Cast aside the “doom and gloom” present in much of the S&T community during the start of the current downturn in Pentagon’s spending. Simulation and training small businesses are fielding new technologies, expanding acquisition models and supporting markets in adjacent sectors – and that’s for starters, reports Group Editor Marty Kauchak.

By most measures a majority of companies in the US simulation & training (S&T) community would fit the US Small Business Administration’s criteria of a small business: independently owned and operated; organized for profit; and not dominant in its field. In the spirit of any US federal bureaucracy, the SBA further refines its categories. In one instance, S&T and other companies which manufacture materiel solidify their status as “small” by having between 500 to 1500 (maximum) employees depending on the type of product manufactured. Small in terms of a bureaucratic label is relative, as these firms make up a staggering 99.7 percent of U.S. employer firms, according to the SBA.

This author has fond memories of visiting small S&T companies through the last 15 years – especially those in their formative stages. The former Blue Ridge Simulation, Inc., a supplier of high-performance sensor simulation, comes to mind. Before the company’s purchase by Rockwell Collins in 2010, I met with Tom Allan, ex-Blue Ridge’s president, in his former backyard garage which had been converted into his business venue.

The former Blue Ridge Simulation shares a heritage with contemporary small companies: they are focal points for innovation in niche sectors in this expanding marketplace – mirroring Skunk Works-like centers of excellence which push the bounds of the technology envelope for aerospace and defense original equipment manufacturers, and other large companies. As the community gathers for 2014 I/ITSEC MS&T is taking the opportunity to provide perspectives on the contemporary S&T environment through the prism of these small companies.

Moving Beyond Decreasing Budgets

As the “sticker shock” of decreasing Pentagon’s budget top lines and the proportionate reductions in S&T accounts wears off, the community is focused on staying profitable and looking for new business opportunities. The strategy appears easier to accomplish as a small entity compared to a medium- and large industry counterpart.

Indeed, Waymon Armstrong, the founder and president of Engineering & Computer Simulations, Inc. (ECS), noted that while his company “has seen some investments in warfighter training lately, it remains a tight budgetary environment.” Nonetheless, “ECS is a small, independently owned company. We can adapt to our clients’ needs in any environment. The mission doesn’t change, even if the budget does.”

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Robert Abascal founder and CEO of AVT Simulations. Image credit: AVT Simulation

Robert Abascal, the founder and CEO of AVT Simulation, provided a second high-level overview of the community’s business environment when he noted his company is currently working on sustainment-related upgrades to training systems that have in the past, for valid reasons, been neglected as an indirect consequence of the ops tempo underway for the last several years. The industry executive noted “‘Train as you fight’ took on a different meaning as our forces were in combat. Considering the announced drawdown plans of our military, we have experienced a greater focus on the utilization of fielded training equipment. We have seen the DoD reinvesting into their training systems portfolio in preparation to utilize these assets to cost-effectively address their ever increasing training and sustainment demands.”

Scott Ariotti, the director of Global Marketing at DiSTI, confidently told MS&T this October 8, that it appears to be “business as usual” with none of the recent high profile activities impacting on progression, award and delivery on the contracts his company is pursuing or engaged with. “This most likely has to do with the platforms these training devices are for: their ‘up time’ is vital to the military’s ability to carry out their mission. Therefore the training devices for maintainers have been proceeding without impact,” he added.

At the same time there continues to be an abundance of specific, business development opportunities – “enormous opportunities” in particular, for those who truly want to help revitalize home station training for the US Army, Ernie Audino, senior vice president for Military Market Development at Raydon, observed. The retired Army brigadier general pointed out this opportunity likely holds true across the other services and the interagency, too. He added, “The effects of 13 years of continuous combat and an acknowledged ‘dip’ in training management skills is a specific concern for the Army, but a major concern common to all is the need to modernize the logistics of the delivery of training.”

Expansion of Low- and High- Tech Programs

Small companies are helping to cast aside any perceptions the S&T sector has “hit a brick wall” in terms of advancing the state-of-the-art in technology across the spectrum of products for low- to high-tech systems.

At the high tech end of the spectrum this S&T segment continues to be a hub of innovation. While change may be incremental in some S&T market sectors, other developments are helping to expand the edges of the technology envelope.

Armstrong provided an overview of the community’s trajectory for innovation, pointing out, “we’ll continue to see new applications in mobile, gaming and virtual-worlds. Current technologies will evolve and new ones develop.” For its part, ECS is combining cognitive learning principles with S & T and delivering a highly personalized learning experience. “The training scenario changes based on the trainee’s reactions. I think the industry is just at the beginning of our capabilities in simulations and training,” he emphasized.

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Waymon, Armstrong, founder and president of Engineering & Computer Simulations (ECS). Image credit: ECS.

