UNMANNED SYSTEMS & IoT TAXONOMY: AUTOMATED & DATA COLLECTION COMPANIES INCLUDED AGENCIES INCLUDED

AASKI Technology Inc. Sprint Corp. (S) Air Force Accenture PLC (ACN) Textron Inc. (TXT) Army ADS Tactical Inc. UNICOM Government Defense Advanced Research Projects Agency Analytic Services Inc. University of Texas Defense-Wide Analytical Mechanics Associates Inc. Ventech Solutions Inc. General Services Administration Arctic Slope Regional Corp. Verizon Communications Inc. (VZ) Department of Homeland Security Arrow Electronics Inc. (ARW) ViaSat Inc. (VSAT) National Aeronautics and Space Administration AT&T Inc. (T) WM Robots Naval Sea Systems Command AVAYA Inc. World Wide Technology Inc. Navy BAE Systems PLC (BAESY) Xtec Inc. Ball Corp. (BLL) Boeing Co. (BA) Booz Allen Hamilton Inc. (BAH) Boston Dynamics CACI International Inc. (CACI) California Institute of Technology Carahsoft Technology Corp. CDW Corp. (CDW) CSRA Inc. (CSRA) Data Link Solutions Dell Inc. DLT Solutions Inc. DXC Technology Co. (DXC) ERAPSCO Esri General Dynamics Corp. (GD) Harris Corp. (HRS) Intelligent Software Solutions USA Inc. International Business Machines Corp. (IBM) iRobot Corp. (IRBT) Iron Bow Technologies Jacobs Engineering Group Inc. (JEC) Johns Hopkins University Kongsberg Gruppen L3 Technologies Inc. (LLL) Leidos Inc. (LDOS) Corp. (LMT) ManTech International Corp. (MANT) Mythics Inc. NANA Regional Corp. Navmar Applied Sciences Corp. Northrop Grumman Corp. (NOC) OnPoint Consulting Inc. Palantir Technologies Presidio Networked Solutions LLC Quality Software Services Inc. QuinetiQ Group PLC (QQ) Raytheon Co. (RTN) SAIC Corp. (SAIC) SAP (SAP) Serco Inc. (SRP) SGT Inc. 1 THE ERA OF AUTOMATED SURVEILLANCE & DATA COLLECTION: UNMANNED SYSTEMS, IoT AND CYBER Advancements in data collection, marked by technology breakthroughs in Unmanned Systems and the Internet of Things (IoT) is reshaping operating concepts for Federal agencies. Defense agencies are further along at integrating these technologies than civilian agencies, which presents an opportunity for civilian agencies to buy cheaper commercial solutions instead of custom built ones. This analytic report presents Govini’s Unmanned Systems and IoT Taxonomy, a roadmap for tracking key market drivers as the Federal government further incorporates these two capabilities into concepts of operations (CONOPS).

Key Findings Spending on Unmanned Systems, IoT and Cyber Defense totaled $31.3 billion in FY16. The smallest category by obligated dollars, Cyber Defense grew the most in FY16 by 52.6 percent primarily from investment in Endpoint Defense and Application Security - two segments most related to IoT.

IoT, the largest category totaled $12.2 billion in FY16. It encompasses a broad set of solutions including Data Collectors and Cloud. Data Collectors accounted for 34.7 percent of IoT spending since FY11 and Cloud 26.8 percent. The two will continue to command the largest shares of IoT spending until technologies advance and costs come down.

Unmanned Systems, the second largest Taxonomy category, has historically been dominated by Aerial investments aligned to military missions. However that is beginning to change as Processing, Exploitation and Dissemination (PED) is gaining in importance. Proliferation of assets in other domains and the need to connect them through data streams for improved decision making is forcing focus on PED.

An elusive priority remains transitioning from closed PED architectures built around existing unmanned platforms to open ones that would allow the integration of the next- generation unmanned platforms. Together Aerial and PED accounted for 84 percent of Unmanned Systems spending.

