The last page of the defense/aerospace industry leading magazine, typically carries a Viewpoint article. In the latest issue, the following article by me is published.
by Gunjan Bagla, Managing Director, Amritt, Inc.
French President Nicolas Sarkozy and the management of Dassault are elated, as Rafale is the apparent winner of the $10.4 billion Medium Multi-Role Combat Aircraft order for India’s air force. France also has an order backlog with India that includes the Scorpene submarine and $2.4 billion in retrofits to the Mirage 2000 fleet.
Where does that leave U.S. defense companies as India, already the world’s largest importer of weapons, according to the Stockholm International Peace Research Institute, prepares to spend another $50-100 billion in upgrading its military and homeland security infrastructure? Fifteen of the top 20 defense companies are American, and the U.S. is responsible for half of the world’s $1.4 trillion defense expenditure. But aside from Lockheed Martin with the C-130J and Boeing with the P-8I, C-17 and AH-64 helicopter, no U.S. company has come close to a billion-dollar defense order from India.
At some companies, management is hearing what a U.S. aerospace executive once told me in New Delhi,: “India is an acronym for I’ll Never Do It Again.”
This attitude is unproductive and unjustified; it also denies American companies the opportunity to win their share of India’s ambitious upgrade plan. With a few simple adjustments, a dozen U.S. prime contractors could sustain thousands of American jobs and deliver security to the world’s largest democracy.
Some perspective is in order. India is unlikely to terminate its long-standing relationships with Russian suppliers. It will receive additional Sukhoi Su-30MKI fighters and continue joint ventures to develop a fifth-generation fighter as well as its Brahmos cruise missile. Israeli companies will continue to win business in India. U.S. suppliers must compete head-to-head with these internationals to gain a share of this large market.
There is considerable ground for optimism, however. Only 10% of Indians have an unfavorable view of the U.S., according the Pew Center. This compares with 77% of Turks, 41% of Mexicans and 28% of Israelis. Most Indians in influential positions have a family member living in the U.S., including Prime Minister Manmohan Singh. Pallam Raju, junior minister in-charge of defense production, graduated from Temple University in Philadelphia, and India’s powerful home and foreign ministers are U.S.-educated.
While there are technology-transfer restrictions imposed by Washington on U.S. companies, the situation has improved. In November 2010, the Obama administration removed several limitations that prevented certain Indian entities from buying U.S. products.
Freed from these restraints, what can American executives do to transform India’s goodwill into business?
•First, they must take time to understand and respect India’s Defense Procurement Procedure. While the DPP is complex, it is being implemented with increasing rigor and consistency. The Rafale win is a testament to this; the DPP 2008 stood robustly resistant to domestic and international political pressures. This is a stark contrast to a scandalous past, such as New Delhi’s infamous Bofors howitzer procurement.
American executives should not assume that Pentagon practices or State Department pressure will curry much favor in New Delhi. In fact, using some Beltway lobbyists can be counterproductive. Although they understand American procurement, they do not appreciate the cultural, political and socioeconomic nuances in India. India is an open and transparent, albeit confusing, society. U.S. suppliers can improve their odds dramatically if they invest deeply in understanding India.
•Second, many Indians react negatively to what they perceive as “American arrogance” when an executive harps on the technical and functional superiority of U.S. equipment. Even the most westernized Indians say they often feel jarred, even belittled. Understated confidence backed with a broad cultural understanding of India’s geopolitical and historical situation is crucial to American success in defense and homeland security.
•Third, some western corporate and political leaders express a sense of entitlement in India, which can be the kiss of death. The most recent example is David Davis, the British member of Parliament who insinuated that India should have ordered the Eurofighter instead of the Rafale because, “We give many, many times more aid to India than France ever did.” The Eurofighter lost narrowly since its lifetime cost of ownership will be higher than the Rafale’s. Sulking only aggravates the customer.
•Finally, there is no substitute for patience and persistence in India. If you send an executive for a one-year assignment to India, he or she may not only come back empty-handed but will often make it harder for the next person to interest a serious audience.
