Airbus Deal Critics Ignore Boeing's Outsourcing - InformationWeek

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IT Leadership // IT Strategy
Commentary
3/12/2008
03:07 PM
Paul McDougall
Paul McDougall
Commentary
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Airbus Deal Critics Ignore Boeing's Outsourcing

The Air Force is getting lots of ack-ack for its decision to award a $35 billion airborne tanker contract to Europe's Airbus instead of Chicago-based Boeing. National defense shouldn't be outsourced, the critics say. There's just one problem with that argument -- Boeing itself sends key military work offshore.

The Air Force is getting lots of ack-ack for its decision to award a $35 billion airborne tanker contract to Europe's Airbus instead of Chicago-based Boeing. National defense shouldn't be outsourced, the critics say. There's just one problem with that argument -- Boeing itself sends key military work offshore.Less than a month ago, for instance, Boeing announced a deal to form a joint venture with India's Tata Industries, under which the U.S. aircraft manufacturer pledged to ship $500 million worth of defense-related aerospace component design and manufacturing work to Tata's operations on the sub-continent.

At the time, Boeing Integrated Defense Systems CEO Jim Albaugh said the deal "represents another step in our commitment to India."

According to Boeing, the agreement's intent is to "develop new supply sources throughout the Indian manufacturing and engineering communities for both commercial and defense applications." Boeing stated outright that it plans to outsource work on the Navy's F/A 18 Super Hornet to its Indian joint venture.

So much for the argument that the Airbus deal is flawed because it makes the U.S. dependent on a foreign country for a vital military platform. It's likely that some of the components that Boeing plans to design and build in India would end up in its advanced tanker, if it ever gets built. (Boeing is officially protesting the Airbus award).

It's arguable that having Airbus build the tanker would actually keep the more sensitive aspects of the program within the United States.

That's because Airbus' participation is mostly about modifying its existing A-330 commercial airframe for inflight refueling. Most of the high-end avionics work will be done by its partner in the venture -- Los Angeles-based Northrop Grumman.

The bigger picture behind all of this is that the U.S. military, as a matter of policy, is increasingly turning to so-called COTS technology (commercial, off-the-shelf) to support its weapons systems. A good portion of that happens to be software from vendors like IBM, Oracle, and Microsoft -- all of whom maintain sizeable offshore operations in India and other emerging markets. The Airbus contract may be a bad deal for a number of reasons -- there's the altogether valid question of whether the company's parent, EADS, gets unfair subsidies -- but the national defense argument just doesn't fly. It's inconsistent with global realities.

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