14th Annual A&D Market Survey: Product Innovation, Cybersecurity and Technology Modernization Key to Combatting Commercial Pricing Pressure and Lower Government Spending

FALLS CHURCH, Va.

The recovery of the global economy and increased demand for commercial aircraft are lifting the aerospace and defense (A&D) industry out of a challenging market. A&D companies are continuing to invest in product innovation and technology modernization for commercial operations, while government and defense contracts are focused on cost control and more targeted capital investments.

This is what top A&D executives reveal in the 2015 A&D Market Survey, conducted jointly by CSC (NYSE: CSC), a global leader in next-generation IT services and solutions, and the Aerospace Industries Association. The 14^th annual survey on business, economic and technology trends polled senior executives and senior managers at global A&D companies.

Key takeaways include:

• Designing and producing innovative products and up-selling and cross-selling products continue to be top goals in the commercial sector. However, pricing pressures are forcing organizations to pursue continuous-improvement and cost-containment measures, slowing the rate of innovation.
• Sequestration has taken a toll on overall defense spending, with 65% of respondents citing budget uncertainty for decreased investments in R&D. Only 50% of respondents say they are investing in R&D, with cybersecurity, UAVs and electronic warfare topping the list of R&D investments.
• A majority of respondents (67.8%) report increased spending to protect against cyberthreats, with nearly half of those (29%) spending 25% to 50% more on cybersecurity in the past year.
• Technology modernization continues to be a major initiative, focusing on application replacement or modernization, and IT infrastructure modernization. Cloud computing is cited as a priority for implementing modernized applications by 41% of respondents.
• Finding skilled workers to replace the industry’s graying workforce continues to be a key factor affecting A&D companies. Critical areas include aerospace engineering, mechanical engineering and cybersecurity.
• More than 71% of respondents in the government sector report at least a 10% increase in product costs related to complying with government acquisition regulations. Thirty percent reported cost increases of at least 26%.

“In response to pricing pressures and lower government spending, A&D companies are becoming more selective in their R&D investments and are more focused on product innovation and continuous improvement of manufacturing processes,” said Tim Ellis, CSC industry general manager, Aerospace & Defense. “Technology modernization is crucial for nearly every organization, and they’re exploring many ways to modernize, including using commercially available Software as a Service, migrating certain applications to the cloud, and integrating systems for better data-sharing.”

Historically, the A&D industry has been slow to adopt cloud computing, but the 2015 survey showed that cloud is a priority for more than 40 percent of respondents. The move to cloud-based SaaS applications was a top-3 priority for modernization in 2015, but about one fourth of respondents cited “too many barriers to adopting the cloud” and uncertainty about the cybersecurity and data privacy of cloud-based applications as reasons hampering wider cloud migration, suggesting more education is needed.

The survey also revealed the A&D industry’s frustrations with the uncertainty over defense budgets and regulations required for participating in government contracts. In addition to discouraging bids on defense contracts, the current regulatory climate is affecting R&D investments at a time when A&D companies are facing a widening skills shortage.

For complete results of the CSC 2015 A&D Market survey, conducted in the spring of 2015 with the Aerospace Industries Association, visit www.csc.com/2015A&DSurvey.

About CSC

Computer Sciences Corporation (CSC) is a global leader of next-generation information technology (IT) services and solutions. The Company’s mission is to enable superior returns on our clients’ technology investments through best-in-class industry solutions, domain expertise and global scale. CSC has approximately 72,000 employees and reported revenue of $12.6 billion for the 12 months ended January 2, 2015. For more information, visit the company’s website at www.csc.com.

About AIA

Founded in 1919 shortly after the birth of flight, the Aerospace Industries Association is the most authoritative and influential trade association representing the nation’s leading manufacturers and suppliers of civil, military and business aircraft, helicopters, unmanned aircraft systems, space systems, aircraft engines, homeland and cybersecurity systems, materiel and related components, equipment services and information technology.

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CSC Contacts:
Anne Eisele, Media Relations, 703-641-2315
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AIA Contact:
Dan Stohr, 703-358-1078
dan.stohr@aia-aerospace.org