“Apart from this, the ten-year construction saga of the corvette "Gawron" clearly indicates how expensive the purchase of single advanced weapon systems can be. With such small forces PN will be unable to provide effective maritime protection of energy supplies to Poland, including liquefied gas shipments from Qatar to the LNG terminal in Swinoujscie.”

This raises questions about the MoDs strategy for naval procurement and purchasing priorities. The top most priority in the MoD should be the purchase of three modern submarines, equipped with air independent propulsion system (AIP), as well as the acquisition of three corvette vessels or ocean patrol vessel (OPV) class such as Govind (DCNS) or Visby (Kockums).

Therefore, the MoD should prioritise a combined tender for purchase of three modern submarines and three corvettes/OPVs. The combined cost of these purchases would be in the range of $1.4-1.8 billion. This is in excess of funds allocated for the modernization of the Navy by 2018, but it is still within the budget limits of the Ministry of Defence. To paraphrase the favourite saying of the former U.S. Secretary of Defense - Robert M. Gates – the implementation of the maritime program would be difficult but not impossible.

Potential participants in the tender would be shipbuilding companies from Europe such as DCNS, Howaldtswerke-Deutsche Werft, Navantia, and Kockums. It could also include the participation of Asian companies such as Daewoo Shipbuilding & Marine Engineering and Mitsubishi Heavy Industries with Kawasaki Shipbuilding Corporation. Such a large group of applicants would facilitate better negotiations thereby leading to favourable conditions of the contract, including technology transfer and participation of the Polish shipbuilding industry in the program.

The maritime project on the one hand would increase the combat potential of the Navy and on the other would bring modern technologies and benefits, not only for the shipbuilding industry but for the entire Polish economy. However, the implementation of the maritime project needs courageous decisions from MoD decision makers to achieve the realization of the programme.”

New analysis from Frost & Sullivan, “Land-based Optronics Market,” finds that the total market for land-based optronics will be valued at around 30.77 billion USD over 2010-2016. This includes all soldier-mounted and vehicle-based optronics infrastructure. The research service covers Australia, France, Germany, the United Kingdom and the United States, and includes an examination of major modernisation programmes in India and parts of Europe.

“The land-based optronics market is perceived as being only marginally affected by reductions in defence spending,” notes Frost & Sullivan Programme Manager Balaji Srimoolanathan. “Although soldier hand-held and man-portable optronics devices will be procured in large numbers, the majority of revenues will be generated by vehicle-mounted/integrated optronics solutions.”

Reconnaissance, surveillance and target acquisition (RSTA) have become a critical part of armed forces’ capability to ward off any potential threat from a variety of sources. Land-based optronics solutions will enjoy precedence over air- and navy-based optronics solutions in the near future due to the existing operations in Afghanistan.

“However, there will be high demand for navigation and surveillance equipment for reconnaissance and armed personnel vehicles from the emerging economies like India, Brazil, Russia, South Korea and others who are involved in huge fleet modernisation processes,” remarks Srimoolanathan.

Power needs of hand-held and man-portable optronics equipment are expected to increase ten-fold in the next five years. Overcoming the power problem, therefore, will emerge as a key challenge for suppliers in this market.

A number of countries in Europe use image intensification binoculars/monoculars for surveillance. Investments in thermal imaging technology have not been significant. In the next 5-8 years, parts of Europe, Asia and the Middle East are projected to witness a shift in trend, as these countries will try to reduce the capability gap existent with their land-based C4ISTAR.

“There is a huge disconnect between the market and policy makers in emerging economies, particularly in India, countries in the Middle East and a few in eastern Europe,” cautions Srimoolanathan. “Understanding or foreseeing the need or demand of a particular nation becomes a formidable challenge for suppliers when they venture into these emerging markets. Strategic joint ventures/partnerships between two companies that complement each other in terms of products and services offered will be critical.”

