A small Canadian company is looking at niche markets in maritime and special forces command-and-control systems and situational awareness, as well as the domestic security arena, as it charts its course over the next several years.
Armed with military contracts from Canada, the United States, Britain, Turkey and Australia, officials with OSI Geospatial say it hopes to fuel growth by concentrating on specific strategic areas.
"We're looking for niche markets that we can control, that we have the customer relationship and where we can control our destiny," said Ken Kirkpatrick, president and CEO of OSI Geospatial.
In the last year, the Ottawa-based company has been awarded security risk assessment contracts with the Port of Buffalo, N.Y., and the Port of Miami; a contract to provide small boat command-and-control systems to the Canadian Navy; as well as work to upgrade the situational awareness and command-and-control systems it has previously delivered to the Royal Navy in Britain.
Earlier this month, the company signed a contract to provide warship navigation systems to the Turkish Navy. Under that contract, OSI Geospatial, which has 124 employees at several locations in Canada and the United States, will deliver and install up to eight navigation systems, with the first to be delivered this fall.
Kirkpatrick said the company has been successful in the warship navigation market and has branched out with related technology for what is being called the warship automatic identification system, or W-AIS. Last year, OSI announced the successful implementation of a contract with the Royal Navy to install W-AIS on 77 vessels.
Kirkpatrick said another niche market that OSI is pursuing is in the area of systems capable of commanding and controlling small boats. Such small rigid inflatables are common for port security and naval use, but the ability to track and provide situational awareness for such assets is lacking, he said.
"There's not a lot of competition in this space," Kirkpatrick said. "I think we can get some significant traction in the short term."
Eric Lerhe, a defense analyst and retired Canadian Navy commodore, said the market potential for such a product could be significant, as most warships carry rigid inflatables and they are used by forces ranging from port police to special operations.
He noted that the terrorists who launched the November attacks in Mumbai, India, came ashore in rigid inflatable boats.
"There's nothing really out there that is capable of sorting out the traffic and identifying friendly craft and the ones that should be looked at more closely," said Lerhe, a research fellow at Dalhousie University in Halifax, Nova Scotia. "So this technology would fill a gap that has existed for a long time."
But OSI's pursuit of the niche markets does not mean that it is uninterested in teaming arrangements with larger firms, Kirkpatrick said. He noted that the company is pursuing a parallel strategy that potentially would see its command-and-control products on larger programs with the help of some of the defense industry's top firms.
For instance, in May, OSI announced that it had signed a teaming agreement with Raytheon to pursue the soldier modernization market. OSI will provide the U.S. electronics giant with its technology and expertise from its Dismounted Close Combat, Command and Control System range of products.
OSI's lightweight system carried by individual soldiers combines instant individual tracking, a set of interfaces with a variety of sensors, a common operational picture and the ability to direct fire on multiple targets. DC4S-Commander enables identical data to be shared with all systems, allowing every user to work with the same up-to-date information about friendly and enemy forces.
One version of the system designed for special forces has been tested by the U.S. military overseas, but OSI officials declined to provide further details. Canada is expected by the end of this year to launch a soldier systems program.
Currently, OSI draws 95 percent of its business from defense.
In February, the company announced that its revenue for 2008 was $25.5 million, compared with $25.3 million in 2007. OSI reported a net loss of $1.6 million after taxes, compared with a $2.9 million loss after taxes in 2007.
Kirkpatrick said that over the last two years, OSI has been investing in the development of new products, including the dismounted soldier command-and-control system. While that will open new markets and revenue for the company in the future, directing funding into research and development did affect the bottom line during that period, suggested Kirkpatrick, who before joining OSI spent 15 years with MacDonald, Dettwiler and Associates, a top Canadian defense and space company.
Dev Bhangui, a market analyst who watches OSI, agreed that directing funding to research and development affected company finances. But he noted that it will also open up new markets for OSI, particularly in soldier modernization systems.
"This is a potential success story, with OSI depending on their execution in the next one to two years," said Bhangui, of Haywood Securities in Toronto.
He said in the short term, he expects OSI to sell off a mapping division, as it is not key to long-term plans.
Growth areas include not only soldier systems but also the small boat command-and-control systems, he said. Bhangui added that for 2010, he is expecting OSI revenue to grow by about 20 percent as contracts start to come in from those areas.
Kirkpatrick said OSI will continue in the defense market but will branch out to related civilian areas, such as supplying command-and-control and situational awareness systems to homeland security agencies, police and other first-responder units.
He noted that OSI's products for the special operations and soldier systems market also have potential for police SWAT units.
"It's a natural projection we're seeing," Kirkpatrick said. "We are definitely, as part of our strategy, looking for ways to transition that core technology to meet nonmilitary operational requirements." ■
E-mail: dpugliese@defensenews.com.
The Army's Future Combat Systems (FCS) program is ready to test a few components that soldiers may have in their hands by 2010.
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