With cuts in defence budgets constricting defence contractors' revenues, commercial markets are emerging as a viable alternate revenue stream. Defence contractors could leverage the technological expertise acquired while developing advanced products for Ministries of Defence (MoDs) to enter the larger commercial markets. Before that, however, they have to familiarize themselves with its practices and regulations to better market their products.
New analysis from Frost & Sullivan (defence.frost.com), Dual-Use Technology, finds that dual-use is not always a clear concept. It needs to be identified, defined and understood so companies can make the most of it.
The move to commercial markets will require effort and a change of mindset from defence contractors. Selling military-inspired products to commercial organizations is a complicated process, as export regulations are highly restrictive. Defence contractors have to be prepared to deal with lengthy processes and adhere to regulations as closely as possible to avoid penalties.
"Despite the opportunities, it is essential that defence companies are aware of the operating challenges in a commercial market fragmented supplier environment, fierce competition and shorter product development and to market cycles, self-funded R&D, and high volumes of production," said Frost & Sullivan Aerospace & Defence Consultant Thomas Saquer.
An extensive technology portfolio and R&D programmes will allow defence contractors to successfully foray into in the commercial market and compensate for the drop in revenues from defence.
Federal agencies spend a considerable amount of money on research and technology (R&T). Therefore, they consider reaching the commercial market through dual-use technology as an opportunity to boost the economy and create a positive environment for employment.
Defence contractors are often involved in fundamental and expensive, state-of-the-art research with government laboratories. Commercial companies, on the other hand, are reluctant to invest huge sums in research due to the lack of a demonstrable short-term return on investment.
"In this scenario, dual-use technology enables the government to engage in risk sharing partnerships with private companies and rationalise the R&T spending, thus saving money while generating new revenues," noted Saquer.
If you are interested in more information on this research, please email Anna Zanchi, Corporate Communications, at anna.zanchi[.]frost.com
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