While defense suppliers are optimistic of
revenue growth, they identified decreasing defense expenditure as a major
concern over 2011–2012.
London, March 2nd, 2012 – An increase in demand for national security priorities such as cyber security, satellites and nuclear defense is expected to increase sales of military equipment across the world, however market uncertainty is of concern, impacting supplier’s ability to forecast and implement a business strategy for the years ahead. Since the global economic crisis, defense contractors who also own commercial lines of business have performed well.
The Middle East and Asia-Pacific are forecast to be key markets in the coming years, with India, Saudi Arabia and the UAE expected to invest heavily and the region comprising Singapore, Taiwan and Hong Kong identified as the most likely to record an increase in demand.
According to survey results, 57% of defense contractors and 56% of other service providers either have or are planning to deploy e-procurement in their organizations. Further, the average size of global annual procurement budgets among defense contractors is US$120 million, three times larger than the average size of the procurement budgets of other service providers.
Suppliers optimistic of revenue growthAcross the defense contractors’ and service providers’ industry, half of respondents are more optimistic regarding their company’s revenue growth over the next 12 months relative to the previous year. In 2011, the global defense budget is expected to reach US$1.1 trillion, with the US accounting for the largest share of this amount. An increase in demand for national security priorities such as cyber security, satellites and nuclear defense is expected to increase sales of military equipment across the world.
Since the global economic crisis, defense contractors who also own commercial lines of business have performed well. Companies such as Boeing, Oshkosh, ITT and Rockwell displayed similar strategies to balance revenue growth. Countries in Asia-Pacific express increased interest in military procurement to match their growing economic power, while defense contractors try to capture maximum share of the market. Security threats due to terrorism and territorial issues among Asian countries are responsible for driving demand for fighter aircraft and ammunition.
Decreasing defense expenditure a concernOf all defense contractor respondents, over half consider decreasing defense expenditure and market uncertainty to be leading business concerns and 42% are concerned about their ability to respond to pricing pressures. While almost 50% of other service providers are concerned about market uncertainty, more than one-third of respondents each consider decreasing defense expenditures and rising competition to be major concerns.
Asia-Pacific and the Middle East considered important marketsThe Middle East and Asia-Pacific are forecast to be key markets in the coming years. India plans to establish a defense modernization program which would make it the second largest defense spender in Asia-Pacific and the seventh largest in the world by 2016. In addition, defense expenditure across the Middle East is expected to grow by 14% over the next five years, with Saudi Arabia and the UAE considered the leading countries in the region in terms of military expenditure.
The region comprising Singapore, Taiwan and Hong Kong was identified as the most likely to record an increase in demand for defense products and services in 2011–2012. This was followed by South Korea, identified by 36% of respondents, and the US, as identified by almost 30% of respondents. Singapore intends to increase its defense expenditure by 6% during 2011–2012, and expects to further increase this in the coming years.
Significant implementation of e-procurementAccording to survey results, 57% of defense contractors and 56% of other service providers either have or are planning to deploy e-procurement in their organizations. The level of e-procurement implementation in the defense contractors’ and service providers’ industry is more in large companies, with almost one-third of companies implementing it, compared to small and medium companies, where approximately 20% of companies in each category have implemented e-procurement.
The average procurement budget size is US$71.3 millionThe average procurement budget size of respondent companies is US$71.3 million. Almost a third of respondents said that their global annual procurement budget would be less than US$250,000, while 16% plan budgets between US$1–US$10 million. The average size of global annual procurement budgets among defense contractors is US$120 million, three times larger than the average size of the procurement budgets of other service providers.
London, March 2nd, 2012 – An increase in demand for national security priorities such as cyber security, satellites and nuclear defense is expected to increase sales of military equipment across the world, however market uncertainty is of concern, impacting supplier’s ability to forecast and implement a business strategy for the years ahead. Since the global economic crisis, defense contractors who also own commercial lines of business have performed well.
The Middle East and Asia-Pacific are forecast to be key markets in the coming years, with India, Saudi Arabia and the UAE expected to invest heavily and the region comprising Singapore, Taiwan and Hong Kong identified as the most likely to record an increase in demand.
According to survey results, 57% of defense contractors and 56% of other service providers either have or are planning to deploy e-procurement in their organizations. Further, the average size of global annual procurement budgets among defense contractors is US$120 million, three times larger than the average size of the procurement budgets of other service providers.
Suppliers optimistic of revenue growthAcross the defense contractors’ and service providers’ industry, half of respondents are more optimistic regarding their company’s revenue growth over the next 12 months relative to the previous year. In 2011, the global defense budget is expected to reach US$1.1 trillion, with the US accounting for the largest share of this amount. An increase in demand for national security priorities such as cyber security, satellites and nuclear defense is expected to increase sales of military equipment across the world.
Since the global economic crisis, defense contractors who also own commercial lines of business have performed well. Companies such as Boeing, Oshkosh, ITT and Rockwell displayed similar strategies to balance revenue growth. Countries in Asia-Pacific express increased interest in military procurement to match their growing economic power, while defense contractors try to capture maximum share of the market. Security threats due to terrorism and territorial issues among Asian countries are responsible for driving demand for fighter aircraft and ammunition.
Decreasing defense expenditure a concernOf all defense contractor respondents, over half consider decreasing defense expenditure and market uncertainty to be leading business concerns and 42% are concerned about their ability to respond to pricing pressures. While almost 50% of other service providers are concerned about market uncertainty, more than one-third of respondents each consider decreasing defense expenditures and rising competition to be major concerns.
Asia-Pacific and the Middle East considered important marketsThe Middle East and Asia-Pacific are forecast to be key markets in the coming years. India plans to establish a defense modernization program which would make it the second largest defense spender in Asia-Pacific and the seventh largest in the world by 2016. In addition, defense expenditure across the Middle East is expected to grow by 14% over the next five years, with Saudi Arabia and the UAE considered the leading countries in the region in terms of military expenditure.
The region comprising Singapore, Taiwan and Hong Kong was identified as the most likely to record an increase in demand for defense products and services in 2011–2012. This was followed by South Korea, identified by 36% of respondents, and the US, as identified by almost 30% of respondents. Singapore intends to increase its defense expenditure by 6% during 2011–2012, and expects to further increase this in the coming years.
Significant implementation of e-procurementAccording to survey results, 57% of defense contractors and 56% of other service providers either have or are planning to deploy e-procurement in their organizations. The level of e-procurement implementation in the defense contractors’ and service providers’ industry is more in large companies, with almost one-third of companies implementing it, compared to small and medium companies, where approximately 20% of companies in each category have implemented e-procurement.
The average procurement budget size is US$71.3 millionThe average procurement budget size of respondent companies is US$71.3 million. Almost a third of respondents said that their global annual procurement budget would be less than US$250,000, while 16% plan budgets between US$1–US$10 million. The average size of global annual procurement budgets among defense contractors is US$120 million, three times larger than the average size of the procurement budgets of other service providers.
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