OUTLOOK 2017

A World in Flux: What These Experts Expect Next Year

Outlook 2017
Entering Uncharted Territory
D
efense and national security strategy for
the last year was dominated by what the
world has come to know quite well, unfor-
tunately: harrowing attacks by terrorist groups,
most often and notably the Islamic State. Politi-
cal muscling, particularly where borders were at
stake. And internal strife, showing itself not via
civilian uprisings but rather a military coup at-
tempt and election shockers on both sides of the
proverbial pond.
How it ended, however, sets the stage for a 2017
dominated by the unfamiliar: A divided Europe.
A new White House administration, led by a US
president that universally confounds. And polit-
ical reconciliations that unsettle some testing
loyalties even as they might signal newfound
cooperation that could (maybe?) prove produc-
tive.
Political transitions are nothing out of the ordi-
nary. Nor are shifting alliances. But what makes
2017 unusual is how much is converging upon the
world at once. It feels like the start of something
new, and nobody knows just yet what will be for
the better versus the worst. And what may even
end up inconsequential.
In the subsequent pages, defense leaders and ex-
perts from around the world share their views on
what they feel will rise above the noise from
innovation and enabling the industrial base, to
rethinking national security strategies.
Jill Aitoro
Executive Editor
Outlook 2017
WHATS INSIDE
Essay contributions from:
Ash Carter, US Defense Secretary, Page 3
Jens Stoltenberg, NATO Secretary-General, Page 5
Roberta Pinotti, Italy Minister of Defence, Page 7
Avigdor Lieberman, Israel Minister of Defense, Page 9
Jorge Domecq, European Defence Agency Chief Executive,
Page 11
Pawe Soloch, Poland National Security Bureau Head,
Page 13
Deborah Lee James, US Air Force Secretary, Page 14
Lt. Gen. Ben Hodges, US Army Europe Commanding General,
Page 15
Dimitris Vitsas, Greece Alternate Minister of National
Defense, Page 17
Jerry Demuro, BAE Systems Inc. President and CEO, Page 19
David F. Melcher, Aerospace Industries Association CEO,
Page 21
Thomas A. Kennedy, Raytheon Chairman and CEO, Page 23
Ruslan Pukhov, Center for Analysis of Strategies and Technolo-
gies Director, Page 25
Stephen Szabo, The Transatlantic Academy Executive Director,
Page 27
Ganesh Raj, Ernst and Young India Partner, Page 29
Byron Callan, Capital Alpha Partners Manager Director,
Page 31
Sponsored: Mark Aslett, president and CEO of Mercury
Systems, Page 33
defensenews.com | 2
Outlook 2017
Innovation Drive
Essential to DoDs Future
A
t my swearing-in ceremo-
ny as secretary of defense,
I said the Pentagon had to
think outside this five-sided box,
and since taking office, opening the
Defense Department to new ideas
and stoking its innovative culture
has been one of my top priorities. I
have made it my mission to innovate
because if we are to remain the fin-
est fighting force in the world, tread-
ing water wont get it done. Weve
made important progress on multi-
ple fronts, implementing changes I
believe will serve my successors for By US Defense Secretary
years to come. ASH CARTER
Innovation is all the more neces-
sary in todays dynamic security
environment. We are currently addressing five
major, unique, and rapidly evolving challenges:
countering Russian aggression and coercion,
especially in Europe; managing historic change
in the Asia-Pacific, the most consequential region
for Americas future; strengthening deterrence
and defensive capabilities against North Korea;
checking Iranian aggression and malign influence
in the Gulf; and accelerating the certain and last- The last budget we proposed
ing defeat of ISIL. At the same time, the Pentagon called for $72 billion in
also must prepare for challenges we cant antici-
pate.
To take on these challenges and stay ahead of
our competitors in an increasingly complex inter-
national landscape, DoD is changing and adapting
how we invest in technology, how we fight, how
we operate as an organization, and how we at-
tract and nourish talent.
Outlook 2017
To ensure that our military contin-
ues leading change technologically,
we are pushing the envelope on
research and development. The last
budget we proposed called for $72
billion in research and development
in the next year alone more than
double what Apple, Intel, and Google
spent last year on R&D combined.
Beyond that, weve made progress
in building, and in some cases re-
building, the bridges between the
Pentagon and Americas technology
community. I created our Defense
Innovation Unit-Experimental, or
DIUx, to connect with startups and
other commercial technology firms
innovating in Silicon Valley; Boston;
Austin, Texas; and everywhere in between. Those
DIUx outposts are already producing new ideas
that will help our warfighters. Were pursuing
these new initiatives while still looking to the
innovative companies in our traditional defense
industrial base to help us accomplish our mission
research and development in
the next year alone more
than double what Apple, Intel,
and Google spent last year on
R&D combined.
defensenews.com | 3
Outlook 2017
as only they can. Americas defense contractors
will need to keep us on the cutting edge in the
years ahead.
Of course, technological innovation and oper-
ational innovation go hand-in-glove. As a result,
the Defense Department is reinvigorating training
across the military branches to return to full-spec-
trum readiness, and re-thinking how we operate
to find new advantages against potential adversar-
ies. We have fundamentally revised our core con-
tingency plans to account for changes in potential
adversaries capabilities, to apply innovation to
our operational approaches, and to better count-
er emerging threats such as cyberattacks. These
updated plans will ensure we have the agility and
ability to win the fights we are in, the wars that
could happen today, and the wars that could hap-
pen in the future.
Innovation in technology and operations are
necessary, but insufficient, because at the pace
todays world demands, the Defense Department
can only succeed as a flexible institution that nur-
tures innovation in all its forms. We cannot afford
to be bureaucratic, too slow to act or risk-averse,
nor to discourage thinking differently. One effort
to encourage innovative thinking is the Defense
Innovation Board, which I established this year.
The board, led by Alphabet and Google Executive
Chairman Eric Schmidt, has already provided
its first set of recommendations on how to apply
Americas wider innovative culture to military
problems. One recommendation Ive already ac-
cepted is the establishment of a chief innovation
officer position to act as a senior adviser to the
defense secretary on innovation.
Of course, people are the bedrock of our mili-
Outlook 2017
People are the bedrock of our
military superiority thats
always been the case and
always will be.
tary superiority thats always been the case and
always will be. While we can acquire the best
technology, and employ the soundest operation-
al and organizational concepts, we are nothing
without our people. So as our country and young
citizens change from generation to generation,
so must our methods for attracting and retaining
the smartest, hardest working, and most talented
among them.
Thats why I launched the Force of the Future
initiatives, to ensure that our people will always
remain cutting-edge. In total, these initiatives
span the career of a uniformed service member
and DoD civilian, from recruiting men and wom-
en to join, to caring for, retaining, and developing
them, and then to helping successfully transition
those who want to move on.
From outreach to the tech community and inno-
vative ecosystems across the country, to opera-
tional and organizational innovation, to building
the Force of the Future, the thread that connects
all these efforts is that their real payoff will come
down the line. Just as Ive benefitted from actions
by my predecessors, I am confident the Defense
Department and its future leaders will benefit
from these initiatives for years to come as each
ensures our military remains the strongest, most
capable, most innovative force on Earth. DN
defensenews.com | 4
Outlook 2017
NATO Depends on Fair
Member Expenditure
F
or NATO, 2017 will be a year
of action. At the NATO Sum-
mit in Warsaw last July, our
leaders agreed on the next steps for
strengthening our deterrence and
defense capabilities, and to project
stability beyond our borders.
In the spring, four multinational
battalions will deploy to Poland
and the Baltic States. These will
be led by the United States, United
Kingdom, Canada and Germany.
NATO will also have a strengthened
presence in the Black Sea region,
with a Romanian-led multinational
brigade. Together, and supported by By JENS
NATO secretary-general and
reinforcements and national forc-
former prime minister of Norway
es, they will present a strong signal
to any potential aggressor: that an
attack on any ally will be met by a response from
all allies. At the same time, we are keeping open
channels of political dialogue with Russia, be-
cause dialogue is even more important in times of force for good.
tension.
In the south, NATO is supporting its partners to
project stability in the region. NATO has already
trained hundreds of Iraqi officers to better fight
the Islamic State group. This program will be
significantly expanded in the new year. Every ally
is already a part the US-led mission to counter
ISIS, and NATO AWACS surveillance aircraft are
now providing vital support for the coalitions air
campaign.
Close cooperation between NATO and the Euro-
pean Union is also vital for our security. In War-
saw, I signed a joint declaration with President of
Outlook 2017
the European Council Donald Tusk
and President of the European Com-
