Defense Secretary Chuck Hagel got a jump on the budget season recently by outlining cuts that will be made to the Department of Defense’s budget request for fiscal 2015. From the content of Hagel’s remarks it’s easy to conclude that no part of defense spending will be spared the budget axe. Indeed, the doom and gloom surrounding the DoD’s FY 2015 budget has been a constant theme in the press since the Secretary’s presentation. Lost in the noise, however, is the fact that Hagel indicated an area of technology spending that would not suffer as badly - intelligence, surveillance, and reconnaissance (ISR). At the risk of stating the obvious, the shrinking ranks of military personnel should force an increase in the use of technology solutions to fulfill the DoD’s mission. The question is where will the dollars flow once the budget has been approved?
General Martin Dempsey, Chairman of the Joint Chiefs of Staff, is on record as being a big supporter of unmanned systems. To quote comments he made back in 2012 at the Joint Warfighting Conference and Exposition: “Unmanned technologies are on the rise, and they’re gaining importance not only in terms of effectiveness, but also in terms of their versatility and value. In an era of fiscal constraint … a platform that offers those traits will almost always be the right one in which to invest.” Taking direction from this, it’s logical to assume that the DoD’s investment in unmanned systems will continue to be strong. It may not rise by much, but in today’s environment flat is the new up.
The DoD’s Unmanned Systems Roadmap, published in 2011, offers some guidance on where DoD investment might go. According to the Roadmap, spending to develop and acquire unmanned capabilities was expected to total $36.4 billion through fiscal 2016. Although these forecast totals have come down somewhat in the years since 2011, DoD requests for funding related to unmanned systems have still remained north of $6 billion per year, illustrating the importance the department places on this technology area.
The DoD anticipated spending 85% of its ISR investment dollars on air systems, 14% on ground systems, and 1% on maritime systems. Recent developments reinforce the fact that these priorities remain intact. For example, in late 2013 the Air Force ISR Agency issued a new strategic plan that outlined the need for a shift in spending from unmanned ISR assets capable of operating in “permissive” environments to those that can operate in contested ones. The Marines are also interested in unmanned systems, piloting a new unmanned Mobile Detection Assessment Response System (MDARS) in Afghanistan. Capable of patrolling an area up to one-mile away, MDARS is capable of doing intelligence gathering duties the Marines won’t have the personnel to perform.
Implications for IT Providers
Where does this focus on unmanned ISR leave information technology providers? In the cat-bird seat, to be honest. The massive amount of data that unmanned systems generate has a significant knock-on effect for Defense IT spending. So much data is produced so quickly that human beings cannot make sense out of it and yet the DoD wants to make data driven decisions. The need to make sense out of the data automatically generates requirements for more and better storage solutions, as well as database software and advanced analytics. Also, as the DoD seeks ways to utilize satellite-based electromagnetic bandwidth to transfer the data, its need for advanced data management products and services will only grow.
In sum, the DoD’s turn toward unmanned systems is a boon for IT providers, especially those that offer big data solutions. Deltek recently forecast in its Defense IT: Strategy, Implementation and Challenges report that the DoD’s addressable core big data market will rise from an estimated $670 million in FY 2013 to $880 million in FY 2018. This equates to a CAGR of 5.6%. So, while the Defense budget may be dropping overall, there are areas of opportunity for those properly positioned to take advantage of the market and technology trends. Big data solutions related to ISR data collected from unmanned systems is one of those growth areas.