Executive Summary Training & Simulation Market- April 2013

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New analysis from Frost & Sullivan, Global Military Training and Simulation Market Assessment, finds total expenditures of $36.88 billion in 2012 and estimates this to increase to $46.09 billion by 2021.

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Executive Summary Training & Simulation Market- April 2013

  1. 1. Global Military Training and Simulation Market AssessmentLVC is Key to Overcoming Tactical Challenges, Albeit in the DistantFutureM8FB- 16April 2013
  2. 2. 2M8FB-16Research TeamAman PannuConsultant—Europe, Aerospace, Defence &SecurityAman.Pannu@frost.comAlix LeboulangerResearch Analyst, Aerospace, Defence &SecurityAlix.Leboulanger@frost.comLead Analyst Contributing AnalystResearch DirectorSteven WebbVice President, Aerospace, Defence & SecuritySteven.Webb@frost.comSpecial ThanksLindsay WootenAssociate EditorMichael BladesSenior Industry AnalystSabbir AhmedConsultant
  3. 3. 3M8FB-16ContentsSectionExecutive SummaryMarket OverviewTotal Market• External Challenges: Drivers and Restraints• Forecasts and Trends• Competitive Analysis• Macro TrendsRegional AnalysisNorth AmericaLatin AmericaEuropeAfricaMiddle EastCentral AsiaAsia-Pacific
  4. 4. 4M8FB-16Contents (continued)SectionConclusionThe Last WordAppendix
  5. 5. 5M8FB-16List Of FiguresFiguresForecast and Trends: Total Market• Total Training and Simulation: Market Global Revenue Forecast•Total Training and Simulation: Market Global Revenue Forecast by End-Users•Total Training and Simulation: Market Global Revenue Forecast by Capabilities•Total Training and Simulation: Market Global Revenue Forecast by Training TypesRegional Analysis• Total Training and Simulation Market: Global Revenue Forecast by Regions• Regional Market Attractiveness MapRegional Breakdowns (for each region)•Total Training and Simulation Market: Regional Revenue Forecast•Total Training and Simulation Market: Regional Revenue Forecast by End-Users•Total Training and Simulation Market: Regional Revenue Forecast by Capabilities•Total Training and Simulation Market: Regional Revenue Forecast by Training Types
  6. 6. 6M8FB-16List Of Figures (Continued)FiguresConclusion•Global Market Attractiveness Map – Live Training• Global Market Attractiveness Map – Virtual Training• Global Market Attractiveness Map – Constructive Training• Global Market Attractiveness Map – LVC Training
  7. 7. 7M890-16Executive Summary
  8. 8. 8M8FB-16Executive Summary• Global economic downturns, global armed forces reorganisations, and troop withdrawals from Afghanistanand Iraq could draw dark prospects over the training and simulation (T&S) market. However, several factorsare triggering strong dynamics across this market:o Under-pressure defense budgets must choose cost-efficient training types, thus accenting innovativetraining-type blends, such as synthetic and embedded training systems.o New armed forces structures will need to enable each soldier to perform multiple tasks from proceduralto operational levels.o Experience from Iraqi and Afghani theatres have highlighted the importance of new, reactive two-waytraining simulators, especially comprising haptics technology, to better prepare and reinforce soldiers’terrain expertise and how to deal with higher levels of stress, and to prepare muscle memory for platformand systems reactions.• Therefore, the global demand for training and simulation is expected to steadily grow at a compound annualgrowth rate (CAGR) of 2.5 per cent between 2012 and 2021 and will represent up to $411.05 billion ofspending.• The Asia-Pacific and Middle Eastern training markets are expected to increase at a CAGR of 4.3 per cent and3.9 per cent, respectively, while other developing markets such as Central Asia and Latin America will grow atslower pace, but will be driven by strong demands for immersive and system-based training. Despite a lowCAGR of 1.0 per cent, North America will still offer the largest market size for training opportunities, closelyfollowed by Asia-Pacific and Europe.Source: Frost & Sullivan analysis.