mission Jean-Claude Juncker, which
committed both organizations to a
new level of cooperation. This year,
we will increase our partnership
with the EU in areas such as coun-
tering hybrid warfare, cyber defense,
exercises and supporting the defense
industry.
NATO and the EU are already
working together in the Aegean Sea
to cut the lines of illegal migration.
Sea Guardian, NATOs new maritime
operation in the Mediterranean Sea,
STOLTENBERG, is engaged in surveillance, counter-
terrorism and capacity-building for
our partners in the region. It will
also share information with the EUs
Operation Sophia and provide it with logistical
support. By combining our different skills and
strengths, NATO and the EU are a formidable
Strengthening our defense and promoting stabil-
ity does not come for free. US President Barack
Every ally is already a part the
US-led mission to counter ISIS,
and NATO AWACS surveillance
aircraft are now providing vital
support for the coalitions air
campaign.
defensenews.com | 5
Outlook 2017
Obama, US President-elect Donald Trump, and ev-
ery federal senator and congressman I have met
on Capitol Hill have rightly called on European
allies to take a more equitable share of the bur-
den. Delivering on higher defense spending has
been one of my top priorities since I took office in
2014. And when I spoke to Trump, I stressed that
we have now started to move in the right direc-
tion.
In 2014, every NATO ally pledged to increase
defense spending to 2 percent of gross domestic
product over a decade. In 2015, defense cuts in
European allies and Canada stopped. And this
year, we expect their defense spending will in-
crease in real terms by 3 percent.
But we still have a long way to go. If all Europe-
an allies and Canada were to meet the 2 percent
spending target, that would mean an extra 100
billion dollars roughly the combined defense
spending of Europes two largest defense spend-
ers, the United Kingdom and France, every year.
NATO has responded to the new security envi-
Outlook 2017
NATO has responded to the
new security environment with
determination. I look forward
to welcoming Trump for our
next summit in Brussels this
year to discuss how NATO
must continue to adapt.
ronment with determination. I look forward to
welcoming Trump for our next summit in Brus-
sels this year to discuss how NATO must continue
to adapt.
In uncertain times, we need strong American
leadership, and we need Europeans to share their
fair share of the burden. Above all, we need to
recognize the value of the partnership between
America and Europe on which NATO is found-
ed.DN
defensenews.com | 6
Outlook 2017
Responding to Fear
and Uncertainty
T
here is no doubt that the
European security scenario
has changed dramatically. As
Europeans, we face growing threats
both from inside and outside our
societies, generating fear and uncer-
tainty. It is important to take these
feelings and the disorientation they
express seriously and act conse-
quently.
European nations must come up
with effective answers to our cit-
izens growing concerns, starting
with an increased effort to provide
advanced but realistic solutions for
common security and defense. By ROBERTA
defense minister and senator for
Italy believes that the European
the Democractic Party
Union needs a new political vision
to address these problems, as well
as the ability to innovate institutions related to
its Common Security and Defence Policy (CSDP)
and a blueprint for action to achieve required
capabilities.
Reinforcing our common defense would bolster
our capacity to project stability in areas and re-
gions critical to our security, as well as make the
use of our resources more efficient and effective.
Also, it would demonstrate a European willing-
ness to strengthen the transatlantic link and to as-
sume a greater responsibility in sharing the costs
of security and defense, providing NATO with a
more homogeneous, usable and sustainable set of our security, as well as make
capabilities.
Developing a new European defense dimension,
therefore, means improving the ability to operate
together within CSDP missions and operations;
Outlook 2017
building a credible set of capabili-
ties, even in common, when the goal
exceeds the capabilities of a single
nation; and ensuring a robust indus-
trial and technological base. It also
means laying out the political con-
ditions, based on a shared, strategic
approach, for the employment of our
capabilities within the frame of the
Atlantic alliance or in full comple-
mentarity of action, meaning coping
with risks, threats and challenges in
areas or situations where the alli-
ance cannot act or will not desire to
act.
PINOTTI, Italy's Improving the ability to operate
together implies better planning by
taking advantage of existing but frac-
tioned structures and procedures.
A higher degree of system standardization and
a commonly agreed set of regulations will also
enhance the usability and the effectiveness of our
forces, reducing overall costs.
In term of capabilities, the EU has already prov-
Reinforcing our common
defense would bolster our
capacity to project stability in
areas and regions critical to
the use of our resources more
efficient and effective.
defensenews.com | 7
Outlook 2017
en that specific pooling and sharing initiatives,
like the European Air Transport Command, can
provide more capabilities; and joint projects like
the Tornado, the Eurofighter or the future EU-
MALE can enable effective cooperation among
national industries on large and expensive proj-
ects. Italy believes that such initiatives should be
replicated in other areas, like logistic support and
training and education.
From an industrial and technological point of
view, Europe also needs to further enhance and
reinforce its competencies, to sustain capability
development and to enable a dynamic role in the
competitive environment of its industrial defense
sector. The existing European Defence Action
Plan is a good framework to promote the interest
of member states.
It could be reinforced by establishing a ded-
icated, long-term European defense research
program and by facilitating cooperative, dual-use
projects on key strategic activities through fiscal
and financial incentives and EU funds.
European states willing to increase defense
cooperation should probably be prepared to bear
the initial burden, in the belief that starting costs
Outlook 2017
From an industrial and
technological point of view,
Europe also needs to further
enhance and reinforce its
competencies, to sustain
capability development and to
enable a dynamic role in the
competitive environment of its
industrial defense sector.
and efforts will be repaid by a more efficient and
effective ability to shape our security environ-
ment. These efforts should not detract resources
from ongoing commitments, but rather reinforce
the European ability to contribute to the defense
of the European region and project stability in
areas critical to our common security.
The long-term result will be a more powerful
and usable European set of capabilities that will
also reinforce the Atlantic alliance. DN
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Outlook 2017
Israels Security in a
Turbulent Middle East
T
he dramatic turmoil that has
seized the Middle East in
recent years holds a number
of important lessons for the interna-
tional community, as policy options
are considered regarding the ongo-
ing regional crises. These lessons
are particularly salient for Israel and
for those concerned with ensuring
its national security.
The massive convulsions that in
recent years have swept through
North Africa and erupted in Syria,
Iraq, Yemen and elsewhere in the
region, and which have seen the em-
By AVIGDOR LIEBERMAN,
powerment of semi-territorial terror-
Israel's minister of defense
ist organizations such as the Islamic
State group, Hamas and Hezbollah,
represent an earthquake of historic proportions.
Multiethnic states such as Libya, Syria and Iraq
have descended into chaotic civil wars as many
aspects of the regions enduring political order,
whose origins lie in the aftermath of World War
I, disintegrate. This basic reality beckons three
main conclusions.
The first conclusion concerns the underlying
reason for the regions instability: the almost
complete absence of a middle class. Most of the
Arab states suffer from institutionalized corrup-
tion, scarcity, extreme poverty and populations
that have lost hope, coupled with a thin stratum
of extremely wealthy tycoons.
To maintain an enduring state, a strong middle
class is crucial. The most stable and prosperous
countries in the world have a broad, educated and and employment.
empowered middle class, in some cases compris-
Outlook 2017
ing up to 80 percent of the countrys
populace. Religious fanaticism and
ultranationalism are the result of
economic failings. The key to curb-
ing them isnt found in bolstering
security services. It lies in economic
development and employment.
This is why Israel prioritizes the fa-
cilitation of economic development
in Judea and Samaria and Gaza. In
the long term, a healthy Palestinian
economy is as much a strategic Is-
raeli interest as a Palestinian one.
The second conclusion pertains to
the disparity between the existing
borders of the states in the region
and their resident populations. Many
of the countries in the Middle East
were artificially established as a result of the
Sykes-Picot Agreement and based on colonial
considerations that did not take into account the
pattern of inhabitance and the deep sectarian rifts
within the respective societies.
Thus, to genuinely solve the regions problems,
Religious fanaticism and
ultranationalism are the result
of economic failings. The key
to curbing them isnt found in
bolstering security services. It
lies in economic development
defensenews.com | 9
Outlook 2017

