Defense Budget 2009 Update

The FY2010 DOD budget is still being tossed about between both houses of Congress but the general outlines are clear. There will be an approximately 5% increase in the DOD basic budget (approximately $535 billion) plus a supplemental authorization of another $130 billion, which represents a significant overall increase in defense spending.

Clients who ask me for general guidance receive the following general answer.
For the next year at least, the Obama Administration will be kind to the defense industry. FY2010 is not really the President's budget anyway, so even to peaceniks it should not be surprising that there are no major cuts.

FY2011 will be President Obama's first DOD budget, and all betting is that there will not be major cuts in the overall number. The fact that Obama appointed Gates to be DOD Secretary is a sign that he recognizes that the world remains very dangerous in spite of the sentiments of the left wing of his party.

FY2011 and beyond budgets will depend significantly on the President's, and the public's, perception of danger in the world. The fact that North Korea and Iran are both acting belligerently is keeping the lights on late in the Pentagon and the situation room at the White House.

That said, expect significant shifts in the allocation of defense dollars.

Winners: the intelligence community, information solutions, cyber security, and software that continues a general trend toward more efficiency and automation of function. That does not only includes military systems; more mundane functions such as data sharing between agencies continues to be a huge priority.

Losers: makers of military hardware including vehicles, aircraft, and ground equipment. For the next few years at least, there is no expectation that the nation will be fighting a traditional ground war.

Unknown impact: military space and NASA.

Stay tuned. Remember that good ideas always have a market in the DOD at those agencies whose sole raison d'etat is to raise the technology bar.

Pentagon Approves Creation of Cyber Command

"WASHINGTON, June 23 (Reuters) - The Pentagon will create a Cyber Command to oversee the U.S. military's efforts to protect its computer networks and operate in cyberspace, under an order signed by Defense Secretary Robert Gates."

The creation of the cyber command at the Pentagon is long overdue. In today's information age, it is axiomatic that information is key and the war on information will only continue to grow.

For example, it is not well-known among the public but there are millions -- millions -- of attempted cyber attacks on Defense networks daily. DAILY. Most come from China but a signficant number come from the former Soviet Union republics and Islamic nations. Any one of these would love to poison our military's computer networks.

I was once speaking with an Air Force colonel responsible for cybersecurity, during 2008, and he remarked that while all his colleagues were fighting the enemy of radical Islam, he was the only one he knew fighting a Chinese enemy, and fending off this enemy's assaults, every day. Every day.

I will be commenting more on this signficant milestone in months to come. Suffice it to say that companies with cybersecurity solutions will continue to be very attractive to those defense agencies (DARPA, IARPA, intel agencies) that are responsible for developing solutions to this evolving and very real problem.