  9. 9. 9M8FB-16Executive Summary (continued)• Globally, air forces will be the biggest users of training and simulation, representing a total market share of50.5 per cent in 2021, driven by significant, complex combat platforms and new procurements in Asia-Pacific, the Middle East, and Central Asia.• Meanwhile, the land forces segment will represent the smallest market share, however, with a dynamicdemand for systems-based training, representing a total market size of at least $60.67 billion between 2012and 2021.• Live training will remain the most used training type, which is particularly significant across the navalsegment, with the projected market size reaching $84.83 billion over the forecast period, before shifting tocomprehensive and more realistic training-type blends, such as synthetic and Live, Virtual, and Constructive(LVC) training.• Virtual and constructive training will progressively gain end users’ preference as they allow complete,immersive training in a shorter timeframe to enhance situational awareness and to improve joint decision-making processes, at the right time and place, with reduced armed forces personnel having moreresponsibilities. As a result, the use of virtual and constructive training are expected to raise at a CAGR of2.1 per cent and 2.2 per cent respectively.• Training is not only about simulators but also how to train efficiently in a simulated world and how to get themost realistic, real-world conditions. Consequently, the training market is also impacted by end users’growing interest for embedded training systems, which enables soldiers to train as they fight, for bettermission rehearsals and tactical awareness.Source: Frost & Sullivan analysis.
  10. 10. 10M8FB-16Executive Summary—Market Engineering MeasurementsMarket StageGrowthMarketExpenditures$36.88 B(2012)Market Size forLast Year of StudyPeriod$46.09 B(2021)CompoundAnnual GrowthRate2.5%(2012–2021)Customer PriceSensitivity8(scale:1 [low] to 10 [High])Total Military Training and Simulation Market: Global, 2012Market OverviewFor a tabular version click here.Stable IncreasingDecreasingNote: All figures are rounded. The base year is 2012. Source: Frost & Sullivan analysis.Base YearMarket GrowthRate(2012-2021)1.8%(2012)
  11. 11. 11M8FB-16Executive Summary—CEO’s Perspective2Platform-based training will have the mostdemanded training capability; however,systems-based training will grow at a CAGRof 2.0 per cent due to C4ISR capabilities.3While virtual training is preferred by Westernend users to optimise budget cuts, livetraining remains the most popular trainingtype globally.4End users require cost-efficient trainingsolutions, enabling training in immersive,seamless, and realistic environments,enhanced by Augmented Reality technology.1The military T&S market is expected to growat a CAGR of 2.5 per cent to gain $9.21billion, mainly driven by air segment demand.5Current distribution channels must adapt tomeet budget constraints, requirements forcustomisation, and cost visibility in after-market support for LVC training capabilities.Source: Frost & Sullivan analysis.
  12. 12. 12M890-16Market Overview
  13. 13. 13M8FB-16Market Overview—ScopeSource: Frost & Sullivan analysis.AirMilitary Training and SimulationMarketEnd UsersTrainingTypesLiveCapabilityTypes:TrainingApplicationSupportPlatformsLand NavalLive, Virtual,Constructive (LVC)MaintenanceSystemsConstructiveVirtualPlatformsMaintenanceSystemsPlatformsMaintenanceSystemsLiveLive, Virtual,Constructive (LVC)ConstructiveVirtualLiveLive, Virtual,Constructive (LVC)ConstructiveVirtual
  14. 14. 14M8FB-16Market Overview—DefinitionsAir, Land, and Naval Armed forces operating across each of these military fieldsMilitary End UsersMilitary Training Application SupportPlatformsPlatform based training for ab initio (or initial), conversion, and mission training intended forpilots, crew, drivers, etc.SystemsSystems-based training includes training for Strategic Training, involving Command Control,Communications, and Computers, Information, Surveillance and Reconnaissance (C4ISR)missions, and Tactical Training, involving Weapon Systems, Dismounted Soldier TrainingSystems (including Small Arms), Counter Improvised Explosive Devices (IEDs) training, etc.MaintenanceMaintenance training is intended for military technicians to be trained to maintain and repairplatform and related sub-systems, such as avionics, either for routine and/or unexpectedmaintenance activities, such as damage control.Source: Frost & Sullivan analysis.
