Investments in Emerging Tech Will Become More Important As Defense Budgets Flatten, Northrop Grumman Chief Says

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The defense contractor’s president and CEO also said she expects consolidation in the defense industrial base to continue.

Northrop Grumman chief executive officer and president Kathy Warden said she expects flattening defense budgets will shift priorities to focus more heavily on research and development efforts keeping the Defense Department at the forefront of technological advancements. 

“These are important areas for our nation to be focused on,” Warden said during a Tuesday Center for Strategic and International Studies webinar. “Things like the future of computing, micro electronics, the use of artificial intelligence and machine learning in a responsible way for national security purposes, or the advanced networking that is required to tie our systems together.”

Warden said that even if defense spending increases at lower rates or budgets flatline, she expects national security will remain a priority for the Biden administration. Whether the Biden administration continues with former President Donald Trump’s exact plan and structure for the U.S. Space Force, efforts to beef up capabilities in space should continue as well, she added. 

“I think two things will be different in the industry 10 years, 20 years out,” Warden said. “One is the use of core technology to rapidly innovate new solution space. And that means there’ll be more partnership, both partnership amongst industrial players, as well as partnership between governments to evolve technologies more rapidly.”

As a result, Warden posits, there will both be more entrants to the defense industrial base as well as more consolidation. The trend toward consolidation among existing government contracting players will continue, Warden believes, but areas that are rapidly growing—like cyber and space—will see new entrants to the market. During her Senate confirmation hearing, Kathleen Hicks, newly sworn-in deputy defense secretary, warned against “extreme consolidation,” which she suggested might stifle innovation. 

Warden also addressed threats in cyberspace and the threat posed by China. Northrop Grumman is the systems coordinator for Unified Platform, an Air Force project meant to support U.S. Cyber Command. 

“Many companies recognize that in particular, their cyber attack surface was expanded greatly during a pandemic, with so many colleagues working from home, and they needed to put additional emphasis into cybersecurity risk management,” Warden said.

Adversaries strike when they believe their targets are distracted by other issues—like a global pandemic, according to Warden. But she said she believes companies have adapted quickly to respond to the growing attack surface in need of protection. 

The defense industrial base in 2020 faced an increase in newly reported common cyber IT vulnerabilities, according to a recent report from the National Defense Industrial Association. That number reached 17,300 in 2020, up from 14,645 in 2017, according to the report.

“This is a very rapidly evolving area, as much as a company can take action today that makes them feel very secure in the defense posture that they've put in place, the adversaries are innovating at that rapid pace such that a week from now, two weeks from now, there'll be a new threat vector, a new vulnerability,” Warden said. “And so this is not a race that can ever be won. It's one that has to be continually focused on. And that's why working together, government and industry collaboration and industry to industry collaboration is so important in the cyber security arena.”

Cybersecurity must move beyond perimeter defense, Warden said, to ensure the internal environment is protected as well. Data, people and assets all need to be protected, even when they are inside the security perimeter, she added. 

With respect to understanding China as a competitor with the U.S., Warden said economic interests and national security interests. China is harnessing technology and information in ways that most other nationals aren’t yet capable of doing, she added.