LONDON --- The increasingly multi-polar world order of 2019 is expected to result in continued geopolitical tensions as well as economic and industrial disruptions. This will drive an arms race as global powers recalibrate diplomacy, embrace new technology, and adjust industrial policies.
Global militaries will look to revisit procurement dynamics and their capability requirements. Furthermore, many operators will seek to procure stored or secondhand platforms, invest in modernisation, and review non-traditional defense suppliers or new business models to mitigate economic costs in a volatile environment.
"Major powers are investing in C4ISR, advanced missile defense systems, and network-centric warfare models to compete in complex and dynamic threat landscapes,” said Arjun Sreekumar, Consultant & Senior Industry Analyst, Defense at Frost & Sullivan. “Research, development, testing, and evaluation (RDTE) in emerging military technologies such as hypersonic missiles, energy-based weapons, and integrated cybersecurity solutions will increase as industry and governments augment their technological prowess.”
"This year will present a large number of new opportunities in Asia-Pacific, the Middle East, and Central and South Asia regions for sales of technologically advanced equipment, such as precision weapons, weaponized UAS, naval systems, and integrated MULTINT platforms,” noted Sreekumar. “The US and Europe will continue to be high-revenue markets in 2019 but will not yield as many new opportunities as the aforementioned regions, as outlays will be mainly directed toward existing programs and new RDTE."
Competition in defense procurement is on the rise, with some OEMs competing on price, while others are involving more government-to-government linkages in negotiations and offering broader elements of technology transfer in the solutions provided. With China and Russia aggressively pursuing defense exports, Western OEMs need to prepare value propositions and solutions in terms of added benefits, such as extended maintenance support and flexible financing support, to compete.
Further growth opportunities OEMs should harness for future success include:
-- Forging strategic partnerships with governments, MoDs, and local industry as traditional buy-and-use relationships are no longer pursued in most major markets.
-- Broadening OEM portfolios to include specialized upcoming weapon technology, such as hypersonic and directed energy weapons, and also preparing to engage government and local R&D agencies in the same segment.
-- Increasing indigenous components and local micro, small and medium enterprises (MSME) in defense projects. Offset flexibility is on the rise, but so are offset quantity mandates.
-- Offering market-specific business models, such as paid downstream services, outsourcing, etc., to capture new funding-constrained markets.
Frost & Sullivan’s recent analysis, Global Defense Outlook, 2019, presents a macro view of global military realpolitik and regional customer requirements in terms of platforms and subsystems, emerging technology and industry dynamics.
Global Defense Outlook is the latest addition to Frost & Sullivan’s Defense research and analysis available through the Frost & Sullivan Leadership Council, which helps organizations identify a continuous flow of growth opportunities to succeed in an unpredictable future.
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