  15. 15. 15M8FB-16Market Overview—Definitions (continued)Training & Simulations TypesLiveTraining accomplished by real people, on real equipment and actual devices, in realenvironments or mock landscapes, such training exercises performed with aircraft producedspecifically for training pilot ( i.e. T-38, L39) practice munitions, aerial target drones, etc.VirtualTraining accomplished by real operators on simulators or in a simulated environment , suchas training performed with Flight simulators, driver land vehicle simulators, submarine controlsimulators, laser simulators, dome trainers, engagement skill trainers, part tasks trainersincluding flight deck, bridge, platform procedures, etc.ConstructiveTraining based on computer generated forces, mostly desktop based in order to practice ondecision making under different scenarios; examples include : real time radar software,computer 2D/3D virtual reality war gaming, etc.LVCTraining combining live, virtual, and constructive procedures into an Integrated Architecture,with linking different simulators and software, with real time new inputs and which requiredsystem interoperability and integratablity, such as enabling networked Joint Forces trainingexercises or advanced Multiple Integrated Laser Engagement System-MILES (i.e. Cubic IWSor Lockheed Martin MXXI CVS)Source: Frost & Sullivan analysis.
  16. 16. 16M8FB-16Please kindly note this study does not include:These following capabilities:• Homeland Security and Police training• Space-based C4ISR systems training• Unmanned, Underwater, and Ground Vehicles (UUVs and UGVs) training• Chemical, Biological, Radiological, and Nuclear (CBRN) trainingThe following aspects:• Educational training, such as accessions, basic training, military academies, advanced degrees,teaching certifications and other commissioning sources• Private military companies providing training services• Operational costs (such as fuel, training ammunitions, etc.)Market Overview—Definitions (continued)Source: Frost & Sullivan analysis.
  17. 17. 17M8FB-16Forecast Assumptions• Market Size: The market size is the representation of total forecast military spending across platforms,systems, and platform maintenance capabilities for training purposes.• Forecast Methodology: Quantifying the total market size first involves evaluating for each country’s differentparameters at the macro level: country tiers, defence budget assessments, national strategic intents, threatassessments, combat status, and local industry evaluations. From there, depending on capabilities, otherparameters are assessed to determine training market spending for each segment, such as the level oftraining customization, mission readiness requirements, local facilities and MoDs’ outsourcing trends.o Platforms-based training forecasts include: active units, their lifespan assessment depending on end-user segments, scheduled retirements, new platforms being procured, and platform-pricing factorsdepending on end-users types.o Systems-based training forecasts include: end users’ spending intensity evaluation, commitment tointeroperability, evidence or intent of C4ISR investment over the study period, and MoDs capability toadopt hi-tech systems, project value, and life cycle.o Maintenance training forecasts are only based on platforms, lifespan assessment, their level ofcomplexity, evaluation of local industry, and country outsourcing trends.Note: For a detailed outlook on forecast modelling tools, please click here. Source: Frost & Sullivan analysis.
  18. 18. 18M8FB-16• Market Size Segmentation: The total market size is provided at the global level and regional levels, byend users, by capabilities, and by training-type levels, in order to present a full analysis on the dynamicsand challenges across this market.o Education is included in the market size and it is understood as training accomplished in aclassroom setting or online courses received from specific Universities (i.e. Defense AcquisitionUniversity), Service War Colleges and courseware developed to support training, is included in themarket size. However, Education exists across all training segments (live, Virtual and Constructive),and for the purpose of this report not sub-segmented in the market size.o Program Assessment: any specific programs, such as for operator training, have been segmentedfor the purposes of the market size across Live, Virtual and Constructive training types. For examplethe Warfighter FOCUS Program in the US comprises each type of training depending on end-usersfighting requirements.• Country Scope: This forecast assesses training and simulation spending across 105 countries until2021.Forecast Assumptions (continued)Source: Frost & Sullivan analysis.