Federal Agencies are investing heavily in evolving Cybersecurity capabilities and it is focusing on software to do it. Identity Credential and Access Management (ICAM) Software and Boundary Defense Software had the largest FY16 spending increases of 198.2 percent and 126.8 percent respectively. The investment approach is paving the way for greater reliance on Unmanned and IoT technologies. UNMANNED SYSTEMS & IoT TAXONOMY

Unmanned Systems IoT Cyber Defense

Unmanned Unmanned Unmanned ISR Data Network Application Endpoint Boundary Cloud Software Aerial Ground Undersea PED Collectors Connectivity Security Defense Defense

ISR Infrastructure Network UAV UGV Inter- UUV Data Science Security ICAM 4.3% 13.0% Processing 28.3% Equipment Assured PNT 32.5% as a 8.2% 18.6% 94.5% 17.8% Traffic 6.7% Platforms operability 19.1% Platforms 10.3% & Analytics Configuration Hardware $3.5B $599.5M $281.7M $1.5B & Services $2.2B $550.8M Service $970.6M $1.0B $1.4B $671.1M Protection $720.8M

Vulnerability Boundary Support UGV Data Science Wireless Migration Database ICAM UUV Sonar 11.0% Sensors 13.0% 64.0% 6.2% 18.8% & Event 32.4% 198.2% Gateway 17.1% Services 27.7% Platforms 8.2% 18.0% & Analytics Services Service Software Software $1.3B $387.3M $184.8M $1.1B $2.1B $548.3M $763.7M $678.5M Response $1.2B $611.6M & Switch $558.5M

Exploitation Platform UAV C2 UGV UUV Command ETL Data Endpoint Virtualization 3.4% 9.7% & 5.1% as a Encryption Infrastructure R&D R&D 27.4% & Control 22.9% 21.8% Processing 6.5% 31.2% Software 72.0% Security 66.0% $1.2B $26.1M $138.8M Dissemination$757.5M $510.8M Service $671.1M $249.8M $200.6M $579.3M $440.7M

Software UAV Tactical System Messaging Endpoint Secure as a R&D 1.0% Data Links 5.2% 3.1% Applications 7.9% Security 2.9% Response 64.2% Router 15.9% $203.2M $450.6M Service $591.0M $207.5M $81.3M $553.0M $375.4M

Web Advanced Patch Boundary Storage Application Data Links 24.8% 42.8% 89.3% Management 23.4% Software 126.8% $189.6M $271.9M Firewall $76.0M $114.3M $333.8M

Wireless Devices 19.1% $151.5M

Data Link Gateways 31.4% $106.8M

Exhibit 1: IoT is the broadest Taxonomy category with the greatest number of sub-segments and thus accounted for the largest FY16 spending share of 38.9 percent, followed by Unmanned Systems with 35.7 percent and Cyber Defense with 25.4 percent.

Note: Govini’s Unmanned Systems & IoT Taxonomy consists of segments and sub-segments. FY16 spending and the percent change in spending between FY15 and FY16 are noted for each sub-segment. UNMANNED SYSTEMS & IoT TAXONOMY: AUTOMATED SURVEILLANCE & DATA COLLECTION 2

Cyber Investment Lays Foundation for Greater Reliance on IoT and Unmanned Systems In preparation for this whitepaper, Govini compiled more than 600,000 distinct contract actions between FY11 and FY16 that correlate to the capability definitions below. This analysis presents annual spending trends and competitor landscape for all elements of Govini’s Unmanned Systems and IoT Taxonomy.

Unmanned Systems Aerial - platforms that operate from the air to provide surveillance, strike and other capabilities ISR PED - architectures for processing, exploiting and disseminating data for decision making Ground & Robotics - terrestrial vehicle or robotic platforms that operate remotely or autonomously Undersea - platforms operating on the surface or submerged in the sea Internet of Things (IoT) Data Collectors - intelligence, surveillance and reconnaissance (ISR) equipment and sensors Cloud - various forms of “as a service” cloud computing models Network Connectivity - network formation through various hardware and software Software - coded instructions informing processors to perform a specific function

Cyber Defense Application Security - finding, fixing and preventing security vulnerabilities in application software Endpoint Defense - protecting networked devices that interact with untrusted devices Boundary Defense - controlling access to networks to prevent successful cyber attacks

Exhibit 2: Cyber Defense spending grew the most in FY16. Two segments most related to IoT, Endpoint Defense and Application Security, had the most growth of 68 percent and 50.1 percent respectively. Unmanned Aerial is the largest segment by FY16 obligations with $6.2 billion followed by Data Collectors with $4.2 billion. UNMANNED SYSTEMS & IoT TAXONOMY: AUTOMATED SURVEILLANCE & DATA COLLECTION 3