Land-based Optronics Market is part of the Defence Growth Partnership Services programme, which also includes research in the following markets: European Homeland Security and European Vehicle Survivability Market Assessment. All research included in subscriptions provide detailed market opportunities and industry trends that have been evaluated following extensive interviews with market participants.

Frost & Sullivan in the recent “European Defence Support in Service Market Assessment” forecasts the total support in service outsource spend in Europe will increase from $13.77bn in 2011 to $22.07bn in 2020. Modernization, Training and Heavy Maintenance support for platforms are areas that are most likely to be outsourced.

“More Ministries of Defence (MoDs) are now considering or employing a multi-source level of support which includes an amalgamation of the different segments to suit their needs,” says Anthony Leather, Research Analyst for Frost & Sullivan Aerospace, Defence & Security group.

Traditionally air platforms have been the first to be outsourced. They are more complex, the costs of maintenance are high and this is where most benefit and cost saving can occur from industry involvement. Frost & Sullivan believes that around 52 per cent of outsourced spend over the next ten years will be on air platforms.

The level of industry integration in support in service differs throughout Europe. The UK has led the way, incorporating industry into their support model. Many Western European and Nordic countries are following this approach with France and Spain likely to be the next countries to outsource more of their support.

“Many armed forces have built up large in house capabilities, like Germany and Italy, to maintain their equipment. This has required substantial investment and time, making them reluctant to change their support model and turn to industry. Nevertheless, budget pressures are forcing countries to be more efficient and explore new support models,” comments Anthony Leather.

The concept of outsourcing support to industry is growing in Eastern Europe, however not to the extent of other regions. There are still many Russian made platforms in the Eastern European market which limits support opportunity.

Creating strategic partnerships with industry can provide opportunities to achieve cost savings and maintain capability. This arrangement has proven to be successful; especially in the role that industry has played alongside military support personnel in Afghanistan.

“Companies that provide support in service must highlight cost saving opportunities to MoD’s. Flexibility within these support contracts is vital to allow armed forces to adapt to emerging or unforeseen threat,” advices Anthony Leather.

“Further industry integration in support is inevitable for armed forces throughout Europe, however the extent of this involvement remains under the control of the MoD, for now,” concludes Mr. Leather.

The Frost & Sullivan research service entitled “European Defence Support in Service Market Assessment” provides an overview of key trends within the maintenance and support activities in the European Defence Market. The research also identifies the key market drivers, restraints and opportunities, and analyses their impact. It provides key findings, strategic insights and a set of actionable recommendations for companies that wish to enter the Support in Service Market in Europe.

New analysis from Frost & Sullivan, European Military Land Vehicles Market Assessment, projects total market revenues at $ 4.52 billion in 2010 and it is expected to reduce to $ 2.01 billion in 2018. The reduction in revenues is mainly due to cuts in spending; however lack of visibility on future programs that might arise after 2015 is also to be considered. The following market sectors are covered in the research: military land vehicles and unmanned ground vehicles.

“At present, urgent operational requirement (UOR) procurements represent an important market driver,” remarks Frost & Sullivan Senior Research Analyst Mahendran Arjunraja. “Once the Afghan operations come to a halt, the market is anticipated to migrate from UOR towards planned modernization programmes, which have been pending for some time.”

Although European countries are curtailing their defence budgets due to the current economic turmoil, significant opportunities continue to exist in the military land vehicles market. The lessons learnt from recent conflicts will motivate armies to opt for advanced and more efficient equipment. Therefore, governments have been changing their focus from quantity to quality. Countries like France, Germany, the United Kingdom and Turkey would be the major markets during the forecast period.

“The noticeable trend in the European land combat vehicles market is the reduction of vehicle procurement numbers,” notes Arjunraja. “In the future, defence suppliers will be unable to enjoy economies of scale unless they innovate. Focusing on other global emerging markets might be also a solution to keep the market share.”