  19. 19. 19M8FB-16• Time Frame: The time frames for the forecast period are indicated in the table below.• Training Customisation Level: Based on the country’s strategic intent, combat status, and plannedprocurements, this parameter assesses the degree of customisation required by end users, from verylow, such as in training products available commercially off-the-shelve (COTS), up to very high, such astailored and personalised software.• Training Types Assessment: Platform, system, and maintenance training calculations depend on end-user types, a capability’s age and respective lifespan (based on their operating sectors), existing trainingprogrammes, and a country’s budget forecast, combat status, and threat assessment.Short Term Year 1–2 2013–2014Medium Term Year 3–4 2015–2016Long Term Year 5–9 2017–2021Forecast Assumptions (continued)Source: Frost & Sullivan analysis.
  20. 20. 20M8FB-16Market Overview—Covered Regions and CountriesNorth AmericaLatin AmericaEuropeAfricaMiddle EastCentral AsiaAsia-Pacific
  21. 21. 21M8FB-16Market Overview—Key Questions This Study Will AnswerWhat is the market potential for military training and simulation despite global budgetconstraints?Which segments and sub-segments hold the most prospect for growth and why?Which countries and regions are showing the most promising rates of growth and whatis the future for these markets over the forecast period?How will new technologies available to the industry revolutionize the military trainingand simulation market?Is there a real shift from Live training towards total Virtual training ?Are the available distribution channels appropriate enough to meet end users’ needs?Source: Frost & Sullivan analysis.
  22. 22. 22M8FB-16Market Overview—Military Training and SimulationDistribution ChannelsTotal Military Training and Simulation Market: Distribution Channel Analysis, Global, 2012*Key: COTS- commercially off-the-shelf .Source: Frost & Sullivan analysis.Key Takeaway: There are many available distribution channels, but these are notadequate to meet end users’ training requirements.JointVenturesand Public orPrivatePartnershipsGovernmenttoGovernment(G2G) andForeignMilitary SalesTrainingCentreleases andDirect Sales,like COTS*Governmentto Business(G2B) andPrivateFinanceInitiativesEnd Users
  23. 23. 23M8FB-16Market Drivers and RestraintsMarketDriversMarketRestraints1–3 years 4–7 years 8–10 yearsCurrent renewal and upgrade cycles ofplatforms and systemsSource: Frost & Sullivan analysis.High Medium-HighMedium LowMilitary Training and Simulation Market: Key Market Drivers and Restraints, Global, 2013–2021Warfare digitalisation trends andinnovative communications equipmentDiminishing defence budgets createssecurity budget spending advantagesHigh complexity Levels of Training andSimulation supply chainLow-MediumMore constructive trainingsolutions requiredLack of interoperability of trainingdevices and systems
  24. 24. 24M8FB-16Military Training Demand(Market Size)MarketGrowth(CAGR)Low0-3%Low<10 $BillionHigh>150 $BillionLatinAmericaEuropeMiddleEast HighAttractivenessLowAttractivenessHigh3-5%Asia-PacificNorthAmericaAfricaRegional Market Attractiveness MapSource: Frost & Sullivan analysis.Region CAGRAfrica 0.03%Asia-Pacific 4.36%Central Asia 3.58%Europe 1.86%Latin America 3.07%Middle East 3.92%North America 1.05%The table represents regional consolidated expenditures and compound annual growth rates across theperiod 2012–2021.CentralAsiaMilitary Training and Simulation: Market Attractiveness MapGlobal, 2012–2021
  25. 25. 25M890-16Appendix
  26. 26. 26M8FB-16Legal DisclaimerFrost & Sullivan takes no responsibility for the incorrect information supplied to us bymanufacturers or users. Quantitative market information is based primarily on interviewsand therefore is subject to fluctuation. Frost & Sullivan research services are limitedpublications containing valuable market information provided to a select group ofcustomers. Our customers acknowledge, when ordering or downloading, that Frost &Sullivan Research Services are for customers’ internal use and not for general publicationor disclosure to third parties. No part of this Research Service may be given, lent, resold ordisclosed to noncustomers without written permission. Furthermore, no part may bereproduced, stored in a retrieval system, or transmitted in any form or by any means,electronic, mechanical, photocopying, recording or otherwise, without the permission of thepublisher.For information regarding permission, write to:Frost & Sullivan331 E. Evelyn Ave. Suite 100Mountain View, CA 94041Source: Frost & Sullivan analysis
  27. 27. 27M8FB-16Market Engineering MethodologyOne of Frost & Sullivan’s core deliverables isits Market Engineering studies. They arebased on our proprietary Market EngineeringMethodology. This approach, developedacross the 50 years of experience assessingglobal markets, applies engineering rigor tothe often nebulous art of market forecastingand interpretation.A detailed description of the methodology canbe found here.Source: Frost & Sullivan research.
