Trai

ling

Edge

Tec

hn

olog

y So

luti

ons:

A p

arad

igm

shi

ft f

or t

he

desi

gn a

nd

supp

ort

of C

OTS

pro

duct

s em

ploy

ed in

CO

IN o

pera

tion

s

By R

on G

iunt

ini

Prin

cipa

l, G

iunt

ini &

Com

pany

, In

c.

IDG

A Ir

regu

lar

War

fare

Con

fere

nce

Mon

day,

May

25,

201

0

1©

G&

C 20

10

Pre

sen

tati

on O

utl

ine

�W

hat

Are

Com

mer

cial

Off

The

She

lf (C

OTS

) Pr

oduc

ts

�O

verv

iew

Of

COTS

Pro

duct

s Em

ploy

ed I

n W

eapo

n Sy

stem

s

�CO

TS V

ersu

s D

evel

opm

enta

l Pro

duct

s

�Tr

ailin

g Ed

ge T

echn

olog

y Co

ncep

t 2©

G&

C 20

10

Wh

at A

re C

omm

erci

al O

ff T

he

Shel

f (C

OTS

) P

rodu

cts

��C

omm

erci

al it

em�

as d

efin

ed in

FAR

Par

t 12

;

prov

ides

fra

mew

ork

for

buyi

ng p

rodu

cts

unde

r Fe

dera

l

Acqu

isiti

on S

trea

mlin

ing

Act

�Th

e ov

eral

l goa

l is

to f

ill D

oD r

equi

rem

ents

whe

neve

r pr

actic

al b

y

usin

g pr

oduc

ts w

hose

des

ign

and

conf

igur

atio

n co

ntro

l is

driv

en

by t

he c

omm

erci

al m

arke

t, r

athe

r th

an e

mpl

oyin

g pr

oduc

ts t

hat

are

desi

gned

spe

cific

ally

for

the

mili

tary

; re

ferr

ed t

o as

Dev

elop

men

tal I

tem

s (D

I)

�C

OTS

pro

duct

s ca

n al

so b

e re

ferre

d to

as

Non

-Dev

elop

men

tal

Item

s (N

DI),

or G

over

nmen

t Off

The

Shel

f (G

OTS

) whe

re a

spec

ific

CO

TS p

rodu

ct is

util

ized

in s

ever

al s

yste

ms

3©

G&

C 20

10

Wh

at A

re C

omm

erci

al O

ff T

he

Shel

f (C

OTS

) P

rodu

cts

ACO

TS P

rodu

ct

Man

ager

B C D

DI

Prod

uct

Man

ager

DI

Prod

uct

Man

ager

DI

Prod

uct

Man

ager

Prog

ram

/ Pr

oduc

t O

vers

ight

M

anag

er

Prog

ram

Ex

ecut

ive

Off

ice

ACO

TS P

rodu

ct

Man

ager

B C D

COTS

Pro

duct

M

anag

er

COTS

Pro

duct

M

anag

er

DI

Prod

uct

Man

ager

Prog

ram

/S

yste

m

Man

ager

Prog

ram

Ex

ecut

ive

Off

ice

E

CO

TS L

egac

y

CO

TS E

volv

ing

Syst

em O

f Rec

ord

Prog

ram

/S

yste

m

Man

ager

EAG

FE Prog

ram

/ Pr

oduc

t O

vers

ight

M

anag

er

DG

FE

Rap

id F

ield

ing

Initi

ativ

e

4©

G&

C 20

10

Exam

ples

Of

CO

TS P

rodu

cts

Cu

rren

tly

Empl

oyed

By

The

Serv

ices

�Co

mm

unic

atio

ns &

dat

a�

Com

pute

rs/s

erve

rs (

Del

l, H

P, I

BM)

�D

ata

stor

age

(EM

C)�

Rou

ters

(Ci

sco)

�PD

As (

Palm

, Bla

ckbe

rry)

�N

on-e

mbe

dded

sof

twar

e (M

icro

soft

)�

Dis

play

s (T

rans

-Lux

, Pan

ason

ic)

�G

PS (

Gar

min

, Mag

ella

n)

�Tr

aini

ng s

imul

ator

s (R

ockw

ell C

ollin

s, C

AE)

�M

RAP

(N

avis

tar

whe

elba

se)

�Fi

xed-

win

g sp

ecia

l pur

pose

airc

raft

(G

ulfs

trea

m, B

eech

. Ce

ssna

. Boe

ing)