End users have been emphasising the importance of low-cost, yet high-quality, equipment. Striking a balance between both and offering suitable solutions present a challenge for suppliers.

“Defence companies must ensure they develop cost-effective offering since absolute cost of equipment will be a key decision making factor,” advises Arjunraja. “Companies which had been benefiting from UOR procurements should start focussing on opportunities in planned defence procurement programmes.”

According to the recent analysis from Frost & Sullivan (Italy: Air Platforms Market) the total market size is nearly $14 billion for air programmes over the period 2011-2020. The following segments are covered in the research: manned platforms and unmanned platforms with sub-segments covering C4ISTAR, and training and simulation.

“Opportunities within the Italian defence market are driven by new platforms and C4ISTAR procurements, although only in the medium- to long-term,” notes Frost & Sullivan Consultant Aman Pannu. “In an effort to save up to EUR 5 billion, the Italian Ministry of Defence (MoD) is planning to cut some major programmes such as the Eurofighter, which has been reduced by 25 units.”

This means that Italy will only buy the already-ordered 21 of the planned 46 Tranche 3A variants. It is highly unlikely that Italy would undertake any new major platform procurement before 2013 at the earliest.

Manned platform revenues are set to slightly decrease in 2013 as the acquisition of M-346, NH-90 and CH-47 is completed. It then flattens out as the procurement of F-35s commences in 2014. Revenues from the latter part of the decade are likely to derive from upgrades.

“Although at present most MoDs execute major procurements by taking the through-life route, Italy still maintains the bulk of the platforms in-house,” remarks Pannu. “This practice is expected to change as the current economic situation is likely to push the Italian MoD to consider future procurement in the form of service-based contracts.”

“To enter the Italian defence market, especially amidst the current economic turmoil, partnership with the domestic participants is the easiest entry strategy,” concludes Pannu. “This is particularly so, since there is still exists a fair degree of red tape.”

Frost & Sullivan enables clients to accelerate growth and achieve best-in-class positions in growth, innovation and leadership. Frost & Sullivan leverages 50 years of experience in partnering with Global 1000 companies, emerging businesses and the investment community from more than 40 offices on six continents.

New analysis from Frost and Sullivan (http://www.aerospace.frost.com), Revenue Opportunities and Stakeholder Mapping in the United Kingdom Naval Programs, finds that the current focus in the defence establishment is on developing capabilities for global expeditionary operations with the United Kingdom aspiring to play a leading role in coalition operations. The following segments are covered in the research: C4ISR, naval training and simulation, and unmanned underwater vehicle in the naval defence domain.

"Ongoing major programmes related to aircraft carriers, Type 45 destroyers and astute submarines will sustain revenues during the forecast period," notes Frost and Sullivan Research Analyst Mahendran Arjunraja. "The actual value of the Vanguard submarine replacement programme will be known only after the main gate approval, which is expected in 2016, while procurements for the Type 26 frigate project is expected to happen after 2020."

The United Kingdom has one of the most evolved naval capabilities in Europe and it is anticipated that the Government will make every effort to retain the country's naval superiority. Currently, however, British naval planners are struggling with an acute resource shortage.

This has been compounded by recent engagements in Afghanistan and Iraq. It is believed that the UK Ministry of Defence (MoD) can no longer afford to have budgets that cover both conventional and specialist capabilities, equally.

"The current economic turmoil and the budget deficit have created doubts over future spending commitment," cautions Arjunraja. "Defence suppliers need to adapt to this new climate of austerity by providing cost-effective solutions."

The current military operations of the country are mostly land based. Hence, an opportunity for urgent operational requirements (UOR) in the naval domain is limited.

Promisingly, for market prospects, however, the emphasis on interoperability with allies is increasing. This trend might create more opportunities for domestic defence manufacturers by opening up markets in allied countries. On the other hand, it would also create intensified competition in the domestic market as more and more foreign companies would flood in, seeking to leverage on the potential for revenue growth.

