Global Military Simulation and Virtual Training Market

Friday 20 January 2012, Amsterdam

The US has observed budget cuts, a situation which is projected to continue in the future. Despite this, North America is expected to account for the largest share of the total global military simulators and virtual training programs market with a 62.3% share over the forecast period. Regional demand is primarily driven by the large procurements of military aircraft, submarines and armored vehicles which have consequently resulted in a demand for training programs. Asia and Europe are also expected to account for a significant portion of the total global military simulators market over the forecast period, with respective shares of 16% and 14.6%. This will be largely driven by the modernization efforts of countries such as India, China, the UK and Russia. Latin America, Africa and the Middle East account for respective shares of 4.3%, 1.2% and 0.8% with regards to global military simulation expenditure.

The global financial crisis has reduced military expenditure worldwide, as a consequence of which a significant number of countries are establishing joint projects in order to share R&D costs. Partnerships between defense firms have also increased, as a significant number of countries are investing in the development of their domestic military simulator development capabilities by establishing strategic alliances and licensing agreements with global military simulator manufacturers.

Demand for military simulators is anticipated to be driven by both internal and external security threats, territorial disputes and modernization initiatives undertaken by armed forces across the world. Perhaps most importantly demand will be additionally driven by the cost effectiveness provided by military simulators in times when defense budgets are being cut due to the economic difficulties being faced by the key markets including the US and Europe.

Simulation models run the risk of not being precise or an exact replication of the real military situation and are at times regarded as descriptive tools and not optimizing ones. The process of creating military simulations concerns the manipulation of a number of variables of a model representing the real system, which can result in the reality of the system as a whole being lost. There is a lack of demand in smaller nations such as countries in Africa, Asia and Latin America. The US forms the majority of the market, followed by large countries in Europe and Asia. With military simulators still emerging as growing market, countries with small defense budgets consider them to be a luxury and are therefore are not inclined to make large procurements.

As high-fidelity simulators are identical to the original equipment they represent, development is cost-heavy. Consequently, developing a cost effective, high-fidelity simulators is a key challenge of the simulation and virtual training market in the context of defense budget cuts announced by many countries worldwide.

Globally, armed forces are increasingly procuring military simulators and virtual training programs in an effort to reduce costs while improving the readiness of their pilots. With rapid increases in the price of aircraft fuel, armed forces worldwide are expected to migrate from training missions to simulators to balance expenditure on their increasingly shrinking budgets. It is estimated that the military equipment-to-simulator hourly/cost ratio is ten to one, enabling significant cost savings.

Air forces, navies and armies are now being forced to look for ways to reduce the workload on their aircraft and helicopters and are cutting back or even eliminating training missions, which typically put more stress on the equipment than other types of missions. This has resulted in an increase in the percentage of military pilot training done in simulators from 30% in 2009, to 50% in 2011 and is further expected to increase to 80% by 2021.

The global financial crisis, the US economic crisis and the European debt crisis are expected to negatively impact defense expenditure and lead to further defense budget cuts. In such weak financial conditions countries are looking for cost-effective alternatives to traditional training missions and procuring military simulators.