borders will have to be altered, specifically in

countries like Syria and Iraq. Boundaries need Air support, bombings and
to be redrawn between Sunnis, Shia and other
communities to diminish sectarian strife and to
the supply of war materiel
enable the emergence of states that will enjoy to affiliates are all part of
internal legitimacy. It is a mistake to think that the equation, but without
these states can survive in their current borders.
A similar conclusion holds true for the Israeli-Pal-
a substantial ground force
estinian arena and for the borders that will ulti- with the capability, will and
mately need to be drawn for the achievement of mandate to directly engage
a stable, two-state outcome. We need out of the
box analysis to avoid being misled by habitual
with the enemy, campaigns
ways of thinking. cannot be decisively won.
The third conclusion concerns the conditions
for attaining victory in military campaigns against
serve as an alternative to the presence of the
insurgent and paramilitary forces. Experience
Israel Defense Forces on the ground.
shows that winning decisively requires boots on
Thus, a realistic appraisal of the socioeconomic,
the ground. Air support, bombings and the sup-
sectarian and geostrategic reality of the Middle
ply of war materiel to affiliates are all part of the
East is needed in order to formulate sound inter-
equation, but without a substantial ground force
national policy for the region, just as it is vital for
with the capability, will and mandate to directly
Israels national security.
engage with the enemy, campaigns cannot be
The regions turbulence has underscored, for
decisively won.
those not already convinced, the critical impor-
This is a sobering but unavoidable conclusion
tance of tangible strategic factors economic
for Western powers seeking to vanquish regional
development, correspondence between political
terrorist groups such as ISIS, but it is also espe-
borders and populations, and militarily defensi-
cially salient in regard to Israels options vis--vis
ble territory enabling the effective deployment
Judea and Samaria. The various formulas that
of ground troops as preconditions for stability
have been proposed over the years as a substitute
and security.
for Israeli control of strategically vital areas along
It is these realistic principles, and not illusory
its eastern flank peacekeeping forces, early
moralism, which need to underpin the Wests
warning stations, satellite surveillance, interna-
approach to the Middle East in general and to the
tional guarantees and others cannot genuinely
Israeli-Palestinian conflict in particular. DN

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Outlook 2017
Acid Test for European
Defence Research Coming
T
oday, more than ever, the
European Union faces a pleth-
ora of challenges. Rising EU
scepticism and populism coupled
with citizens growing fears for their
internal and external security require
a fundamental debate on the future
of Europe.
Defence has to be a centre piece of
this debate. Eighty-two percent of re-
spondents to a Europe-wide survey
have confirmed they want greater
involvement of the European Union
By JORGE DOMECQ, chief ex-
in the fight against terrorism; 66
ecutive of the European Defence
percent want the Union to intervene Agency (EDA), an intergovern-
more in security and defence policy. mental agency of the EU Council an Defence Agency (EDA) whose
Since the European Unions new
Global Strategy was presented by
the EUs High Representative for Foreign Affairs
and Security Policy Federica Mogherini in June
2016, efforts by several EU nations to develop
a stronger, more integrated and more efficient
European defence have gained new momentum.
The Global Strategys Implementation Plan on Se-
curity and Defence, the European Commissions
Space Strategy presented in October as well as
the European Defence Action Plan to be tabled
end of November will further add to it.
In this endeavour, defence research and technol-
ogy (R&T) is not just a side issue but an essential
prerequisite for its achievement.
The European Global Strategy insists on the
need for Europe to develop an appropriate lev-
el of strategic autonomy in order to be able to
guarantee the security of the Union and its citi-
zens. We have to be clear about this: if Europes
Outlook 2017
ambition is to reach such a level of
strategic autonomy and if it wants
to retain the ability to develop the
military capabilities it will need in
the future, then it has to invest in
future-oriented defence and research
technology programmes. Not tomor-
row, but now. Member states na-
tional defence research expenditure,
which is declining, therefore needs
to be boosted and complemented
by collaborative EU-funded defence
research.
First steps in this direction have
already been taken, and the Europe-
main missions are to facilitate Euro-
pean defence cooperation, support
capability development and strengthen the in-
dustrial and technological base of the European
defence sector is actively involved in all of
them. Since its inception, the EDA has been a hub
for cooperation in defence R&T with more than
180 projects launched worth over 800 million.
Intergovernmental as well as national R&T will
continue to be important and thats why we have
to revert the descending trend.
Since its inception, the EDA
has been a hub for cooperation
in defence R&T with more than
180 projects launched worth
over 800 million.
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Outlook 2017
In 2016, we entered a new dimension: defence
research funded by the EU. The EUs first pilot
project on defence research, which marks the
first time that the EU budget is used for defence
research, is run and managed by the EDA on be-
half of the European Commission. Its implemen-
tation is well advanced and the three contracts
it foresees have been signed on 28 October. It is
crucial insofar as for the first time it is testing the
conditions for defence research in an EU frame-
work. More important, it also paves the way for
the next milestone on the road towards dedicated
EU defence research: the launch of the so-called
Preparatory Action on CSDP-related research. It
was decided by the European Commission with
one main objective in mind: to demonstrate the
added value of EU-funded research in the defence
sector.
Set to start in mid-2017 and running over a
three-year period (2017-2019), the Preparatory
Action (PA) will thus be a genuine test-bed, or the
acid test to put it bluntly, for proving the rele-
vance of European defence research and laying
the foundations for a fully-fledged EU defence
R&D programme in the Multi-annual Financial
Framework 2021-2027. A good start is essential
for the success of the whole undertaking; thats
why 2017 is so crucial for the future of European
defence research. Here too, the EDA is set to play
a key role as the implementing agency for the
management and implementation of the research
projects as well as for the future exploitation of
the outcome of the Preparatory Action projects.
How to make of the Preparatory Action a suc-
cess? Certainly not by producing research which
is not driven by member states capability require-
ments. Therefore, the key aspect in assessing
Outlook 2017
Defence R&T is an essential
prerequisite to develop the
capabilities of the future
and thus to provide for our
citizens' security.
the EU added value of the PA will be the actual
uptake of the technology research by the industry
and the Ministries of Defence. European defence
research has to produce new strategic capabili-
ties for European armed forces and increase the
competitiveness of the EU defence technological
and industrial base. The PAs primary operational
aim is thus to produce successful research cases
which can underpin the development of military
technologies and which would normally not be
conducted by member states acting alone. The PA
work programme therefore needs to rely on the
priorities identified in the Capability Development
Plan (CDP) so that it can genuinely address the
expressed and foreseen capability needs of the
member states.
Defence R&T is an essential prerequisite to
develop the capabilities of the future and thus to
provide for our citizens' security. Commitment
by the European institutions, member states and
industry is required to put one of the European
Union Global Strategys core messages into ac-
tion: Union funds to support defence research
and technologies and multinational cooperation
and full use of the European Defence Agencys
potential are essential prerequisites for European
security and defence efforts, underpinned by a
strong European defence industry. DN
defensenews.com | 12
Outlook 2017