"Absolute cost, sustainability and life time support are the future procurement priorities of the MoD," concludes Arjunraja. "Domestic defence companies would not be able to benefit from economies of scale unless they supplement their order book with foreign sales or innovate in-house."

Many experts consider this a promising note for the military helicopter market, which is just coming out of a very challenging period. The expeditionary nature of today's missions, the heavy wear and tear of the platforms that operate under extreme conditions, and the ageing helicopter fleets worldwide are driving the global demand for helicopters.

The global helicopter market across military and civil end-user segments is facing a growth in demand, reaching a potential market size of nearly 24,000 platforms over 2011-2020. The key factors contributing to this industry growth are upcoming replacement cycles in worldwide military and state-run fleets, growing disposable income in emerging markets and the structural growth of the global economy. However, it is the military that continues to be the main driver for helicopters.

According to Frost & Sullivan research, on the assumption that the market conditions are likely to remain favourable, the military will account for more than 60 percent of the global helicopter demand over the next 10 years (in terms of market value), generating revenues of nearly US$200 billion, and creating orders of nearly 9,000 platforms between 2011-2020.

This demand for military helicopters is driven not only by a desire to obtain new, modern helicopters but mostly by the need to replace/upgrade a large global fleet of ageing helicopters of all types and sizes, both in western countries and emerging markets.

Global Military Helicopter Demand, 2011-2020

Frost & Sullivan research indicates that the global market for support-in-services (SIS) represents a very lucrative market. However, end-users within the military segment still need to fully recognise the benefits of advanced service agreements, such as Performance Based Logistics (PBL) and Total Cost of Ownership (TCO). In a situation where the average life of a helicopter is about 40 years and growing (through a series of upgrades with life extensions and capability-enhancing upgrades), the SIS market represents a significant opportunity for the primes to create a diverse income stream, especially in times of budgetary austerity.

Despite the expected growth for military helicopters, the industry faces significant challenges, including the defence budget cuts in some of the traditionally strong western markets, but also in some emerging markets where the end-users may be exercising caution in terms of procurement, both operationally and financially. The impact of the global economic turmoil is visible across a majority of programmes in military helicopter segments, as they generally tend to be large procurements.

The exceptions are the countries that are engaged in deployments or recently withdrew, as well as countries that started the procurement process before the crises and find it difficult to cancel for financial and contracting reasons. Although they seem to be weathering the economic downturn much better than the western markets, the emerging markets such as Brazil and India are still somewhat vulnerable to budget volatilities, which has led to more diligent procurement processes for most major military assets.

Military forces across the globe, particularly in emerging markets, are currently undergoing major acquisition and upgrade programmes in their helicopter fleets. Overall modernisation also means that nations are considering filling capability gaps and procuring helicopters in different segments in order to cope with multiple operational requirements. Frost & Sullivan believes that the industry needs to be innovative, not only in developing new technologies and expanding portfolios, but also in introducing new business models and operational support such as through life contracts in order to support the end-user segments, and in turn drive new programmes and procurements.

Title:	Global Military Helicopters Market - Financial War Clouds: Driving New Opportunities and Business Models
Date:	2011-06-14
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New analysis from Frost & Sullivan, The Middle East Military Air Market - Revenue Opportunities and Stakeholder Mapping, finds that the Middle East military air market would earn revenues of $1280 million in 2010 and estimates this to reach $3906 million by 2020. The solid rise could be attributed to growing recognition of air assets as a force multiplier across all regional defence communities. The following countries are covered in the research: Saudi Arabia, UAE, Oman, Qatar, Kuwait and Bahrain.

"The Gulf Cooperation Council (GCC) countries are moving towards an integrated air defence network to include air platforms, air defence batteries and air surveillance systems under the 'Peninsular Shield' initiative; but the progress has been slow," notes Frost & Sullivan Aerospace Analyst. "The use of networked force by the US and European forces in the Gulf War and the latest Iraq and Afghanistan wars have been a startling revelation for Middle Eastern MODs who are now keen on acquiring these capabilities."

