Heavy investment into aerospace and defence by IT and Internet players


The recent announcement by Google that it will acquire satellite company Skybox Imaging for $500 million demonstrates that IT and Internet players are increasingly interested in aerospace and defence.

“Their satellites will help keep our maps accurate with up-to-date imagery,” the company said when it announced the acqusition. Google already operates Project Loon, a network of high-altitude balloons designed to give internet access to remote places around the world. In April the company also bought Titan Aerospace, a drone maker, shortly after Facebook bought drone maker Ascenta…

Elon Musk, initially the founder of the successful internet secure payment company Paypal, is now a major stakeholder in the Global space launch business with SpaceX. And just imagine what Iphones, and Google Glasses can bring to the battlefield, not to mention the cloud! In 2013, they also invested 4 to 5 times more than the average aerospace and defence (A&D) manufacturers.

There is always more open-source or commercial technology in A&D. In the past 5 years, the commercial content in defense acquisitions has risen from about 10% to about 30%, according to William Lynn, former US deputy defense secretary and current DRS Inc CEO. Many defense companies have been investing less in R&D, Lynn added.

In a very interesting interview with AFP, Tom Enders, gave his feeling on this phenomenon. “I think that in the future our industry will have to work much more closely with these new high-tech companies. If only because these guys are increasingly intruding on our territory,” he said last week in Normandy. “Aerospace is still a rather young industry but these people are even younger and I think there is no debate as to which of us is the more vibrant industry. They are. The speed of decision and risk taking and all that is amazing. It should make us think as we look at the software industry, when you look at the IT industry at the Microsofts, Amazons, Facebooks, SpaceXs, Yahoos. It is all coming from the US. Bright young Frenchmen and bright young Germans have been forced to leave Europe,” Enders added.

Meanwhile, due to his mounting focus on profitability, some question Airbus’ ability to maintain acceptable levels of R&D, especially in defense.

Boeing CEO Jim McNerney said last month that his company was trying to replicate Apple’s success at incremental innovation “rather than trying to make big leaps in technology every 25 years or so…” And for her part, Marilyn Hewson, Lockheed Martin CEO, intends to boost R&D funding by 5% this year over the $700mn it spent last year, Reuters reports. She also aims at making Lockheed Martin’s R&D network more international.

In 2013 Microsoft, Google and Apple invested 4.6 times more in research and development ($18.8bn) than the 5 main Pentagon suppliers ($4.1bn), i.e. Boeing Defense, L-3 communications, Lockheed Martin, Northrop Grumman and Raytheon.

Republished with permission from ADIT – The Bulletin.