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May Finally Have Hit Bottom


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Sometimes you have to hit the bottom before you can work your way up and out. Thud. In February we found the bottom. The AUSA Winter is a conference we’ve attended and supported for many years. It allows us the opportunity to have an interplay with many of our industry’s customers and show our support. From the perspective of someone visiting the exhibit floor with no data from the organizers, this show was only about a third the size of last year’s—in both exhibitors and attendees. Travel cutbacks for U.S. military personnel were highly evident—only foreign military personnel were visible below the pay grade of O-6.

Here at COTS Journal, we ruminated over having our Editor-in-Chief, Jeff Child, and me go to this conference this year, considering the current military budget situation and the prospect of a lightly attended conference. In the end we decided it was just as important for COTS Journal to show support for our industry in bad times as in good times. This similar view was taken by many more of the smaller exhibitors than the big power houses of the industry. Although Boeing was not the only big prime with a fully laid out and staffed booth, they were the exception. Too many primes had empty booths with just a company sign and a few people standing around to direct people on how they could contact corporate representatives back in the plant. Some primes embarrassed themselves to the point of not even having a product sign or piece of literature on these large island booths.

Like any conference or show, some company booths had a large number of attendees interested while others had very few. This one was no different. The reduced show size provided us the opportunity to talk to many more people than we usually can. One of the questions we always posed when visiting a booth was this: “Many companies decided not to come or not to stock and staff their booth, what prompted you to buck that trend?” Although the answers varied, the more common themes were: “we paid for most of the cost already,” “my customers are here and I need to show the same level of commitment,” and “although the attendance is light we always find a few new clients.”

Even though we felt badly for the conference speakers who had a light attendance, we felt even worse for company employees who had to stand in completely empty booths and attempt to explain why their management decided on this tact. It’s always easy to support your team when times are good. But it’s when times are bad that support is needed the most. I’m highly disappointed in the companies that did not support the industry and embarrassed their companies with their empty booths. I’m certain that the attendees that did come out for the conference took notice of the companies that didn’t support the conference or the industry.

This last year, it was easy for us to get into a melancholy mood and focus on all the problems and forget that not everyone is feeling the same pain. Those that have been doing better than the average are highly reluctant to let the word out. That said, there is a respectable number of companies under $100 million that have had growth over the previous year—some even 20-30 percent. Now that Congress has allowed Sequestration to go into effect and some form of budget deal must be implemented, on April Fools’ Day we should all start to see improvement. Although Congress will still attempt to re-adjust what the services say they need to complete their mission; it will be to a lesser degree—allowing the services to move forward not only with mandated reductions but also acquisitions.

Unless the new Secretary of Defense Hagel makes drastic changes to the plan put in place by SECDEF Panetta, we should start to see more contracts for cyber and unmanned systems, special ops and space. Transforming existing leading-edge technology into usable and affordable military systems will be key to getting the most out of our reduced number of military personnel and their requirement to respond to several threats simultaneously. Major military suppliers have already determined a plan to cope with acquisition changes, and their stockholders must concur with their plans because they haven’t abandoned ship. Over the next few months, undoubtedly, the nightly news will continue to capitalize on the fact that in January they learned the words Sequestration and Sequester. In contrast, the trade press has been concerned about sequestration and the military budget ever since sequestration was signed into law. We’re at the bottom. From here on out the trade press should be able to write about positive trends in our marketplace—and it’s long overdue.