�O

ff-r

oad

cons

truc

tion

vehi

cles

(Ca

terp

illar

, Ter

ex)

�N

ucle

ar, b

iolo

gica

l & c

hem

ical

sen

sors

(Sm

ith I

ndus

trie

s)C

OTS

Pro

duct

s B

ecom

ing

A P

latf

orm

For

DI

5©

G&

C 20

10

Pro

duct

Sou

rce

Type

Com

pari

son

Elem

ent

CO

TSD

evel

opm

enta

lAc

quis

ition

Cy

cle

Tim

e Fo

r W

arfig

hter

Sy

stem

D

eliv

ery

Mad

e-To

-Sto

ck o

r As

sem

ble-

To-O

rder

; fr

om

imm

edia

te t

o a

few

wee

ks d

eliv

ery.

Pro

vide

s ab

ility

to

be e

xtre

mel

y qu

ick

in r

eact

ing

to

oper

atio

nal c

hang

es r

equi

red

to f

ight

our

en

emie

s

Mad

e-To

-Ord

er;

with

man

y de

sign

con

figur

atio

n ch

ange

s,

can

take

yea

rs f

or d

eliv

ery

CO

TS V

ersu

s D

evel

opm

enta

l Pro

duct

s

Join

t Ca

pabi

litie

s In

tegr

atio

n an

d D

evel

opm

ent

Syst

em (

JCID

S) d

elib

erat

ely

emph

asiz

es a

naly

sis

and

risk

avoi

danc

e at

the

exp

ense

of

spee

d. J

CID

S

norm

ally

tak

es f

ive

to n

ine

year

s, d

epen

ding

on

the

com

plex

ity, f

rom

the

time

a ne

w s

yste

m is

req

uest

ed, u

ntil

a so

lutio

n is

del

iver

ed.

Col

. Tim

oth

y C

hym

a, U

S A

rmy

Acq

uis

itio

n C

orps

,

at 2

010

Broo

king

s In

stitu

te m

eetin

g

6©

G&

C 20

10

CO

TS V

ersu

s D

evel

opm

enta

l Pro

duct

sM

ore

from

Col

. Tim

oth

y C

hym

a on

acq

uisi

tion

spee

d

�By

com

paris

on, t

he A

rmy�

s R

apid

Equ

ippi

ng F

orce

(R

EF)

can

turn

out

sys

tem

s in

7 t

o

15 m

onth

s; it

can

do

this

bec

ause

it is

sm

all,

has

acce

ss t

o fu

ndin

g w

ithin

the

sam

e

year

it w

ants

to

mak

e a

purc

hase

, and

mos

t im

port

antly

it in

tera

cts

dire

ctly

with

the

units

in t

he fie

ld s

o it

unde

rsta

nds

thei

r ne

eds

far

bett

er t

han

the

trad

ition

al

proc

urem

ent

adm

inis

trat

or. R

EF is

som

ethi

ng t

he A

rmy

shou

ld e

mbr

ace

in it

s lo

ng-

term

mod

erni

zatio

n pr

ogra

ms.

��

.man

y of

the

pro

duct

s em

ploy

ed a

re C

OTS

The

Arm

y�s

Trai

ning

and

Doc

trin

e Co

mm

and

(TR

ADO

C), r

elea

sed

in 2

010

a pl

anni

ng

docu

men

t, �

Ope

ratio

nal A

dapt

abili

ty:

Ope

ratin

g U

nder

Con

ditio

ns o

f U

ncer

tain

ty a

nd

Com

plex

ity in

an

Era

of P

ersi

sten

t Co

nflic

t-20

16 t

o 20

28,�

auth

ored

by

Bri

g. G

en.

H.R

. McM

aste

r.

�We

wan

ted

to e

mph

asiz

e th

e co

ntin

uous

inte

ract

ions

with

an

adap

tive

adve

rsar

y, t

he

need

to

have

tho

se q

ualit

ies

of o

pera

tiona

l ada

ptab

ility

�in

nova

ting

to s

eize

and

ret

ain

that

ada

ptiv

e in

itiat

ive.

