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Lemmings, Outboards and Carriers

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I’ve been told that I can be very opinionated, although I don’t see it. I try not to follow trends like a lemming heading for the cliff–which is what I think many mainstream journalists have been doing for the last six months. Why weren’t they pursuing or exploring warnings about impending problems that were issued by some experts to the public and Congress two years ago? It’s like after 9/11. On 9/12 Congress wanted to hold a lynching party, but didn’t want to admit its failure to act or fund requests to warnings that came long before 9/11.

So here I sit trying to get a pulse of the market to ensure the focus of COTS Journal stays on target. Daily, I’m talking to people and reading as many publications as I can about the military market–all in an effort to get a consensus view from as many sources as possible. More than 90% of the information I’m getting says that the military embedded computer market won’t see any overall change for at least the next 18 months–no change resulting from action by the Administration or Congress, that is. No one really wants to speculate beyond the 18 months because everyone’s waiting to get a feel for the Administration’s post-election plans and abilities. After a change in administration or Congress, political commitments by everyone running for election result in some shuffling of the deck chairs with respect to military programs. So we will see that happening in the next 6 months.

One issue that only a few people are commenting on is the effect that the general economic climate may have on the embedded mil market. If we have layoffs, cut backs and plant closures in the general electronics industry, that will affect the military market. The military still relies heavily on what mainstream electronics would call “older technology.” The larger wafer dice in the semi industry are one example. They’re easier to package and harden for producing products that perform in extreme temperatures. In all this downsizing and cost-cutting, the older facilities and fabs are the ones that will be taken off-line and closed at a much quicker pace than we’ve seen in the past. So any last-time buy opportunities will be almost instantaneous. Companies that buy these wafers for speculation and hold on to them for future hardening and packaging may be much less eager to fund inventory purchases in the current economic climate. We will see this trend of trimming in all but the most productive process throughout the supplier chain.

Now that I’ve dragged you all into deep depression, let’s see if we can all cheer each other up by considering some possibilities that may really have a very positive impact in our marketplace. Secretary of Defense Gates is a strong proponent of modernizing the military. That doesn’t mean he’s pushing for DDG-1000s, F-22s or FCS. Like Don Quixote, he’s trying to get the old guard military leaders to accept the fact that their future concern will less likely be a peer-to-peer conflict, but rather more of the same we are encountering in Afghanistan. And, like it or not, the U.S. will be the country engaging these situations. Irrespective of how hard the new administration reaches out for closer ties and support from our allies and other nations, their response will be token at best. The rest of the world has become very aware that, when it comes to causes that we wish to pursue, we will carry the burden if they hold back.

Gates is also very aware of and concerned over the Pentagon’s procurement philosophy of getting twice as much technology as a trade-off for half as many systems. This process puts us on a path for doom. By working the increased technology trade-off for decreased quantity scenario to some stupid conclusion we get down to one hellacious system that can do everything. But a small number of such systems is no match when combating tens of thousands of 1960-era technology systems or street fighters with RPGs in city rubble. You can’t get away from the fact that sheer numbers reach a point of being able to defeat the highest capability.

So how is this all good for the military embedded computer market? It means that we can see an increase in retrofits and upgrades of older and current systems ensuring the availability of a larger number of systems. And, if we find real wisdom in the Administration and its new appointees, and they push the old guard into changing, then we will also see the potential for newer and a greater quantity of less-leading-edge systems using more standard off-the-shelf type of technology. Development money will shift from extreme sophisticated technology for finding solutions to more practical problems using available technology. These systems will not be in quantities of a few but quantities of thousands. This takes us right back to higher standard production numbers being more profitable than developing an extreme product to produce just a handful.

This philosophical change to modernizing the military requires a mind-set change by the old guard leaders. Here’s an analogy I’ve used many times before: This is like trying to turn an aircraft carrier with an outboard motor. This can be an impossible task for an administration that does not have a Congress supporting the effort. The new administration appears to have a good relationship with Congress now. But we’ll need to see if it can move Congress to support any positive changes. Otherwise we end up with just another aircraft carrier outboard motor analogy.