Polands Security Priorities

P
olands geopolitical location For this reason, we are very
is responsible for the fact that pleased that the latest NATO summit
our country has always treated in Warsaw was a demonstration of
all questions related to security as unity by the allied countries, and
of crucial importance. However, the the security interests both in NA-
events that took place in the past TOs east and south were taken into
several years have further empha- account, in line with the 360-degree
sized this priority. approach.
For understandable reasons, our Regarding the eastern flank, the
greatest concern is Russias aggres- decisions to establish a forward mil-
sive policies, and the countrys read- itary presence in Poland, the Baltic
iness to use force, modify borders states, but also Romania and Bulgar-
and break international law. ia were not only signs of a tangible
We are also aware that Europes increase of the regions security
security issues are not only related By PAWE SOLOCH, head but also a sign that NATO treats the
to military threats in the east. They of Poland's National Security threat by Russia as a real threat. This
also comprise new, destabilizing Bureau is fully in line with the Polish diag-
factors such as the migration crisis nosis, which states that currently we
caused by instability in the south or terrorism. are not experiencing a period of turbulence, but
We take notice of these factors, we are trying to we are facing a permanent deterioration of our
fully understand them and we put emphasis on security environment.
this in our relations with foreign partners. This Today, the priority for Polands president and
is why we have provided our military support to the government is to seek a full implementation
the anti-terrorist coalition in its fight against the of the decisions made in July at the military level.
so-called Islamic State, and we have shown readi- It is with great satisfaction that I admit that we
ness to participate in further stabilizing efforts. are on the right track to achieve this.
With these challenges in mind, Poland is ex- Poland does not only wish to be a security
panding its activity within the external dimension consumer but also an active participant of allied
as part of NATO, the European Union and oth- presence in the region and south of NATO. We
er international organizations but also within decided to deploy a tank unit to the allied battal-
the internal dimension, related to building up the ion, which is under development in Latvia. We
countrys own potential. plan to deploy a second unit to Romania. Also,
Within the external dimension, NATO remains, we are actively working to strengthen the allied
without any doubt, the most important guarantee institutions that are located in Poland, such as the
of our security. It is the strongest alliance in histo- Joint Force Training Center in Bydgoszcz, and the
ry, in possession of real military power, but also a command of the Multinational Corps Northeast in
practical platform of strengthening the transatlan- Szczecin. DN
tic bond between Europe and the US and Canada.

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Outlook 2017
Beware Unknown Unknowns
A
s I reflect back on my time
as the senior civilian in the
United States Air Force, Id
like to leave something behind for
my successor. Humbly, here are
some thoughts for the next Air Force
secretary to consider.
Dear Sir/Madam: You are about to
take the reins of a magnificent group
of Americans at the forefront of U.S.
national security, flying and fighting
to preserve our freedoms around the
world. They are as busy as Airmen By US Air Force Secretary
DEBORAH LEE JAMES
have been in many decades, and you
will take great pride in all they do.
Having seen all the good that my service has
done for the nation under the strain of read-
iness challenges and budget uncertainties I
wanted to share some thoughts that I hope will
help you succeed in leading this proud institution. credible deterrence in an increasingly unstable
For your consideration:
Beware of the unknown unknowns. I came
into office with these top priorities taking care
of Airmen and their families; balancing todays
readiness and tomorrows modernization and
making every dollar count. Although I have re-
mained true to these priorities there were times I
had to shift to respond to urgent problems. So be
prepared to be agile, flexible and transparent with and the stresses on an Air Force that has been at
Congress, Airmen and the American people.
Just because you direct it doesnt mean it will
get done. You have to be relentless in following
through. For example, I tried for some time to
tackle the burden of extra administrative duties
that made it more difficult for Airmen to accom-
plish their core missions. It took longer than I
would have liked to make a dent, but we did. And
we are better for it. You need to keep this up.
Given the Air Forces reliance on technology
and innovation, I cannot stress enough the impor-
Outlook 2017
tance of continual, non-stop collab-
oration with our industry partners.
It takes an extraordinary commit-
ment to open communication with
industry if we are to find ways to
stem the ever-rising costs of military
programs, gain new innovation from
nontraditional companies and speed
up the acquisition process. But it is
doable. You will inherit some enor-
mous challenges, as will other ser-
vice secretaries and leaders in Wash-
ington. From where I sit, here are the
critical ones.
First, continue the fight to elimi-
nate the Budget Control Act and sequestration.
Our ability to modernize depends on it.
Second, we must update our nuclear forces and
infrastructure. They are a bedrock of the nations
world. In a similar vein, keep the focus on space.
The Air Forces capabilities in space enable the
entire joint team and provide economic security
to our nation. And finally, I hope that you will con-
tinue to advocate for funding our readiness and
people accounts. Our ability to plan sensibly is a
key to recovering readiness levels that have fallen
in part because of the pace of modern warfare
war for 25 consecutive years. Moreover, facing
shortages of pilots and maintainers and the need
to grow other key capabilities like ISR, we need
to increase our end strength.
In the future, we must be an Air Force that can
prevail in high end fights; one that optimizes
human performance, respects diversity and treats
every Airman with dignity and respect. If you get
the people part of the equation right, the rest has
a way of taking care of itself.
I wish you much success. DN
defensenews.com | 14
Outlook 2017
US Army Europe and
Its Role in Deterrence
E
urope faces numerous secu-
rity challenges including the
influx of migrants and asylum
seekers, increasing acts of terrorism,
and adversarial actions by Russia
that seek to destabilize the region
and increase their prominence.
While all are concerning, NATO is
focused on deterring efforts to desta-
bilize Europe and, at the Wales and
Warsaw summits, moved quickly and
decisively to initially assure eastern
allies and partners on the periphery.
The alliance has begun transition-
ing from assurance to deterrence By LT. GEN. BEN HODGES,
and defense. The United States is fol- commanding general of
lowing NATOs lead in this transition US Army Europe
with a new security stance in Eu-
rope and enhancing the capabilities
of USAREUR, our NATO allies, and our partners.
The nine-month deployment of a heel to toe
Armored Brigade Combat Team (ABCT) and the
Combat Aviation Brigade (CAB) as the Regional-
ly Allocated Force (RAF), our contribution as a
framework nation to NATOs Enhanced Forward
Presence (eFP) Battle Groups, and the estab-
lishment of an armored divisions worth of Army
Prepositioned Stock (APS) are a visible contribu-
tions. Combined with an integrated multi-national
exercise plan as a backdrop, they demonstrate
Americas commitment to stability, security, and
unity of the alliance in Europe.
A key outcome of the Warsaw Summit was the
commitment from four framework nations (Great
Britain, Canada, Germany, and the United States)
to the NATO eFP concept. These nations will
Outlook 2017
deploy combat-ready, multi-national
Battlegroups (BG) to support the
national defense plans of Estonia,
Latvia, Lithuania, and Poland (re-
spectively). The U.S. is contributing
a full Stryker Squadron from the 2nd
Cavalry Regiment, based in Germa-
ny, to serve as the core for the first
U.S.-led eFP BG. As each eFP BG
achieves operational capability, the
USAREUR formations, including
the deployed ABCT, will be able to
increase deterrent effect in the Black
Sea Region.
Applying elements of speed are
critical to achieving deterrence here
in Europe. The first being the "speed
of recognition" through improved
coordination and information shar-
ing provides indicators of a pending or potential
crisis. Second is the speed of decision, which
provides the decision space to prevent a crisis.
The third is "speed of assembly," which includes
the immediate deployment of our RAF elements
to demonstrate capability and delivery of force
ready to fight tonight.
To increase the NATO deterrent capability, USA-
The alliance has begun
transitioning from assurance
to deterrence and defense.
The United States is following
NATOs lead in this transition....
defensenews.com | 15
Outlook 2017
REUR is committed to increasing interoperability
and training of allied and partner forces and in
2017 will conduct more than 90 exercises with
allies and partners to do so.
USAREUR remains committed to NATO and
European security through a holistic and bal-
anced strategy that this year will feature a series
of exercises in the Black Sea region during the
summer of 2017.
As the premier exercise series for USAREUR
in 2017, it will consist of 15 exercises in seven
countries involving over 35,000 troops across
the joint and combined Force. It is an integrated
training plan for the collective defense, furthering
partner capacity and improving interoperability: a
profound demonstration of U.S., ally and partner
commitment to security and stability in the Black
Sea region.
The U.S. is steadfastly committed to the defense
of Europe and fulfills that pledge through deploy-
Outlook 2017
USAREUR is committed to
increasing interoperability
and training of allied and
partner forces and in 2017
will conduct more than 90
exercises with allies and
partners to do so.
ing an eFP Battlegroup, committing an ABCT and
CAB to the new heel-to-toe continuous rotations
to Europe, assembling equipment and ammuni-
tion in APS sites across Europe, and increasing
the interoperable multinational exercise program
to transition from assuring NATO allies and part-
ners to deterring aggressive actions by Russia and
any other potential adversary. DN
defensenews.com | 16
Outlook 2017