Unmanned Grows Competitive as Technologies Advance and Applications Evolve The initial value proposition for unmanned technology is that it relieved warfighters of high- threat casualty situations. It still purports that value, but as technology advances and cost come down, drones are finding their way to more markets including transportation, agriculture, energy, construction, movie production, public safety and of course retail. The Federal government’s use of unmanned platforms, however, is limited to mostly military and security missions that tend to require custom solutions with closed networking. However, civilian agencies are not likely to have the same custom requirements and therefore could look to existing low-cost commercial solutions to meet their needs. This means that current providers of unmanned platforms used by the Department of Defense (DoD) including General Atomics, Northrop Grumman, and Textron are not likely going to be the ones providing solutions to civilian agencies. Regardless of the application - surveillance, mapping, delivery or deep water/space exploration, Federal spending on unmanned systems is poised for significant growth, especially as related Federal regulations evolve and new technologies emerge. One trend worth watching is advancement in software that can be reprogrammed to instruct drones to do new things based on machine learning and artificial intelligence (AI). Shield AI is one commercial company helping DOD deliver the solution. Co-Founder and CFO, Brandon Tseng says, “the future is all about learning and turning that learning into real capabilities”.

Exhibit 3: The largest segment of Unmanned Systems, Aerial grew the least in FY16 by 6.4 percent; a sign of the segment’s mature state. Other domains, particularly Undersea is less mature and is increasingly important to modern warfare and combating potential adversaries like China. It had the most growth of 19.5 percent, followed by ISR PED with 14.8 percent. As unmanned capabilities proliferate across domains PED will be used to fuse data, making it a linchpin of Unmanned Systems. UNMANNED SYSTEMS & IoT TAXONOMY: AUTOMATED SURVEILLANCE & DATA COLLECTION 4

Procurement Mechanisms Being Developed to Buy Aerial Beyond Existing Applications Aerial is the most mature of the unmanned systems. The need to extend air dominance into anti-access area denial (A2AD) with surveillance and strike capabilities has created a Federal market that peaked in FY12 with $7.6 billion in unclassified spending.

While the market is dominated by military and security agencies, other civilian agencies are beginning to think through how unmanned platforms can be integrated into regular operating concepts. However, Unmanned Aerial System (UAS) capabilities being bought by DOD are not necessarily the same capabilities sought by civilian agencies. Civilian customers tend to require smaller platforms without high altitude long endurance capabilities.

This creates an opening for commercial drone makers and the Federal Government has created contracting mechanism to buy them. UAVs can be bought through GSA contracts, Schedule 66, special item number (SIN) 627-50 and training support services can be procured through SIN 627-2005. Schedule 70, SIN 132-8 is also used to purchase unmanned systems. Modern Technology Solutions, Avwatch, L-3 Technologies and Raytheon are among companies utilizing the purchasing mechanisms.

Most Unmanned Aerial Vehicle (UAV) spending is captured by platform Original Equipment Manufacturers (OEMs). General Atomics, Northrop Grumman Textron and Boeing account for 84 percent of spending as they successfully delivered on the military’s custom requirements.

Exhibit 4: General Atomics’ UAV platforms are most in demand, which also gives it a dominant position in Support Services. An emerging sub-segment, UAV C2 Infrastructure is led by L-3 Technologies and Textron. UNMANNED SYSTEMS & IoT TAXONOMY: AUTOMATED SURVEILLANCE & DATA COLLECTION 5

Unmanned Ground & Robotic OEMs to Work Closely with Integrators to Deliver Solutions Federal investment in Unmanned Ground Vehicles (UGVs) & Robotics has softened from its FY12 high of $1.6 billion. Historically, much of the spending has been tied to Explosive Ordnance Disposal (EOD), but that is beginning to change as more applications emerge.

Autonomous vehicles and industrial robots are just a few of the ones that have great potential for agencies. Much of their development is being funded directly by the private sector. The most successful applications thus far have been with simple repeatable actions. Nonetheless, breakthroughs in autonomy are frequent and forthcoming.

Unlike the unmanned aerial market, the leading providers of UGV Platforms to the Federal Government also happen to be among the leading producers of commercially available products. This is largely due to the fact that terrestrial applications are, in some cases, less regulated than aerial ones. However, Federal system integrators led capture of UGV C2 & Teaming spending, which has become the largest sub-segment by contract obligations in recent years. This means that any viable UGV solution won’t operate in isolation, rather as a network of interdependent drones.