��ag

ain

COTS

pro

duct

s w

ill p

lay

a ke

y ro

le

7©

G&

C 20

10

Pro

duct

Sou

rce

Type

Com

pari

son

Elem

ent

CO

TSD

evel

opm

enta

l

Uni

t Co

st

Hig

h ca

pabi

lity

rela

tive

to c

ost,

due

to

amor

tizat

ion

over

larg

e po

pula

tion

of R

&D

and

CP

I in

itiat

ives

(Le

an, T

QM

, Six

Sig

ma)

; th

ough

CO

TS in

tegr

atio

n co

sts

can

be h

igh

Hig

h co

st d

ue t

o am

ortiz

atio

n of

dev

elop

men

t co

sts

over

sm

all p

rodu

ctio

n po

pula

tion,

as

wel

l as

high

indi

rect

cos

ts

"The

priv

ate

sect

or h

as f

latt

ened

and

str

eam

lined

the

mid

dle

and

uppe

r ec

helo

ns o

f its

org

aniz

atio

n ch

arts

, ye

t th

e D

efen

se D

epar

tmen

t co

ntin

ues

tom

aint

ain

a to

p-he

avy

hier

arch

y th

at m

ore

refle

cts

20th

Cen

tury

hea

dqua

rter

s su

pers

truc

ture

tha

n 21

st C

entu

ry r

ealit

ies,

�S

ecre

tary

Gat

es"G

iven

Am

eric

a's

diff

icul

t ec

onom

ic c

ircum

stan

ces

and

parlo

us f

isca

l con

ditio

n,

mili

tary

spe

ndin

g on

thi

ngs

larg

e an

d sm

all c

an a

nd s

houl

d ex

pect

clo

ser,

har

sher

sc

rutin

y. T

he g

ushe

r ha

s be

en t

urne

d of

f, a

nd w

ill s

tay

off

for

a go

od p

erio

d of

tim

e.�

Sec

reta

ry G

ates

, 201

0

CO

TS V

ersu

s D

evel

opm

enta

l Pro

duct

s

Low

-cos

t CO

TS p

rodu

cts,

�fru

gally

eng

inee

red,

�bun

dled

toge

ther

as

a w

eapo

n sy

stem

, will

be

mor

e co

st a

ttrac

tive

than

the

empl

oym

ent o

f hig

hte

ch s

yste

ms

8©

G&

C 20

10

Pro

duct

Sou

rce

Type

Com

pari

son

Elem

ent

CO

TSD

evel

opm

enta

l

Rel

iabi

lity

Larg

e po

pula

tion

usin

g pr

oduc

t, w

ith e

xten

sive

w

arra

nty

feed

back

. OEM

war

rant

y co

sts

are

3-6%

of

acqu

isiti

on v

alue

of

new

pro

duct

s; h

igh

ince

ntiv

e to

impr

ove

relia

bilit

y�le

ss

failu

res=

high

er p

rofit

s�m

edia

n O

EM P

rofit

Af

ter

Taxe

s (P

AT)

is o

nly

7%, t

hus

war

rant

y co

sts

can

have

mat

eria

l im

pact

on

shar

ehol

ders

The

less

rel

iabl

e th

e pr

oduc

t,

the

grea

ter

the

reve

nue

gene

rate

d du

ring

the

Prod

uct

Supp

ort

lifec

ycle

sta

ge. M

TBF

anal

ysis

aft

er in

itial

ILS

st

udie

s pe

rfor

med

dur

ing

deve

lopm

ent

stag

e ar

e ra

rely

re

visi

ted.

Tech

nica

l D

ocum

en-

tatio

n

Rea

dily

ava

ilabl

e, a

t no

add

ition

al c

ost

in

mul

tiple

med

ias;

ext

ensi

vene

ss o

ften

driv

en b

y co

nsum

er/s

afet

y re

gula

tion.

Als

o ch

ange

s tig

htly

man

aged

due

to

liabi

lity

issu

es

Cum

bers

ome

and

exp

ensi

ve

to m

aint

ain

over

life

of

prod

uct

CO

TS V

ersu

s D

evel

opm

enta

l Pro

duct

s

9©

G&

C 20

10

Pro

duct

Sou

rce

Type

Com

pari

son

Elem

ent

CO

TSD

evel

opm

enta

lFi

eld

Serv

ice

Rep

rese

n-ta

tives

(F

SRs)