Re-Orienting the Hellenic

Defense Industry
T
he coexistence of several Technological and Industrial Base
threats in our geographical (EDTIB) and to NATO's security of
environment requires Greece supply.
to be more alert in the field of securi- The Greek defense industry has
ty, in comparison with the other EU been developed after 1974. Today, it
member countries. consists of larger State enterprises
To confront these threats, Greece and several smaller private business-
must rely on the diplomatic, eco- es that are subcontractors to major
nomic, military, cultural, technologi- international defense manufacturers,
cal and industrial capabilities of the and they are involved in a wide range
country. Furthermore the Hellenic of production activities.
Armed Forces are kept in a high lev- Despite the fact that Greece was
el of effectiveness and operational one of the biggest importers of de-
readiness to counter external mili- fense equipment in the last decade,
tary threats against national security By DIMITRIS VITSAS, the Greek defense industry focused pri-
interests. alternate minister of national marily on the domestic market.
An important factor for the oper- defense for Greece But the recent politico-economical
ational readiness of the Hellenic and technological developments
Armed Forces is security of supply. have created an entirely new envi-
In the complex environment of modern weapon ronment for the defense industry. Technology in
systems, where supply chains are characterized defense and security changes rapidly. National
by technological complexity, global spread and a defense budgets have been reduced and interna-
large number of companies, individual countries tional competition has become fiercer. Very few
cannot ensure full autonomy in the field of securi- companies are now able to rely solely on their
ty of supply by local sources regardless of their domestic markets.
capabilities. The prolonged economic crisis in Greece has
Consequently, Greece aims to develop and lead to significant reduction of our defense spend-
maintain a defense technological and industrial ing. Hence the in-country opportunities for the
base, in critical areas, capable of supporting the
requirements of the Hellenic Armed Forces with
products and services in crisis or war, assuring in The prolonged economic
this way the vital national interests of the country. crisis in Greece has lead to
Moreover, by strengthening its domestic de-
fense technological and industrial base, Greece significant reduction of our
intends to contribute to the EU's efforts to devel- defense spending.
op a strong and competitive European Defense

Outlook 2017 defensenews.com | 17

Outlook 2017
domestic defense industry are limited. Further-
more, our current legal framework for the pro-
curements in defense and security, that adopts
Directive 2009/81/EC, does not favor the develop-
ment of the domestic defense industry.
The Greek minstry of defense, in its effort to
create an export oriented and competitive domes-
tic defense technological and industrial base that
will support the Hellenic Armed Forces, seeks the
assistance and participation of all the possible
actors and in particular of the domestic defense
industry. The domestic defense industry will have
to forget past practices and it is required to invest
in the development and production of technolog-
ically advanced products that have international
Outlook 2017
The domestic defense industry
will have to forget past
practices and it is required to
invest in the development and
production of technologically
advanced products that have
international demand.
demand in order to increase its exports and seek
business opportunities and partnerships over-
seas.DN
defensenews.com | 18
Outlook 2017
Planning for a More
Certain Future
A
s the transition continues for
the incoming administration,
we look forward to working
with the new national security team
as it establishes its priorities. During
this period, I am confident the U.S.
aerospace and defense industry will
demonstrate agility and remain res-
olute in helping to meet the needs of
military and intelligence agencies.
Amid numerous global securi-
ty challenges, there are three key
issues we must address to ensure a
strong national defense that is fully
prepared to protect vital U.S. inter- By JERRY DEMURO, president to shareholders.
ests here and abroad. & CEO, BAE Systems, Inc.
First, there must be a clear commit-
ment to robust and stable defense
budgets. We are hopeful that the support for a
strong military voiced during the campaign sea-
son translates into a more predictable defense
budget. Sequestration was thankfully put on hold
by the budget agreement enacted in 2015, but
those caps could reemerge if action is not taken
soon. It is time to end the impact of sequestration
and return to budgeting based on current and
future threats and not the arbitrary spending caps through our strategic alliances. One of the con-
of the Budget Control Act of 2011.
Furthermore, the uncertainty associated with
long-term defense spending impacts not only
the militarys capabilities and readiness, but also
industrys ability to invest its resources in the cut-
ting-edge technologies necessary to maintain our
military superiority. We encourage the new ad-
ministration to work with Congress to ensure the
fulfillment of an adequate, long-term commitment
Outlook 2017
to funding for procurement, research
and development, and readiness.
Second, while there have been
meaningful improvements to the ac-
quisition process, there is opportuni-
ty to further improve and streamline
the system. In response to declining
budgets in recent years, the industry
has effectively realigned organiza-
tions, reduced staff, and restructured
to ensure an efficient and effective
industrial base. These market-driven
initiatives were essential for us to
remain competitive and accountable
Similarly, the Department of De-
fense must rationalize its structure
and operating practices and care-
fully examine the regulatory regime that could
free up resources to invest in equipment, force
structure and readiness. Importantly, reducing the
money spent on regulations will provide greater
investment by industry into the next generation
of defense technologies and capabilities at the
heart of the Third Offset Strategy.
Lastly, we must enable collective security
Sequestration was thankfully
put on hold by the budget
agreement enacted in 2015,
but those caps could reemerge
if action is not taken soon.
defensenews.com | 19
Outlook 2017
sistent themes in our recent presidential election
was encouraging allies and partners to do more.
In order to equip them to do more, we must
prioritize programs designed to allow the United
States to share its technological advantages with
key allies and partners around the world.
Such export initiatives strengthen key alliances,
improve interoperability with our international
partners, enhance bilateral defense relations,
support coalition building, and are essential to
deterrence in the era of great power rivalry. In
addition, these provide the Pentagon with greater
buying power through economies of scale and in-
crease capital investment for defense technology
and modernization programs.
Credible deterrence demands certainty. By
demonstrating a commitment to defense, stream-
lining acquisition policies that encourage inno-
vation, and strengthening strategic alliances, the
United States can ensure the certainty that future
Outlook 2017
By demonstrating a
commitment to defense,
streamlining acquisition
policies that encourage
innovation, and strengthening
strategic alliances, the United
States can ensure the certainty
that future global security
demands.
global security demands. Industry understands
the important role we must play in delivering that
certainty, and welcomes continued partnership
with both the executive and legislative branches
in 2017 and beyond. DN
defensenews.com | 20
Outlook 2017

