Diversification Helps Training & Simulation Companies Seal Defense Contracts.

Business Editors

PALO ALTO, Calif.--(BUSINESS WIRE)--Jan. 12, 2004

Participants in the U.S. military training and simulation (T&S) markets are focusing on diversifying into the lucrative operations and maintenance (O&M) sector in an effort to sustain and increase market share.

A series of cost-saving initiatives by the U.S. miltary and Department of Defense (DoD) in terms of research, development, test and evaluation (RDT&E) have opened a floodgate of opportunities for simulation companies in the form of O&M contracts.

New analysis from Frost & Sullivan (www.Aerospace.frost.com), U.S. Military Training & Simulation Markets, reveals this market generated $3.63 billion as revenue in 2002 and is likely to reach $4.46 billion by 2010.

"T&S companies need to develop their simulation systems in tandem with management and maintenance plans to succesfully venture into the O&M space," says a Frost & Sullivan Research Analyst. "Another route for diversification is through mergers and acquisitions of companies that specialize in logistics support and O&M related activities."

The U.S. military has revamped its acquisition policy by utilizing simulation training, as it costs less than 5 percent of total expenses of live training. Simulation systems are also proving to be economical in consumption of fuel, ammunition, and manhours.

Several branches of the military have increased the number of contracts for services related to facilities, equipment, and personnel For instance, the U.S. Airforce has issued a long-term contract for flight simulation training for F-15 and F-16 platforms under the Distributed Mission Training contracts. The U.S. Army has followed suit by issuing a similar contract under the Flight School XXI contract.

In a few instances, the military has allowed the contracting companies to operate and maintain existing facilities and programs including combat training ranges for live exercises.

Companies vying for these contracts should be aware some systems liable to be cancelled before the completion of their originally planned lifecycles. For instance, the total requirement for F-22 aircraft has been cut back more than once, which obviously in turn, reduces the need for T&S systems for those aircraft.

"The key to winning contracts is to hire specialist sales and marketing personnel with a thorough understanding of defense requirements and the ability to quickly grasp the impact of ongoing politics within Congress and the Pentagon," says the Frost & Sullivan analyst. "Another equally vital task is to hire competent systems engineers capable of identifying, determining, and executing customers' requirements," he adds.

Quickly advancing technology and tight delivery deadlines have created a compelling need among participants to be the 'first-to--market'. They are further pressured to acclerate delivery by the new defense doctrine mandating strategic changes and the growing demand for state-fo-the-art simulation systems, a must for combat operations in urban terrain (MOUT) and special operations forces (SOF).

For reducing time-to-market, vendors need to streamline their time-consuming product development procedures. One alternative to overcome this double-edged problem is to subcontract a portion of the R&D process to another equally well-equipped company.

The U.S. Military Training & Simulation Markets, part of the Aerospace & Defense subscription, examines the demand for six categories of T&S systems: air and space, land, sea, C4ISR, training ranges, and education programs. It also examines the current market trend for procurement, RDT&E, and O&M besides providing revenue forecasts and information on market share and competitive landscape. Executive summaries and interviews are available to the press.

Frost & Sullivan, an international growth consultancy, has been supporting clients' expansion for more than four decades. Our market expertise covers a broad spectrum of industries, while our portfolio of advisory competencies includes customized strategic consulting, market intelligence, and management training. Our mission is to forge partnerships with our clients' management teams to deliver market insights, create value, and drive growth through innovative approaches. Frost & Sullivan's network of consultants, industry experts, corporate trainers, and support staff spans the globe with offices in every major country.

U.S. Military Training & Simulation Markets

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Keywords in this release: U.S., military, training, simulation, T&S