White Paper

w w w. m r c y. c o m WHITE PAPER Meeting Today's Defense Challenges In our white paper published January 2015, we talked about the emergence of a business model adopted by Mercury Systems. A pdf of this paper can be obtained on our website mrcy.com. In that paper we talked about our business model which we believe addresses the evolving challenges within the defense industry. Specifi- cally, the issues covered center around the need to recognize and adapt to changing defense procurement directives, the need to drive both affordability and innovation simultaneously, leveraging a commercial business model that includes investing our own funds in R & D, and the drive to adopt modular open systems architec- tures as a way to promote both innovation and affordability. 2 Executive Summary Since the initial publication of the whitepaper titled- "Driving a Next Generation Business Model in Defense Electronics"- much has changed. We have stayed the course defined by the fundamental tenets of our business model but we have also evolved. This is a function of the natural evolution of any commercial company including ours, but perhaps more importantly, in response to a rapidly changing landscape within defense. Recently, the geopolitical trends already evident a couple of years ago have only gathered momentum. These include: • The continued threat and corresponding need to deal ISIL a lasting defeat • The continued growth of China and its relevance as a trading partner that simultaneous- ly poses a potential strategic threat. As Defense Secretary Ash Carter stated in his April 27, 2016 remarks before the Senate Appropriations Committee… " in the Asia-Pacific, where we haven't faced great power competition since the end of World War II… China is rising, which is fine, but behaving aggressively, which is not." • On-going Russian aggression and unpredictability • The potential threat of North Korea and the need to continue to keep our forces on the ready on the Korean Peninsula • Iran remains a potential destabilizing force in the Middle East and a potential problem for our allies there, not withstanding the nuclear accord • The need to support special forces and special operations teams with the solutions they need no matter where and when it's required At the same time, the department of defense continues to drive and accelerate long-standing requirements and urgently drive needed change. During the same April 27, 2016 testimony referenced above, Defense Secretary Ash Carter did a good job of summing up where the DoD needs to be: "Our Military must be balanced with the proper size and capability to defeat any attack against U.S. forces and our allies. And because of the decisions in this budget, our military will be better prepared for both present and future challenges, and better positioned to deter, and if neces- sary fight and win, wars against even the most high-end of potential adversaries…The budget also significantly funds important new technologies that, when coupled with revised operational concepts, will ensure we can deter and if necessary win a high-end conventional fight in an anti-access, area denial environment across all domains and warfighting areas- air, land, sea, cyberspace, and the electromagnetic spectrum." More specifically, on the technology front, Secretary Carter talks about the importance of…. "who can out-innovate faster than everyone else. It's no longer just a matter of what we buy; what also matters is how we buy things, how quickly we buy them, whom we buy them from, and how quickly and creatively we're able to upgrade them and repurpose them to be used in different and innovative ways to stay ahead of future threats." Image courtesey of Defense News

• Cover