A New National Security

Cooperation Strategy
P
resident-elect Trumps call to ongoing partnerships that can last
our allies to contribute more decades with training, sustainment
to our mutual security inter- and upgrades after the initial export
ests can be achieved with a new of a system. We should win as often
Trump Doctrine that prioritizes as possible.
building partner capabilities through Ensuring these exports are consis-
the export of U.S. defense products. tent with U.S. foreign policy, while
On Day One, President Trump should protecting the battlefield technolo-
direct the Departments of State, gy edge of the U.S. military, should
Defense and Commerce to develop a remain top of mind. However, we
National Security Cooperation Strat- have to consider the policy, security,
egy and ask for the resources and and economic risks of denying or
support from Congress to execute delaying these exports. For instance,
this strategy successfully. with emerging technologies like un-
The United States is the global lead- By DAVID F. MELCHER, presi- manned aircraft systems (UAS), we
er in defense sales, and has made dent and CEO of the Aerospace can either define and shape the fu-
record numbers of Foreign Military Industries Association ture market and use of these systems
Sales (FMS) in recent years. So why or leave a vacuum for others to fill.
does this enterprise require reform, The current security cooperation
let alone the attention of the president? The truth enterprise is also not designed and resourced for
is we no longer have the funds, capacity, or polit- the volume, pace, scope and complexity of the
ical will to be the worlds policeman. If we want global threat environment. There are important
to advance our interests against threats ranging initiatives in the Defense Security Cooperation
from near-peer adversaries to terrorist cells, we Agencys Vision 2020 and the interagency under-
need allies and partners that can shoulder the way to manage these requirements under aus-
burden with us. tere conditions. In the recent NDAA, Congress
These countries have a choice about who to buy further supported these efforts by streamlining
from and work with. The quality, sophistication, budget authorities and FMS contracting while
and aggressiveness of our global competition
has grown significantly. Our partners will hedge
against perceived weakness in U.S. commitments The quality, sophistication,
to global security and are courted by the highest and aggressiveness of our
level political leaders supporting our foreign com-
petitors. global competition has grown
This competition is a zero-sum game and every significantly.
defense export establishes our influence through

Outlook 2017 defensenews.com | 21

Outlook 2017
creating professional development opportunities
for security cooperation experts. These reforms
are foundational, evolutionary steps that must
be accelerated and expanded upon, especially to
ensure we have the right bandwidth and training
in the security cooperation workforce.
Revolutionary change can only happen with
political leadership at the presidential level to get
the interagency to identify and act on priorities
for security cooperation. An effective National
Security Cooperation Strategy will ensure our al-
lies are ready with full spectrum and sustainable
capabilities to serve as a deterrent and to fight
with us against common threats.
Significant advance preparations (e.g. foreign
policy, advocacy, technology security, capacity
building) are needed for this kind of partner capa-
Outlook 2017
Revolutionary change can
only happen with political
leadership at the presidential
level to get the interagency to
identify and act on priorities
for security cooperation.
bility. The threats are not waiting and our part-
ners are not either. We need a Trump Doctrine
and a National Security Cooperation Strategy to
guide the whole of government and ensure Con-
gress is in support with the necessary oversight
and resources. DN
defensenews.com | 22
Outlook 2017
Third Offset: Still Critical
to National Security
T
he complex national security
and foreign policy challenges
facing Americas future will
demand a continued focus on provid-
ing our men and women in uniform
with a technological advantage.
For generations, we have benefited
from this advantage, but it is now be-
ing challenged by potential adversar-
ies from around the world. Across all
domains air, land, sea, space and
cyber our opponents are seeking
to close the technological gap in
US military capabilities and exploit
them to their advantage. By THOMAS A. KENNEDY,
In light of such efforts, and given chairman and CEO of Raytheon ness) and quick assessments of po-
the dynamic and challenging geopo-
litical environment, Americas tech-
nological superiority has never been more import- decide and act loop or cycle, an organization that
ant to national security. The best way to retain
that superiority is to maintain the commitment to
the Pentagons Third Offset strategy.
Since the implementation of the First and Sec-
ond offsets, other nations have exploited a global
pool of emerging technologies to challenge our
capabilities in important areas like cyber, pre-
cision munitions and ISR. With our leadership
being threatened across all domains, our defense
capabilities must continually advance and make a
technological leap.
The Third Offset strategy is led by break-
throughs in deep learning, human-machine col-
laboration, human-machine combat teaming,
assisted human operations, and network-enabled,
cyber-hardened weapons to enhance battlefield
awareness and weapon capabilities. The key
Outlook 2017
to success will be close collabora-
tion among industry, academia and
government to rapidly innovate and
integrate the next-generation capa-
bilities (advanced technologies) we
will need to maintain superiority.
Many of these technologies will
integrate artificial intelligence and
autonomy with human thinking to
enable our war fighters and systems
to make better decisions faster than
our adversaries. This is critical in
accelerating the rapid comprehen-
sion of operational environments
(through in-depth situational aware-
tential responses and consequences.
Referred to as the observe, orient,
can perform this cycle faster than an opponent
can gain the upper hand.
These technologies provide other advantages
as well. In the not-too-distant future, war fighters
will be able to safely conduct their operations
Across all domains air,
land, sea, space and cyber
our opponents are seeking to
close the technological gap
in US military capabilities
and exploit them to their
advantage.
defensenews.com | 23
Outlook 2017
from extended distances. From multiple distrib-
uted positions, low-cost networked systems will
autonomously complete missions, with the hu-
man operators safe from danger.
In fact, many technologies are rapidly approach-
ing a unique juncture in the exponential acceler-
ation curve with momentum fueled by advanced
computing and unparalleled connectivity between
industries and domains.
New materials being engineered at the atomic
levels will enable us to push the boundaries of
system performance in ways we havent seen
before.
Advances in quantum technology will provide us
with new phenomena to exploit in sensing, com-
puting, communications and security.
The world is undergoing a period of accelerating
Outlook 2017
From multiple distributed
positions, low-cost networked
systems will autonomously
complete missions, with the
human operators safe from
danger.
technological change. So our nation must remain
steadfast, and industry is at the ready to do its
part.
The Third Offset strategy has provided the
vision. The key will be the focus and political will
of our leaders to sustain this commitment. DN
defensenews.com | 24
Outlook 2017
Pulling Back the Veil
on the Syrian Conflict
T
he key Russian foreign policy
event of 2016 was the ongoing
military operation in Syria.
On March 15, President Vladimir
Putin announced a partial pullout of
Russian forces, saying that the key
mission objectives had already been
fulfilled. But despite that announce-
ment, the scale of the Russian inter-
vention continued to grow.
Russia is engaged in a very delicate
balancing act in Syria, waging war on
Islamic State forces and the moder-
ate opposition to the Assad regime
By RUSLAN PUKHOV, director
at the same time. The goal here is of the Centre for Analysis of
to defeat them all and prop up the Strategies and Technologies
friendly regime in Damascus. There in Moscow
is also another goal: to demonstrate
that Russia has reemerged as a
global power and force the West to work with it,
breaking the foreign policy isolation imposed on
Moscow over the conflict in Ukraine.
After more than a year of the Russian military
intervention in Syria, the results so far are not an
unalloyed success. The forces deployed in Syria
remain fairly limited, and the losses have been
small. For the Russian military machine, the cam-
paign in Syria is like a large drill; it does not put
much strain on the resources, while at the same
time providing an opportunity to field-test new
weaponry and equipment. Meanwhile, the Rus-
sian public doesnt really see the point of the mil-
itary involvement in Syria but there is no great
public anger or rejection of it, either. It mostly
serves to stoke up the patriotic sentiment to some weaponry and equipment.
degree, and those who expected Syria to become
Outlook 2017
another iteration of the disastrous
Soviet campaign in Afghanistan have
been left disappointed for the time
being.
Nevertheless, from the military
point of view, it is clear that the
original goals of the intervention
have not been achieved. Russian
military assistance has been crucial
in inflicting some painful defeats on
ISIS (such as the liberation of Palmy-
ra) and on the anti-Assad opposition
(the siege of Aleppo). It has stabi-
lized the regimes situation but
there has been no turnaround in the
Syrian war. Syrian President Bashar
Assads forces have proved too weak
to win any decisive victories; all
they can do is firefight crisis after
crisis on individual stretches of the front. To win
the war, Assad needs large reinforcements on the
ground and those are nowhere to be found.
Meanwhile, continued Russian involvement in
For the Russian military
machine, the campaign in
Syria is like a large drill; it
does not put much strain
on the resources, while at
the same time providing an
opportunity to field-test new
defensenews.com | 25
Outlook 2017
Syria inevitably gets Moscow ever deeper into
commitments to its Syrian allies, complicating
any future attempts to extricate itself from the
entire situation.
The foreign policy balance of the Syrian cam-
paign is even less in the Kremlins favor. The
intervention has damaged Russias relations with
many powerful, regional actors, the bust-up with
Turkey being a case in point. Even though Putin
managed to put an end to hostility with Anka-
ra much quicker than many expected, this was
achieved at the cost of Moscows acquiescence
in Turkeys own military intervention in northern
Syria, which clearly runs counter to the interests
of both Russia and Assad.
Meanwhile, the Russian campaign in Syria has
driven relations with the West to a new low. In the
second half of 2016, there was an outpouring of
Western condemnation on humanitarian grounds;
there was even talk of new sanctions. For the first
time in decades, a direct military confrontation
Outlook 2017
For the first time in decades,
a direct military confrontation
between the Russian and
US forces became a distinct
possibility.
between the Russian and US forces became a
distinct possibility, especially if Washington had
gone through with plans for establishing a no-
fly zone in Syria, which some US politicians had
been advocating for years.
As a result, by late 2016, Moscow had found
itself facing a set of growing risks in Syria. Mil-
itary logic dictated the need for ramping up the
scope of the Russian intervention but that
could lead to even more serious complications on
the foreign policy (and at some point, domestic)
front.DN
defensenews.com | 26
Outlook 2017

