With Defense Programs becoming multi-billion investments for nations and big spending committed over the long term, governments tend to demand foreign suppliers to commit a part or all of their spending to the local economy. Arms procurement is essential for securing national defense and sovereignty. When done successfully, these investments stimulate economic growth with social and technological impact.
For global enterprises seeking to maximize competitiveness, establishing long-term positions in local markets often contribute to reducing costs, improving turnaround time, and stimulating growth opportunities.
As a global aerospace and defense company, IAI has always maintained growth by pursuing significant, strategic cooperation with local partners among industries and government organizations. This cooperation is based on understanding the partner’s needs and the solid core competencies of a highly skilled workforce, technological expertise, and an extensive product portfolio based on its Intellectual Property (IP).
An Infrastructure for Success
In many defense acquisitions, the initial procurement cost is equal, sometimes twice the value of in-service support spent over decades of the program lifespan. That’s why local sourcing of logistical support and services is an important part of these programs. By subcontracting the production of parts and components or establishing training services for logistic maintenance and support over the program’s lifespan, the user controls an important part of the project timeline and value chain.
Defense partnerships always begin with studying the local industrial base, which often opens exciting and attractive opportunities for cooperation with local manufacturers and service providers. But establishing a full-scale business relationship may take a long time and require significant investment in skill and technological development. By implementing strategic partnerships with government organizations and large companies, and sourcing products and services to small and medium enterprises, contractors help secure jobs in-country and develop the industrial infrastructure for future growth. A gradual transition enables local partners to prepare the human resources and skills to grasp new technology. Depending on the complexity and availability of know-how, the development of skilled labor may require years of youth education and technical training to foster the necessary change.
Technology Transfer in Phases
Many nations seek to leverage defense spending as an investment in developing local capabilities in technology and engineering. The pace of development depends on the initial level of technical skills. Highly developed countries are content with the access to the new technology while others would require deeper skill development that could span over years. In some cases, establishing a local supply chain and in-country logistical support provides a significant benefit for a global company seeking to accelerate Turn-Around-Time (TAT) for repairs and spare parts. It also ensures operational flexibility and national self-reliance for the user. Short TAT based on local suppliers and personnel also reduces delivery costs and establishes a local pool of technical instructors and trainers to support the industrial base in the future.
Evolving the local industrial base and manufacturing technology transfer enables local partners to assume a larger share of defense programs and acquire independence and self-sustainment with the local production of strategic supplies, technical support, and system maintenance services.
An Evolutionary Process
Such processes require commitment and patience on both sides, as the benefits of the partnership may come after years of hard work. By selecting the right business partner, a foreign enterprise can efficiently address the customer, minimizing the risk of cultural friction. Accessing know-how and mastering technology are essential assets that reduce technological risk and improve confidence in the overall program. By maintaining full ownership of IP and establishing various joint ventures, companies can share technology and know-how with local partners to secure their interests.
Through the evolution of industrial cooperation, local partners can scale up their share of joint programs, from the assembly of parts and system modules to the manufacturing of complete subsystems and system integration and testing, enabling the companies to assume prime contractor responsibility. Cooperation often spans beyond industrial partnerships, academic collaboration, and joint venture companies’ establishment with tremendous gains in jobs, academic research, and industrial capabilities.
