The Technological Advance of War

With today's official end of combat operations in Iraq and a speech scheduled for tonight in the Oval Office by President Barack Obama, it’s time to look at one thing that has come out of America’s involvement in this long war—innovation.

In every war, technologies get developed for military purposes, and those innovations ultimately lead to changes in business. Of all the technological innovations involved in both the Iraq War and the ongoing conflict in Afghanistan, perhaps none has been more striking than the widespread adoption of drones—unmanned aerial vehicles—for everything from reconnaissance to bombing runs.

The drones were around before the two wars, but they've truly proved their use in the post 9/11 security environment. And that has meant a great deal to the businesses that have brought the technology together and made it a key tool in America’s arsenal.

The contracts have ranged from $69 million recently given to Boeing to build drones designed in Boeing's St. Louis office, to a $250 million deal between the Defense Department and L-3 Communications Geneva Aerospace, a Carrollton, Texas, maker of unmanned aircraft, to supply drones to the U.S. Special Operations Command.

Ticer declined to say how many of the unmanned aircraft—called the Viking 400—the Command will be buying from L-3 Communications Geneva Aerospace, and added that “it’s hard to say” what factors might go into the agency’s decision to exercise the annual extensions on the contract.

And for one company, the ramp up in the use of drones is one of the bright spots in the Great Recession. As the traditional revenue engine of Textron Inc. , the Cessna aircraft, experiences a stall, sales of military drone planes sold under the company’s Wilmington, Massachusetts-based aerospace and defense unit are flying high.

Textron Systems Inc., which produces products from guided missiles to armored military transporters, posted a $61 million year-over-year jump in revenue to $502 million in the third quarter of 2009 as its parent company saw revenue plunge 27 percent to $2.55 billion. Sales from its marquee Cessna aircraft segment dropped 40 percent.

Much of Textron Systems’ growth came from the military’s insatiable appetite for its unmanned aerial systems and company officials expect that trend to continue even as defense appropriations are likely to wane.

“Our view is that the defense budget indeed will decrease over the next few years, and even at that rate the procurement and research-and-development areas of the budget are going to be pressured,” said Textron Systems CEO Frank Tempesta. “I think we are in several areas that are really priorities of the new administration. Over the next three years we’re going to grow, and I would day we would expect growth of 8 to 10 percent.”

The subsidiary, at 5,500 employees, is much smaller than other prime contractors, such as Raytheon Co. or Boeing Co. Its size means Textron must focus its efforts on high-end specialty products like ground sensors and precision weaponry, as well as acquire businesses to fill in the gaps.

During the next 10 years, the market for unmanned aircraft will be upward of $37 billion, according to Larry Dickerson, senior analyst at Forecast International, a Newtown, Connecticut-based market research firm specializing in aerospace and defense. That breaks down to about $17 billion spent on research and development, with another $20 billion on putting the craft into production, he said.

Reporting for this story was provided by the St. Louis Business Journal, Boston Business Journal, and Dallas Business Journal.