The Atlantic Alliance

and European Security
T
he election of Donald Trump different in that the new president
as the next American presi- is more open to cutting a deal with
dent will lead to what John Putin along a spheres-of-influence
Foster Dulles once called an ag- approach. He will see no American
onizing reappraisal on both sides interest in pushing NATO enlarge-
of the Atlantic. The future of NATO ment beyond where it stands and
and of the American role in Euro- could even contemplate NATO
pean security is clearly now very retrenchment back to a core area
open. Trumps views on Russia and of western Europe and Poland. The
President Vladimir Putin are part of Baltic states will now be in a new
a larger worldview of a man whose gray zone. Trump and his national
foreign experience has been entire- security adviser, Michael Flynn, are
ly based on business deals. Trump also likely to partner with Russia on
the deal-maker believes the United combating the Islamic State group,
By STEPHEN SZABO, execu-
States has been supporting a group tive director of the Transatlantic especially in Syria.
of free riders in Europe who have Academy, a Washington-based This reorientation of American
taken advantage of American lar- think tank strategy in Europe will face a num-
gess. He has a view similar to one ber of key questions. Where will
held by Putin, which is that the the American security guarantee
world is made of winners and losers and that only extend? Will it include all current NATO member
the strong prevail. His and Putins admiration for states? How will a deal on spheres of influence
strong leaders also applies to strong countries. actually work in Ukraine? What will such an un-
Trump also wants to refocus on rebuilding Ameri- derstanding do to the Western sanctions regime
ca and restoring the industrial base. and to Western unity?
Much of this builds on themes of both the Bush The dangers for miscalculation and military con-
and Obama administrations, which have also
stressed that the Europeans carry more of the
leadership and defense burden, have shifted Trump the deal-maker believes
American strategic priorities toward Asia and
specifically China, and have reacted to growing
the United States has been
pressures at home to rebuild the domestic eco- supporting a group of free
nomic base. However the Trump view goes much riders in Europe who have
further in his linking of American security guar-
antees under Article 5 of the NATO treaty directly
taken advantage of American
to the amount allies contribute to defense. The largess.
Trump view of the new Russian challenge is also

Outlook 2017 defensenews.com | 27

Outlook 2017
frontation in Europe have never been higher. Rus-
sian military modernization has been substantial
over the past four years and it now has the capa-
bility to deny access to NATO forces in its im-
mediate neighborhood, including the Baltics and
the Baltic and Black Seas. It does not have the
capability of posing a serious conventional threat
to western Europe and probably not to Poland as
well, but has compensated for this with a new and
extremely dangerous emphasis on nuclear weap-
ons and nuclear intimidation. Russia now regards
nuclear weapons as more than a deterrent but as
an instrument of de-escalation. All this comes
at a time when Russian military harassment in
the Baltic area has reached dangerous levels. The
Russian government has pulled out of its commit-
ments made under the Intermediate
-Range Nuclear Forces Treaty governing nuclear
forces in Europe, has escalated its nuclear pres-
ence in Kaliningrad and has peaked hysteria over
nuclear war with its public.
The potential for miscalculation and for conflict
are enhanced by the insecurity of the Putin re-
Outlook 2017
The potential for
miscalculation and for conflict
are enhanced by the insecurity
of the Putin regime, which
is leading a country with
a declining economy and
population and which lacks
stable governing institutions.
gime, which is leading a country with a declining
economy and population and which lacks stable
governing institutions. Military-to-military com-
munication is at an all-time low and all efforts
at diplomatic agreements have failed as Western
leaders have come to the belief that agreements
with Putin mean nothing. Now add in the uncer-
tainty of a very different kind of American admin-
istration, and the result is both dangerous and
uncertain. DN
defensenews.com | 28
Outlook 2017
Future of Make in India
Is Defense
D
riven by the goal to reach
self-reliance and reduce
dependence on foreign equip-
ment, India has launched the Make
in India initiative to promote and
encourage domestic defense pro-
duction. This initiative will address
a national desire for economic and
strategic autonomy and would save
foreign exchange.
The government previously created
defense production capabilities in
the form of ordnance factories and
public sector undertakings to cater
to the requirements of India's armed By GANESH
forces. Now there is a need to en- policy adviser with Ernst and
Young India.
large the role of the Indian private
sector as well as develop capabili-
ties and capacities for the production of military
equipment.
Over the last 70 years, India has created a robust part of this category. This allows design by for-
industrial base with the aim of transforming the
country from a net importer to a net exporter of
defense equipment in the coming years through
its Make in India campaign.
This year, the Defence Procurement Procedure
was launched to boost this new initiative, and a
new category was introduced under the indige-
nously designed, developed and manufactured
(IDDM) provisions, which will encourage the
defense industry here.
Having recognized the importance of indigenous manufacturing as well as
design and development, the government has for
the first time prioritized domestic manufactur-
ing as well as granted pride of place for design
and development. There is also the Make in India
Outlook 2017
category of procurement, which now
enables the armed forces to select
programs for consideration under
that category.
In another example, the category
of Buy IDDM encourages purchases
from Indian sources that incorporate
indigenous design, development and
production. This essentially means
that the design has to be indigenous,
development has to be indigenous,
and production or the manufacturing
process has to be indigenous.
However, the government feels
RAJ, a partner and there could be occasions when such
conditions cannot be met by do-
mestic industry, due to its evolving
nature. Therefore, the Ministry of
Defence (MoD) has also considered a non-
indigenous design and development proposal as
eign companies, when combined with indigenous
Having recognized the
importance of indigenous
design and development, the
government has for the first
time prioritized domestic
granted pride of place for
design and development.
defensenews.com | 29
Outlook 2017
manufacturing. If the design and development is
indigenous, then an indigenous manufacturing
content of 40 percent could suffice; if the design
and development is non-indigenous, then a 60
percent indigenous content is mandated. Thus
the MoD has taken care of both the requirements,
namely, design/development as well as manufac-
turing in the same category.
The government needs to have strategic partner-
ships (SP) to encourage the private industry into
the defense acquisition process. If we can grant
contracts to defense public sector undertakings
on a single-tender basis, then we must also be
able to provide our private industry tenders on a
single-tender basis. This can be achieved if we
have SPs. The concept of SPs is that we identify
from our private industry those that meet criteria
for a given discipline, such as aircraft, helicop-
ters, missile systems, guns, materiel, submarines,
surface ships, tanks and other specialist vehicles,
small arms and ammunition, and so on.
Industry now has multiple options to meet the
Outlook 2017
Indian armed forces are
deployed in intimidating
Indian conditions and for
the Indian conditions in which
they are deployed, they require
Indian solutions.
requirements of the armed forces through indige-
nous design and development.
They could invest in design and development
in an organic manner, thus investing heavily in
researchers development.
The government has done well to incentivize
industry to strive for indigenous design, develop-
ment and manufacturing. Indian armed forces are
deployed in intimidating Indian conditions and
for the Indian conditions in which they are de-
ployed, they require Indian solutions. DN
defensenews.com | 30
Outlook 2017