  28. 28. 28M8FB-16F&S Quantitative Modelling•Scenario-based Market simulation, deploying market-tested assumptions to translate qualitative data(key factors impacting defence segments, for example) into quantitative data.• Price matrix• Weightening metrics• Market share statistics• Time-based probabilitiesF&S Database•Use of extensive, bottom-up databases (in-house and outsourced) listing the raw datanecessary in the first step of a market forecast exercise:• Existing Military capabilities• Planned programmes•Anticipated programmes•Engage industry experts, end users, and industry in constructive discussions to ensure thatdata is up to market standards and has been thoroughly updatedF&S Analysis (Key Factors and Parameters)•Analyse key factors to filter and select the core factors relevant for each Defence market segment,Product Line, service and/or technology, based on F&S expertise from ongoing secondary and primaryresearch.•Create an industry matrix to ascertain the supply and demand trend within specific markets.Military Customer: Strategic Intent, Budgets, Replacement, Operations, InfrastructureTechnology: R&D, New Products & Technologies, Lifecycle, Substitutes, ObsolescenceEconomic Factors: Global & National Economy, Customer SpendingGlobal Military Trends: Markets, Cultural Factors, In-Country Industrialisation, SkillsCompetitive Environment: Competition, New Entrants, New Markets, First Mover AdvantageF&SDatabase(platforms, systems)F&SAnalysis(Key Factors andParameters)F&SQuantitativeModellingF&SInteractiveForecastModelForecast Modelling Tools for our Defence ProgrammesFrost & Sullivan’s Approach to Quantitative Analysis
  29. 29. 29M8FB-16Market AnalysisFrost & Sullivan Intelligence CentreSecondary ResearchIndustry and Technical Journals, Articles, World Wide WebPrimary ResearchIndustry ForumsPhone DiscussionsFace to FaceQualitative Analysis is derived from validated Primary and Secondary research
  30. 30. 30M8FB-16Learn More—Next Steps• Talk to an analyst• Take our DNA Survey• Arrange a Growth Workshop• Explore the Growth Excellence Matrix 2.0• Attend a relevant live or virtual event
  31. 31. 31M8FB-16Table of Acronyms UsedC4ISR Command Control Communications and Computers, Information, Surveillance, andReconnaissanceC4ISTAR Command, Control, Communications, Computers, Intelligence, Surveillance, Target Acquisition,and ReconnaissanceC5ISTAR Command, Control, Communications, Computers, Combat Systems, Intelligence, Surveillance,Target Acquisition, and ReconnaissanceCAGR Compound Annual Growth RateCfA Contracting for AvailabilityCPAF Cost plus award feeCPFF Cost plus fixed feeG2B Government to BusinessG2G Government to GovernmentIDIQ Indefinite Delivery and Indefinite QuantityIEDs Improvised Explosive DevicesJV Joint VentureLVC Live Virtual ConstructiveOEM Original Equipment ManufacturerMILES Multiple Integrated Laser System
  32. 32. 32M8FB-16Table of Acronyms Used- (continued)MoD Ministry of DefenceMOOTW Military Operations Other Than WarsMRO Maintenance, Repair, and OverhaulPPP Public Private PartnershipPBL Performance-Based LogisticsPFI Private Funding InitiativeSIS Support in ServiceTCO Total Cost of OwnershipTLM Through-Life ManagementTSS Total Service SolutionTSP Training Service ProviderUAV Unmanned Aerial VehicleUGV Unmanned Ground VehicleUUV Unmanned Underwater Vehicle
  33. 33. 33M8FB-16Frost & Sullivan4, Grosvenor GardensLondonSW1W 0DHUnited Kingdomwww.frost.comAlexander WoodsDirector, Strategic AccountsAerospace, Defence & Security+44 (0) 20 7343 8309+44 (0) 7811357516Alexander.Woods@frost.comContact Information

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