The new procurement surge over 2011-2015 highlights on-going big-ticket purchases, particularly in Saudi Arabia and the United Arab Emirates. Political influence weighs heavily in defence acquisition decisions. As a result, most new procurements are being sourced from the United States under Foreign Military Sales (FMS). There have been efforts to balance this relationship through procurements from elsewhere, including from Europe and Russia.

"The US and European arms regulations (such as ITAR and End User Monitoring) often restrain the export of sensitive defence technology and capability such as UAVs to the Middle East market," states the Analyst. This has been a particular dampener for the Western defence companies who want to be part of the development success story in the region.

Tier-1 suppliers need to focus on identifying new procurement opportunities and position their equipment accordingly. They should examine and identify lacunae in the current inventory of a particular country in terms of mission/role specific platform and strive to fill these gaps.

"System integrators should consider the intangible value that the project brings to the company, provided a good-quality project and associated services are delivered," concludes the Analyst. "This has the cascading effect of winning further bids elsewhere in the region: reference to past project has a distinctive advantage in the Middle East market."

The Middle East Military Air Market - Revenue Opportunities and Stakeholder Mapping is part of the Defence Growth Partnership Service programme, which also includes research in the following markets: Middle East Strategic and Tactical Communications Market, Strategic Analysis of European Soldier Modernisation Markets, Middle East Oil & Gas Infrastructure Security Market and Asia Pacific Naval Communication Market. All research included in subscriptions provide detailed market opportunities and industry trends that have been evaluated following extensive interviews with market participants.

Frost & Sullivan enables clients to accelerate growth and achieve best-in-class positions in growth, innovation and leadership. The company's Growth Partnership Service provides disciplined research and best-practice models to drive the generation, evaluation, and implementation of powerful growth strategies. Frost & Sullivan leverages 50 years of experience from more than 40 offices on six continents.

The next generation of technological development for military communications will be greatly influenced by the goal of a fully interoperable solution, wherein data can be obtained from various sources irrespective of the solution.

Analysis from Frost & Sullivan, “Defense Communications: Funding Trends and Prospects,” finds that defense communications technologies such as tactical radios and military satellite and network-centric communications are the key technologies driving funding in the defense communications market.

"Network centric warfare (NCW), enhanced situational awareness and increased use of commercial off-the-shelf (COTS) technology are witnessing increasing technological development and funding activities," notes Technical Insights Research Analyst Anand Srinivasan. "Integration of existing technologies with new cutting edge technologies is further driving the research activities in this sector."

The market for defense communications is likely to be supported by a number of demand drivers, notably the need for allied information advantages in large-scale operations such as those in Iraq and Afghanistan. The defense industry is entering into a new phase where huge R&D efforts are being concentrated on defense communications, as an increasing number of defense establishments realize the need for empowering their defense forces with the latest communications technologies available.

Despite the bright outlook for the market, there are some challenges clouding the landscape. Lack of funding remains a key factor in Europe and Asia has not been able to match up to the capabilities of the United States. Trends in Asia-Pacific and the Middle East point to procuring radios either from the US or Europe as opposed to indigenous R&D. Some of the issues faced by communications technologies include interoperability, bandwidth, multilevel security, scalability, electronic counter measures and collaboration across multiple weapons.

Even though a particular nation takes a large number of initiatives for addressing the most important challenges faced by defense communications, only the relevance of contribution determines its competence. The evolving situations and technologies pose new challenges for ensuring seamless communications of command and control information between the various geographically separated, forward-deployed units.

"At present, a lot of funding is going into research activities to deliver cutting edge technologies which can be leveraged in battle field communications," says Srinivasan. "These technologies are expected to address the dominant concerns surrounding the existing communication technologies in the defense sector."