Avai

labl

e on

a g

loba

l bas

is, e

ven

in/c

lose

to

com

bat

thea

tres

. 24/

7 co

vera

ge p

rovi

ded

eith

er

on-s

ite o

r vi

a ca

ll/w

eb

Very

exp

ensi

ve;

in t

heat

re

$400

-500

,000

/yea

r pe

r co

ntra

ctor

FSR

. Gov

ernm

ent

FSR

out

of

LCM

C ca

n be

$2

50-3

50,0

00 p

er y

ear

Trai

ning

Use

r fr

iend

ly p

rodu

cts

requ

ire li

ttle

tra

inin

g th

roug

h tr

aini

ng s

choo

ls a

nd O

JT

Exte

nsiv

e de

velo

pmen

t fo

r M

OS

trai

ning

sch

ool a

nd O

JT

due

to le

arni

ng c

urve

and

tu

rnov

er

Supp

lier

Base

Ther

e ar

e us

ually

3-4

glo

bal h

ighl

y co

mpe

titiv

e O

EMs

for

any

cate

gory

of

prod

ucts

; al

l are

hi

ghly

cap

italiz

ed a

nd p

rovi

de p

rodu

cts

to la

rge

cust

omer

bas

e

With

rol

l-up

of D

efen

se

indu

stry

, DoD

con

fron

ted

with

�to

o bi

g to

fai

l�si

tuat

ion;

oft

en o

nly

two

cont

ract

ors

able

to

com

pete

; th

ere

prof

its a

re v

irtua

lly t

he

sam

e, w

hich

mea

ns t

hat

they

ha

ve t

he s

ame

busi

ness

m

odel

s�w

hich

can

be

good

or

bad

CO

TS V

ersu

s D

evel

opm

enta

l Pro

duct

s

10©

G&

C 20

10

Pro

duct

Sou

rce

Type

Com

pari

son

Elem

ent

CO

TSD

evel

opm

enta

l

Tech

nolo

gy

Mat

urity

Larg

e R

&D

(4.

5% o

f sa

les

Cate

rpill

ar, 7

% H

P,

16%

Int

el)

and

prod

uct

test

ed w

ith la

rge

popu

latio

n fe

edba

ck

Due

to

long

dev

elop

men

t cy

cle,

mat

urity

is a

co

nsta

ntly

mov

ing

targ

et

Tech

nolo

gy

Leve

l19

70 D

efen

se/B

usin

ess/

Cons

umer

tec

h hi

erar

chy;

20

10 C

onsu

mer

/Bus

ines

s/D

efen

se t

ech

hier

arch

y

A m

inor

ity o

f #

of

wea

pon

syst

ems

depl

oyed

are

re

quire

d to

be

�ble

edin

g ed

ge,�

thou

gh t

hey

can

be

the

maj

ority

of

acqu

isiti

on

$$$

CO

TS V

ersu

s D

evel

opm

enta

l Pro

duct

s

�We

purs

ue t

echn

olog

ies.

The

y ar

e no

t ne

cess

arily

the

mos

t ad

vanc

ed,

but

they

ar

e th

e m

ost

usef

ul,�

Adm

. Eri

c O

lson

, Com

man

der,

S

peci

al O

pera

tion

s C

omm

and

(SO

CO

M)

in 2

010

CO

TS p

rodu

cts

are

very

sop

hist

icat

ed/c

ompl

ex d

ue to

saf

ety,

regu

lato

ry a

nd

cons

umer

dem

ands

/requ

irem

ents

�A lu

xury

aut

o ha

s 10

0 m

illion

line

s of

em

bedd

ed s

oftw

are

code

�A M

erce

des

navi

gatio

nal s

yste

m h

as 2

0 m

illion

line

s�A

For

d ca

r has

10

milli

on li

nes

�A F

-35

has

5.7

milli

on li

nes

�A F

-22

has

1.7

milli

on li

nes

11©

G&

C 20

10

Pro

duct

Sou

rce

Type

Com

pari

son

Elem

ent

CO

TSD

evel

opm

enta

lIn

terf

ace

With

Co

mm

erci

al

Best

Pr

actic

es

Enab

ler

to s

tay

curr

ent

with

rap

idly

evo

lvin

g co

nsum

er/c

omm

erci

al m

arke

t

Oft

en is

olat

ed f

rom

bes

t pr

actic

es b

ecau

se o

f a

cont

ract

or�s

bus

ines

s m

odel

of

mor

e is

mor

e; c

ost-

plus

co

ntra

cts

Tech

nolo

gy

Fam

iliar

ity

Entr

y le

vel s

oldi

ers

have

use

d m

any

of t

he

prod

ucts

in t

heir

civi

lian

lives

lead

ing

to h

igh

leve

ls o

f pr

oduc

tivity

in m

issi

ons

empl

oyin

g th

ese

prod

ucts

Oft

en n

ot u

ser

frie

ndly

fe

atur

es

CO

TS V

ersu

s D

evel

opm

enta

l Pro

duct

s

�We

have

you

ng f

olks

tod

ay w

ho a

re v

ery

expe

rienc

ed w

ith g

amin

g, a

nd

they

�re n

ot g

oing

to

be im

pres

sed

if w

e ha

ve s

imul

atio

ns w

ith p

op-u

p ta

rget

s.