Caltech’s leading position in the UGV sub-segment comes from its management role in the Mars Rover program. The facility operator of NASA’s Jet Propulsion Lab accounted for 36.6 percent of UGV Platform spending. Others including SGT, Boeing and General Atomics dominated the next largest sub-segment UGV C2 & Teaming accounting for a combined 59.5 percent of spending.

Exhibit 5: Established commercial OEMs like WM Robots, iRobot, QinetiQ, Lockheed Martin and Boston Dynamics are among leading UGV platform providers. UNMANNED SYSTEMS & IoT TAXONOMY: AUTOMATED SURVEILLANCE & DATA COLLECTION 6

Unmanned Undersea Investment Surges in FY16 and Will Remain Elevated in Future Years Unmanned Undersea spending increased the most in FY16 among all other unmanned systems segments. Spending rose by 19.5 percent to $605.4 million. The capability is becoming increasingly important to DoD. It also has civilian applications for deep sea and littoral exploration, surveillance and mapping.

Undersea, however, is the most immature of the domain systems as sonar and power source advancements are required. Overall market spending is less than half the size of Unmanned Ground & Robotics and less than one-tenth the size of Unmanned Aerial Systems. That is because UUVs have not been widely deployed and have a substantially smaller share of R&D funds compared to the others. The dynamic, however, is in the process of changing as UUV R&D led segment spending higher in FY16 by 27.4 percent to $138.8 million.

The UUV platforms currently in operation are used primarily for undersea mine detection. Other ISR capabilities that are being addressed include tracking quiet diesel-electric submarines, assisting of manned vessels, torpedo targeting and supporting airborne ISR. Navy has funded more than 80 percent of the work to-date and Defense Advanced Research Projects (DARPA) has funded the remainder. Naval Sea Systems Command (NAVSEA) is currently soliciting proposals to its Science & Technology Broad Agency Announcement.

Exhibit 6: Unmanned Undersea attracted significantly more investment in FY16 than previous years. UUV R&D increased the most in FY16 by 27.4 percent, followed by UUV Sonar with an 18 percent increase and UUV Platforms with 13 percent. Technology development efforts are focused on ruggedizing platforms for deep sea and endurance missions, improving sonar and power source technologies. UNMANNED SYSTEMS & IoT TAXONOMY: AUTOMATED SURVEILLANCE & DATA COLLECTION 7

Push Toward Open PED Architecture Will Determine the Future of Unmanned Systems In the Age of Information, ISR PED is gaining importance. It is the hub-and-spoke network that receives data and turns it into insight used for decisive action. As AI capabilities mature, a fully- automated PED architecture will be allocated decision authority on problems deemed intractable or beyond human cognition. But in order for PED’s potential to be realized, open architectures must be developed and the Federal government is a long way away from making this happen. New data strategies and supporting programs emphasize interoperability and “many-to-many” data exchange. Army is moving forward; it recently awarded a potential 5 year $900 million IDIQ contract to Leidos, AASKI Technology and Textron for Tactical Unmanned Aircraft Systems (TUAS) field support. The objective is to integrate cutting-edge technologies into ground control stations and data terminals. Army’s incremental approach to improving PED is different than Air Force, which is more focused on advancing technological capabilities such as machine learning and AI for its three primary missions: lifecycle management, intelligence and cyber.

In addition to the established Air Force and Army programs, other agencies are investing in technology that could help field modern PED systems. NASA accounted for 5.6 percent of the sub- segment’s spending since FY11. Through its mission, the space agency collects and processes earth observation data and is the largest by market share behind Army’s 17.6 percent and Air Force’s 15.1 percent. NASA, along with DISA, are significant buyers of analytics technologies. The two led purchasing since FY11, combining for 14.1 percent of spending.

Exhibit 7: Lockheed Martin and Raytheon account for 17.5 percent of the largest sub-segment Processing from their role in DCGS. The second largest sub-segment, Data Science & Analytics is the most competitive with an average of 34 bids being placed per award. UNMANNED SYSTEMS & IoT TAXONOMY: AUTOMATED SURVEILLANCE & DATA COLLECTION 8

Data Collectors and Cloud are Most Critical to Unlocking the Potential of IoT IoT has the potential to dramatically reshape how Federal agencies go about delivering their mission. Proof points are already emerging in the private sector as remote industrial sensing solutions are being used to better manage capital equipment and gain efficiency in operations. In some cases, IoT is automating decision making based on data that previously did not exist.

