While Defense Spending Shrinks, Cyber Warmongers Win Big
Responding to the economic crisis, Defense Secretary Robert Gates has been leaning on the Pentagon to cut costs across the board. The one exception to this rule has been cyberdefense, and not surprisingly, the biggest winners have been those shouting the loudest about how America is losing the global "cyberwar."
Many of the more traditional aerospace names have been diving in, because the cyber arena "is going to be one of the few growth opportunities the defense market is looking at during the Obama years," says Lexington Institute defense analyst Loren Thompson. Lockheed Martin (LMT), Raytheon (RTN) and Boeing (BA) have all created or expanded their cyber divisions in the last year to try and capture some of this market.
But the biggest winners in recent months has been Booz Allen & Hamilton, which netted over $400 million in new government contracts over the last two months. "Booz Allen & Hamilton seems to be exempted from the Pentagon's drive to reduce reliance on outside contractors and consultants," wrote one defense industry website.
A big factor in this success has been the loud warnings coming from Michael McConnell, former director of the NSA, now an executive Vice President at Booz Allan. McConnell has kept up a steady drum beat of alarm, testifying before Congress and frequently appearing in the media. "The United States is fighting a cyberwar today, and we are losing. It's that simple," he wrote in the Washington Post.
Actually, it's not that simple at all. Most of the recent high profile activity that McConnell likes to point to has been corporate espionage, not international warfare. In fact White House's current cyber czar, Howard Schmidt recently told Wired magazine that, "There is no cyberwar. I think it it's a terrible metaphor and I think it's a terrible concept. There are no winners in that environment." No winners, that is, except for savvy defense contractors.