They

exp

ect

trai

ning

sys

tem

s to

sta

ck u

p w

ith t

he la

test

Xbo

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7/08

1/10

7/11

1/13

7/14

1/16

7/17

1/19

7/20

7/08

1/10

7/11

1/13

7/14

1/16

7/17

1/19

7/20

COTS

(P)

rodu

ctio

n D

ate

COTS

(P)

rodu

ctio

n D

ate

COTS

(A)

cqui

sitio

n D

ate

$100

0

$200

0

24©

G&

C 20

10

The

Trai

ling

Edge

Tec

hnol

ogy

Con

cept

Fo

r C

OTS

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duct

s: P

rodu

ct S

upp

ort

03

-10

Fai

led

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arab

le L

RU

, 07

-06

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duct

ion

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e

Like

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d Cu

rren

t R

epla

cem

ent

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e (C

RV)

$1

,00

0

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hout

rat

e 6

5% o

r $

65

0;

repa

ir w

ithin

lim

its f

or

rete

ntio

n

Cost

Of R

epai

r $

40

0

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aire

d an

d fo

rwar

ded

to

mai

ntai

ner

for

inst

alla

tion

Lega

cy A

ppro

ach

COTS

Rep

arab

le L

RU

48

m

onth

sol

d pr

oduc

tion

date

w

ith c

ost

of $

40

0

BER/

Was

hout

rat

e 2

5% o

r $

250;

re

pair

outs

ide

limits

for

ret

entio

n an

d di

spos

ed

09

-08

dat

e of

LRU

pro

duct

ion,

ac

quire

d fo

r $

25

0 in

a r

epai

red

cond

ition

, and

for

war

ded

to

mai

ntai

ner

for

inst

alla

tion

COTS

Rep

arab

le L

RU

18

m

onth

sol

d pr

oduc

tion

date

w

ith c

ost

of $

25

0

Trai

ling

Edge

App

roac

h

Sim

plifi

ed;

typi

cal L

ike-

Kind

Ex

chan

ge

empl

oyed 25

©G

&C

2010

The

Trai

ling

Edge

Tec

hnol

ogy

Con

cept

Fo

r C

OTS

Pro

duct

s: P

rodu

ct S

upp

ort

This

con

cept

can

be

adap

ted

to a

Per

form

ance

Bas

ed

Logi

stic

s/O

utco

me-

Base

d Pr

oduc

t Su

ppor

t Bu

sine

ss M

odel

�Con

trac

tor

can

be p

rovi

ded

with

a f

ee f

or e

xecu

ting

conc

ept

�Con

trac

tor

can

wor

k w

ith d

epot

und

er a

Pub

lic P

rivat

e Pa

rtne

rshi

p

(PPP

) to

exe

cute

con

cept

�A P

rodu

ct S

uppo

rt I

nteg

rato

r (P

SI)

and

a Pr

oduc

t Su

ppor

t M

anag

er

(PSM

) m

ust

wor

k cl

osel

y to

geth

er t

o as

sure

tha

t th

e in

itiat

ive

is

mee

ting

the

War

fight

er r

equi

rem

ents

and

fav

orab

ly im

pact

ing

TOC

26©

G&

C 20

10

�CO

TS p

rodu

cts

are

play

ing

a m

uch

larg

er r

ole

in t

he

desi

gn o

f w

eapo

n sy

stem

s

�D

oD le

ader

ship

sho

uld

cont

inue

to

thin

k ou

t-of

-box

in

orde

r to

ass

ure

that

our

War

fight

ers

have

con

tinuo

us

acce

ss

and

supp

ort

of t

he C

OTS

pro

duct

s th

at t

hey

requ

ire in

ord

er t

o de

feat

our

ene

mie

s;

the

Trai

ling

Edge

Tec

hnol

ogy

busi

ness

mod

el is

one

way

to h

elp

them

lead

tha

t in

itiat

ive

Con

clu

sion

s

27©

G&

C 20

10

Qu

esti

ons?

Ron

Giu

ntin

i, Pr

inci

pal

ron@

giun

tinic

ompa

ny.c

om57

0.52

3.09

92

ww

w.g

iunt

inic

ompa

ny.c

om

28©

G&

C 20

10