IoT has great potential in Federal markets, but the fulfillment of that potential is largely dependent on how agencies and industry collaborate to deliver comprehensive solutions. No one company can deliver a comprehensive solution on their own as IoT requires Data Collectors, Networking, Cloud and Software.

Data Collectors, the largest segment of IoT which consists of ISR equipment and sensors, is the largest with $4.2 billion in FY16 spending, followed by Cloud with $3.3 billion and Network Connectivity with $2.5 billion. Data Collectors stand to lead IoT market spending for the foreseeable future until technology advances and costs come down. Cloud platform providers also stand to benefit greatly as processing, storing and making data readily available is a critical component of any IoT solution. Network Connectivity technology will evolve along with sensors, but will command a small portion of the total value of IoT. Software will also capture a small portion as advancements in coding has made software ubiquitous and cost-effective to produce.

Exhibit 8: Spending on Network Connectivity, the second smallest segment by FY16 contract obligations grew the most by 18.1 percent. The growth was driven primarily by investment in wireless services and upgrading and replacing data links. Cloud grew by 16.4 percent, primarily from investment in Cloud Storage and Platform-as- a-Service (PaaS). Spending on Data Collectors, the largest segment increased by 11.6 percent. UNMANNED SYSTEMS & IoT TAXONOMY: AUTOMATED SURVEILLANCE & DATA COLLECTION 9

Sensors and Data Collectors Serve as Linchpin to IoT and Investment is Picking Back Up The recent maturation of sensor technology is what makes IoT possible. Advancements in fabrication and power usage have created unlimited applications. With low production costs, sensors can be placed anywhere to generate valuable structured data that previously didn’t exist and can be used for real-time decision making.

As much as unmanned systems and remote sensing platforms can work together, they also offer competing solutions. Unmanned systems are best suited for observation and ISR mission sets, while remote sensing platforms are best suited for real-time monitoring and detection. Unmanned systems tend to collect unstructured data, while sensing platforms have the capability to collect both unstructured and structured data. The difference between the two determines how analytics can be used for decision making; data models for structured data are much easier to construct.

ISR Equipment & Services is the larger of the two segments, but only by a small margin. Sensor spending has surged in recent years, increasing by 17.9 percent between FY11 and FY16. A large portion of the sensor payloads are associated with weapons platforms, but investment on in situ remote sensing solutions is on the rise.

While sensor technologies are still in their infancy, their cost-effectiveness make them viable tools for automating data collection, processing and decision making.

Exhibit 9: General Dynamics led capture of ISR Equipment & Services with 42 percent of sub-segment spending, but the company isn’t well positioned in Sensors. The higher growth sub-segment of the two, Sensors, is led by Lockheed Martin, BAE Systems, Raytheon, ManTech Northrop Grumman and Boeing. UNMANNED SYSTEMS & IoT TAXONOMY: AUTOMATED SURVEILLANCE & DATA COLLECTION 10

Network Connectivity Investment Set to Rise with IoT and Unmanned Systems Spending Bow Wave Network Connectivity is the conduit for unmanned and IoT applications and new technologies are always coming to market. One reason for the constant innovation is that much like sensors, range, cybersecurity and power requirements have everything to do with data transmission requirements. As these two technologies continue to evolve, so too will Network Connectivity.

Signs of evolution are already appearing in defense markets as legacy airborne networks are augmented and replaced by advanced capabilities. One of the legacy technologies is Tactical Data Links (TDL), the largest sub-segment that serves as the standard communication for military command, control and communication (C3) systems. Another legacy technology is Data Link Gateways that connect aerial assets to the Global Information Grid (GIG). Spending on TDLs decreased by 5.2 percent in FY16 to $450.6 million and spending on Data Link Gateways decreased by 31.4 percent in FY16 to $106.8 million. Spending on newer peer technologies such as Assured PNT and Advanced Data Link Networks increased by 32.5 percent and 24.8 percent respectively.

Wireless Services, a sub-segment most suitable for IoT applications and smaller drones had the most growth increasing by 64 percent to $548.3 million in FY16. Spending on Wireless Devices also increased by 19.1 percent to $151.5 million in FY16.

