vigorous discussions with several associations. NDIA invites your questions and encourages the participation of those associations looking for a better way to serve their government and defense industry customers.

Please e-mail me your comments at [e-mail].