Ariotti said that through the past several years his company has made a name for itself as the pioneers in the development of virtual environments for use in maintenance training applications. “Through these efforts we’ve been actively developing tools and technology to reduce the time, cost, and risk associated with developing these complex graphical environments that are packed into a small virtual landscape (think aircraft, trucks, personnel carriers, and engines). We’re now introducing at the 2014 I/ITSEC the availability of these tools and technology as a commercial off-the-shelf product offering as our Virtual Environment Software Development Kit (VESDK).”

Raydon’s Audino provided another insight, noting “the greatest trend, frankly, is not in regards to emerging types of training technologies or new virtual training techniques, but much more so in regards to novel, innovative and low-cost ways to access state-of-the-art virtual training.” It is not enough to envision an Army-wide training strategy that incorporates virtual training at levels far higher than ever before, the community training expert noted, and continued, “if the Army cannot afford to resource that strategy via the usual methods. The Army can only have the strategy it can afford.”

Orlando-based Abascal noted AVT Simulation is seeing opportunities to sustain and upgrade legacy training systems. “The innovations we can deliver include the reuse of Commercial Off-the-Shelf and Commercial and Non-Developmental Items (CaNDI as I like to call this) to leverage reuse of proven and mature components. Leveraging this technology will not only produce innovative solutions faster, better, and cheaper but will also save the DoD on the ‘logistical tail’ end of the life-cycle proposition,” he added.

As the Pentagon continues to increase the service life of many fixed-wing and rotary aircraft AVT’s competencies should resonate well within the services’ training communities. Abascal continued, “Considering the budget and time constraints our industry and customers experience, we continue to seek ways to leverage proven technology to reduce cost and improve performance for the sustainment of legacy systems as well as the development of entirely new training system applications.”

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US Army Brigadier General (retired) Ernie Audio, senior vice president for Military Market Development at Raydon. Image credit: Raydon

This I/ITSEC will see the continued evolution in company members’ portfolios – driven in part by the reality that military S&T companies have expertise to offer training communities in other high risk industries.

Armstrong reflected that ECS looked at the defense forecast several years ago and decided to venture into new markets “… where we could leverage our knowledge and the technology concepts we advanced for DoD.” Adjacent sectors of interest to ECS include oil and gas, transportation, healthcare, safety, emergency management and crisis response. “Any industry that is at high risk of costly errors and accidents can reduce that risk significantly with simulations and training,” he said.

Similarly, DiSTI is expanding its presence in the civil aviation sector – most recently as an exhibitor at 2014 WATS (www.halldale.com/wats)

Cost and Business Models

MS&T and its sister publication CAT (www.halldale.com/cat) have reported on the shifting plates of the S&T community’s business foundation through the last several years. Most recently we conveyed with great interest the blockbuster consolidation (AAI military simulation and training, OPINICUS and Mechtronix) which formed TRU Simulation + Training – now a proven competitor in the military and civil spaces. That development appears to be a harbinger of more mergers, acquisitions and other transactions in our sector into the near future.

AVT Simulation’s Abascal reflected on this interesting dynamic underway in the community. “I anticipate continued consolidation throughout our industry based on the anticipated reduced procurement opportunities or production based work. I see our market shifting from the customer buying trainers, or in this case, buying less and less trainers to an emerging dynamic in play where the ‘Customer is buying training’ – training as a service.”As expected cost and business models are also on community leaders’ minds.

For his part, Abascal recalled it has always been problematic to quantify the cost of the trainer to justify acquiring them. “It is easier to quantify the cost to develop trained operators. As historical usage has provided more reliable data, perhaps now the business model can be justified that will initiate merger and acquisition, and consolidation strategies to achieve more favorable business outcomes. This market dynamic will be balanced by technology as our market continues to evolve and mature, creating new business opportunities to serve the customer better.”

Raydon’s Audino continued on this theme and described the prowess of small companies from another perspective – their ability to meet their military customers’ available funding in particular with innovative acquisition models – including renting training materiel.

The retired general officer pointed out from one service’s perspective, the Army, many leaders are beginning to look closely at the cost per soldier-training-hour as a key point of comparison between otherwise fundamentally similar virtual training systems. “Once that factor is on the table, it quickly becomes clear that the total cost of ownership, which includes costs to develop, acquire, field, sustain, refresh, etc., via traditional means, cannot approach the very low costs per soldier-training-hour achievable when those virtual training capabilities are rented, rather than purchased,” he asserted.

In a rental strategy, unit leaders need only identify their training objectives and plan their training to match appropriate rented virtual training enablers to their budget and time available to train. Then, when the training systems (enablers) arrive on site for the start of an exercise, the unit trains under the command of their own leadership and realizes near 100% utilization during the event. “At the end of the exercise the training enablers depart for the next unit or cycle in user feedback for spiral development on industry’s nickel,” he explained.

Under Raydon’s model, industry, not the Army, assumes the risk for development, refresh, maintenance and sustainment, and other life cycle elements. “This is how the Army will be able to train to combat proficiencies above what might ordinarily be expected on likely, low resourcing levels. To me this is how units and soldiers will ‘punch above their weight.’ Small companies are making this possible right now,” he emphasized.