White Paper

w w w. m r c y. c o m WHITE PAPER 2 New geo-political challenges create new opportunities where the winners will be the fastest innovators: • Aging platforms - require modernizations at the speed of technology for new missions • International and foreign opportunities - require secure, trusted and safe processing systems for information protection and mission autonomy • Breakthrough technologies - low-risk game changing commercial technologies will define the future innovation winners Since the early 1990s and Secretary of Defense William Perry's watershed COTS initiative, the DoD has strived to leverage the best commercial off the shelf (COTS) technology. The COTS initiative was originally affordabili- ty-centric, but is increasingly required for the performance, interoperability and quick reaction capability found in commercial marketplaces. To stay in front, defense electronics will need to be produced with the capability and velocity of commercial systems. Additionally, the defense industry has other special requirements and characteristics - regardless, as Defense Secretary Ash Carter said to the Senate Appropriations Committee, "Future success will go to the fastest innovators. Leading the race now depends on who can out-innovate (and deploy) the fastest." Do more with less - better and quicker The defense industry as a whole has cut manufacturing capacity, reduced headcount, lost engineers and has the headwind of an aging workforce, as newly minted professionals don't always see a career in defense elec- tronics desirable. The need to stay "competitive" during times of uncertain and contracting military spending has preceded the fastest acceleration in technology and threat evolution in history. To stay in front, new approaches to defense electronic development and manufacturing have to be adopted. Mercury recognized that the best commercial technology had to be de- ployed quickly and that a modified commercial business model was the vehicle with which to do it. Such a model could enable the DoD to retool and evolve more efficiently and effectively, if the model was made fully compatible with defense industry requirements. Mercury has systematized this approach with our next generation defense electronics business model. Since 2001, when China joined the World Trade Organiza- tion, the US has lost nearly a third of its manufacturing jobs – China now produces 50% of the world manufactured output. China's capability has become so great it is assumed by many US startups that China is where their products will be produced. Meanwhile, other technically advanced nations including Germany and Japan have maintained a much stronger manufacturing capability. Ref MForesight report MF-TR-2017-0201, funded by NSF and NIST. "Leading the race depends on who can out-innovate the fastest" Technology is advancing faster than ever – the accumulated knowledge of mankind now doubles every 12 months. Nowhere is this knowledge advance more obvious than in the domains of computing and communi- cations. For the defense industry, knowledge brings capability, oppor- tunity and menace - as new and old, symmetric and asymmetric adver- saries field increasingly sophisticated threats. Offsetting these threats requires responses that need to be even better and they need to be deployed quickly. The commercial marketplace quickly replaced a relatively few wired telephones with billions of untethered wireless smartphones – it seems everyone has one regardless of where they are. Internet enabled, these smartphone-users communicate, share and access information any- where and this has redefined what communication is. To maintain, or increasingly to re-establish a capability gap between our defense sys- tems and peer, near-peer threats requires the defense industry to move as fast as the commercial marketplace. That is to say, innovate quickly and deploy better solutions, fast. And then do it again. With the biggest defense re-calibration in decades underway, our national defense doctrine is pivoting towards: • A full-spectrum model to deter potential adversaries • Updated defense strategies, operational concepts and tactics • Smart and essential technology innovations that leverage the best commercial solutions That's not to say the commercial high-tech marketplace is a panacea. HTC and Blackberry (formerly Research In Motion) have transitioned from marketplace titans to near-also-ran in a few short years. It's one thing to lose marketplace stature; it's another to lose national defensive initiative. The technology that changed the fortune of companies like HTC and Blackberry is the same technology that state and non-state actors around the world are using to field their own, often innovative threats to our national defensive posture. Deployment of our contemporary defense systems has to be competitive with the agile efficiency of the commercial marketplace to offset emerging threats that are evolving as quickly as technology itself. Apple, Samsung, Amazon and Microsoft are also commercial high-tech companies. Unlike HTC and Blackberry they have found a business strategy that keeps them in front. These companies are innovators, and that's their focus. They leverage the best commercial manufacturing capabilities from world-class commercial contract manufacturers like Foxconn (China) and Asus (Taiwan) to offload their production to, while they maintain their core innovation focus. (Blackberry transferred their manufacturing to Foxconn in 2013 under new CEO John Chen which is enabling Blackberry to focus on its innovative software. This transition is seen as the mark of the beginning of Blackberry's turn around.)

• Cover