In the future, enhanced investments are likely to be made in projects where the emphasis is on amalgamating cutting edge technologies with the express needs of the defense communication sector. High bandwidth communications, which are currently being deployed in the commercial sectors, will be utilized to shore up the defense sector.

Defense Communications: Funding Trends and Prospects, a part of the Technical Insights subscription, provides a preview of the process of private equity, venture capitalists and other corporate funding. Further, this research service includes detailed technology analysis and industry trends evaluated following extensive interviews with market participants.

Frost & Sullivan enables clients to accelerate growth and achieve best-in-class positions in growth, innovation and leadership. The company provides disciplined research and best-practice models to drive the generation, evaluation, and implementation of powerful growth strategies. Frost & Sullivan leverages over 50 years of experience in partnering with Global 1000 companies, emerging businesses and the investment community from 40 offices on six continents.

New analysis from Frost & Sullivan, European Vehicle Survivability Market Assessment, estimates the total market to be EUR 4.2 billion from 2010 to 2019. The market is likely to experience a decline between 2011 and 2012 as UOR are about to reduce. After 2012, however, regular procurements and modernization programs will spur market growth. In this research, Frost & Sullivan's expert analysts thoroughly examine the following survivability systems: passive armor, reactive armor, active protection system and electronic countermeasure system.

"The total market is likely to be EUR 6.2 billion across the period 2006-2019 with France, the United Kingdom, Germany, Turkey, Spain and Italy set to spend a considerable amount on vehicle procurement," notes Frost & Sullivan Research Associate Binny Winson. "Approximately 69.0 per cent of the total amount is expected to be spent on passive armor, 23 per cent on active protection system and the remainder on electronic countermeasure systems."

The increasing involvement of European nations in out-of-area operations, the lessons learnt from the recent conflicts, combined with the proliferation of threats and the increasing complexities posed by asymmetric warfare, will compel Europe's armies to invest in the best-in-class survivability solutions to provide the maximum protection for every war fighter.

"Thus, the sizable number of vehicles procured in the future would be equipped with extreme protection capability, right from the manufacturers' site, to enable the armored fleet to be rapidly deployed for operations abroad.

"Companies are trying to penetrate the market by forming relationships with original equipment manufacturers and system integrators in the home market as governments show increasing preference for locally based industries," cautions Winson. "This trend of awarding contracts to companies with a local presence is because of the jobs involved and the defence industrial strategy in place in countries like the UK."

Hence, having a country presence -- by either opening a subsidiary, forming joint ventures or by acquisition -- will continue to be important. It will, at the same time, be challenging as tough competition is expected from locally based industries.

Another challenge is the technical complexity of some survivability solutions that demand extreme operational testing before being fielded. While such equipment as active protection system is sophisticated yet rugged, it should at the same time, be easy to operate and repair on the field by soldiers and by combat engineer corps.

Moreover, survivability products should meet NATO standards like the STANAG. They also need to meet other specifications set by the country that is acquiring these products.

"Threats are varied and there is no 'one size fits all' solution," says Winson. "Hence, integrating different capabilities in one single system such as, for instance, combining hard kill and soft kill countermeasure, will continue to be difficult."

The recent financial crisis has put defence spending across Europe at risk. There are plans across most European countries to drastically reduce defence budgets. This will have a major impact on procurement programs.

Nevertheless, there are reasons for optimism. Upcoming land programs in the United Kingdom, France, Germany, Turkey and Spain are of significant volume and promise to offer tremendous growth opportunity. Furthermore, near-term growth is dependent upon accessing ad-hoc appliqué Armour UOR's, as battlefield threats evolve.

Frost & Sullivan enables clients to accelerate growth and achieve best-in-class positions in growth, innovation and leadership. The company provides disciplined research and best-practice models to drive the generation, evaluation, and implementation of powerful growth strategies. Frost & Sullivan leverages over 45 years of experience in partnering with Global 1000 companies, emerging businesses and the investment community from 40 offices on six continents.