Fallout from US, European

Globalization Retreat
P
ursuit of international defense debt levels may not allow states to
growth has been a core goal of address security needs.
many US and European firms, Affordability of armed forces and
but these goals may start colliding weapons systems remain an issue
with more nationalist policies and and some of the most advanced kit
plans in an era where looser fiscal built by US defense firms may be
policies still wont satisfy national too expensive and well in excess of
security needs. internal threats or regional threats.
The upshot is more global compe- The past 15-20 years have seen con-
tition and the possible emergence solidation in the US defense market,
of different defense sector business emergence of European national
models to address market needs. But champions, the rise of globally com-
consequently it is far from a given petitive defense enterprises in China,
that U.S. and European firms can South Korea and Turkey, a revived
retain their global market shares in By BYRON CALLAN, managing Russian defense sector, and lifting
defense. director, Capital Alpha Partners of export restrictions on Japanese
Globalization has been checked by defense products.
the UK Brexit vote and US elections The defense industry has mainly
in 2016. President-elect Donald Trumps promise been multi-domestic, with exports and co-produc-
to withdraw from the Trans-Pacific Partnership tion of major weapons defining characteristics.
entails that Chinas Regional Comprehensive These business models could change, driven by
Economic Partnership will likely instead move three factors.
ahead. European elections in 2017 may result in One premise is that if countries increase defense
more centripetal forces bearing on the European spending, they will want those funds spent to the
Union, and Turkey has stated its desire to join the benefit for their own industries and not necessar-
Shanghai Cooperation Organization instead of the ily those of US and European exporters. Exports
EU. and offsets may give way to a need for in-country
Trumps calls for US allies to assume more of
their own defense burden and concerns his cam-
paign raised about US global security engagement Given the affordability issues
are two new factors that should weigh on defense that will persist, defense
in 2017 and beyond. enterprises may also need
These changes are occurring in an era where
many countries face multiple, complex security to think along these lines to
challenges. Fiscal austerity may be falling out of capture more market share.
fashion, but competing social demands and high

Outlook 2017 defensenews.com | 31

Outlook 2017

partnerships, possibly to develop products that

compete with advanced systems now offered by The challenges to globalization
the US and Europe.
A second premise is that defense enterprises are going to make it more
may need to think more like automobile compa- important for defense firms
nies by offering a range of products that address that intend to compete
different market segments.
Ford, for example offers cars spanning entry globally to have a multi-
level to luxury. Given the affordability issues that domestic supply chain and
will persist, defense enterprises may also need to manufacturing footprint.
think along these lines to capture more market
share.
A final premise is that the challenges to global-
ization are going to make it more important for turing footprint. Protectionism will raise costs of
defense firms that intend to compete globally to imports, and that will have knock-on impacts on
have a multi-domestic supply chain and manufac- exports. DN

Outlook 2017 defensenews.com | 32

Outlook 2017 Sponsored Content
Three Ways to Streamline
Defense Department Procurement
E
very incoming defense secre-
tary makes it a goal to over-
haul defense procurement,
only to be overwhelmed by the
immensity and complexity of the
worlds largest organization. Better
Buying Power 3.0, the latest effort,
appears to have significant momen-
tum and for good reason: Adversar-
ies are catching up to the technolog-
ical superiority of the U.S. in radar,
communications, and especially
electronic warfare and theyre
doing so with remarkable speed.
By MARK ASLETT, president
The DoD intends to address this and CEO of Mercury Systems
with a three-part strategy: engaging
more collaboratively with commer-
cial high-tech companies, simplifying its complex
procurement process, and employing open hard-
ware and software architectures throughout the
services. These are admirable goals and Mercury
Systems strongly supports them, but they would
be easier to achieve if the DoD considered the
following recommendations:
Bring Mid-Tier Defense
Suppliers into the Loop
Tier 2 and Tier 3 defense contractors have
strong relationships with the commercial sector
and already employ their technology in embed-
ded systems and other electronic systems. These
Outlook 2017
companies are also fluent in working
with the government so they are
well suited to act as an impedance
match to calibrate the speed of
commercial technology develop-
ment with the rate of its adoption in
defense systems. So, while reaching
out directly to the high-tech sec-
tor through initiatives like DIUx is
understandable, the DoD should not
overlook that its mid-tier commer-
cial suppliers are a valuable resource
that can bridge the cultural gap
between government and private
industry.
Streamline Open
Architecture Deployment
The Air Force, Army and Navy are all working to
develop and apply open modular system architec-
tures to major defense systems. This approach,
if used correctly, can dramatically increase the
speed and reduce the cost of technology inser-
tion while creating competition that would allow
products from multiple vendors to be employed
without major redesign.
However, industry views open architectures as
a way to rapidly innovate while amortizing in-
vestment costs across multiple platforms, but the
DoD views them as a way to minimize risk and
cost through commoditization. But as commoditi-
defensenews.com | 33
Outlook 2017 Sponsored Content
zation prioritizes cost reduction it stifles defense
contractor internally-funded research and devel-
opment. To remove this impediment, the DoD
should recognize that when broadly applied, open
architectures and their modular plug-and-play
approach to technology insertion will reduce
costs and risk over the life of systems while elimi-
nating the disincentive to innovate.
A great example of an open architecture cur-
rently being deployed on some critical defense
platforms is the OpenVPX embedded computing
standard, pioneered by Mercury. The OpenRFM
initiative, also introduced by Mercury, has a
similar goal of applying this approach to RF and
microwave subsystems that are key elements of
electronic warfare systems.
Adopt a Realistic Business Model
Streamlining the procurement process requires
the DoD to adopt a sustainable business model
tailored to meet its goals.
Mercurys next-generation business model, for
example, matches the rate at which the company
introduces new technologies to the rate at which
its customers can adopt them. Mercury has suc-
cessfully used it for several years and continues
to revise it as new knowledge and capabilities are
acquired. The model has three basic tenets:
Quickly and affordably adopting the best
available commercial technology.
Substantially investing in internal research
and development to foster more advanced solu-
tions.
Creating pre-integrated open architecture
subsystems using a modular building-block ap-
proach, enabling customers to quickly configure
Outlook 2017
DoD should recognize that
when broadly applied, open
architectures and their
modular plug-and-play
approach to technology
insertion will reduce costs
and risk over the life of
systems while eliminating the
disincentive to innovate.
solutions while reducing cost and time to market.
The approach has been well received by our
customers, as it lets them reuse modular systems
with little modification, thereby accruing savings
by spreading their investment cost over multiple
programs.
For the DoD, such a model would create a more
flexible procurement strategy that enables new
technologies to be inserted into platforms when
they become available, reducing lifecycle costs.
In summary, while the DoDs three-pronged
approach is a formidable challenge, some of its
difficulties can be overcome by relying on exist-
ing Tier 2 and Tier 3 high-tech commercial sup-
pliers to the defense industry to bridge the gap
between the defense and commercial domains.
Reducing cost while simultaneously encouraging
innovation can be achieved without commoditi-
zation by exploiting the inherent benefits of open
architectures, and by adopting a business model
better matched to its goals.
defensenews.com | 34
 MADE IN

AMERICA
OUTLOOK 2017
A World in Flux: What These Experts Expect Next Year