Exhibit 10: Network Connectivity rebounded in FY16 from a slight dip in FY15 increasing by 18.1 percent to $2.5 billion in FY16. Wireless Services grew most among sub-segments with 64 percent, followed by Assured PNT with 32.5 percent and Advanced Data Link Networks with 24.8 percent. TDLs the largest sub-segment is in decline. UNMANNED SYSTEMS & IoT TAXONOMY: AUTOMATED SURVEILLANCE & DATA COLLECTION 11

Foundational Cloud Investments Pave Way for Data-Centric Drone and IoT Technology Many supportive arguments have been made for Cloud. Chief among them is that Cloud provides cost-savings by allowing data center consolidation, but the benefits are much greater. Cloud makes Big Data Analytics possible through improved mobility, greater collaboration and unparalleled flexibility. It also allows all of the resources necessary for Big Data to live in one place.

The Federal Government is buying into Cloud. Overall spending increased by 16.4 percent to $3.3 billion in FY16. Cloud Storage led sub-segments, growing by 42.8 percent to $271.9 million, followed by Platform-as-a-Service (PaaS) growing by 21.8 percent to $671.1 million. Growth in the two sub- segments suggests that investments are being made with IoT and Unmanned Systems in mind as Cloud Storage is a model where data is stored in logical pools across multiple servers and locations, which allows for data to be readily available and accessible. PaaS is a category of cloud services that allows customers to develop, run and manage applications without the complexity of building and managing their own. The two are necessary components of real-time analytics platforms tied to IoT and Unmanned Systems.

Spending on other Cloud sub-segments also increased in FY16. Infrastructure-as-a-Service (IaaS) increased by 8.2 percent, followed by Cloud Migration Services with 6.2 percent and Software-as-a- Service (SaaS) by 3.1 percent.

Exhibit 11: The two largest Cloud sub-segments are dominated by IBM and DLT Solutions, reseller of Amazon Web Services and Google products. DLT also has a strong market position in the SaaS sub-segment, while Carahsoft dominates PaaS. UNMANNED SYSTEMS & IoT TAXONOMY: AUTOMATED SURVEILLANCE & DATA COLLECTION 12

Advancements in Software Development to Support Unmanned and IoT Applications Software has changed dramatically in recent years. The costs and technical skills required for development have decreased substantially, which has lowered market barriers and increased competition. In turn, software has become ubiquitous where a piece of code or algorithm can be scripted to do just about anything.

The proliferation of open source coding languages is one reason for the dramatic change in the software ecosystem, and agile development and application programming interfaces (APIs) are others. Cloud has allowed engineers to build and deploy instances and machines much faster at a fraction of the cost compared to ten years ago.

The pervasiveness of software means that whatever applications are required for IoT and Unmanned Systems will undoubtedly be available at low costs. Cybersecurity and Analytics are similar examples. Until recently both were performed almost entirely by humans, but nowadays software does most of the work. This is primarily because at the core of Cyber and Analytics is Big Data and machines perform data functions much better than humans. In fact, it is fair to say that humans can not keep up with the pace of data proliferation and this is even more so the case with the voluminous data generated by IoT platforms and Unmanned Systems.

Exhibit 12: The largest sub-segment, Data Science & Analytics is competitive with Esri, CSRA, Leidos, Northrop Grumman and Palantir among leaders. Resellers of Oracle and SAP database products, Mythics and DLT Solutions dominate the second largest sub-segment. CDW leads System Applications and DXC Technology captured the most ETL spending accounting for 14.6 percent of sub-segment spending. UNMANNED SYSTEMS & IoT TAXONOMY: AUTOMATED SURVEILLANCE & DATA COLLECTION 13

Federal Cyber Posture is Evolving and Should Account for IoT and Unmanned Systems The Federal Government is in the midst of transforming its Cyber capabilities. Advancements in digital transformation, on-line citizen services, surveillance and intelligence have created troves of sensitive data that require protection.

Outdated hardware and software is one reason for existing vulnerability. Another is the sheer size and scale of government networks. But like all intractable problems, a definitive solution is elusive and the most that can be done is manage risk through process and protocol frameworks.

IoT and Unmanned Systems present new challenges for Cybersecurity. Their autonomous nature makes them a threat if they are hacked and controlled by adversaries. This is one major challenge that regulators and standard setters are grappling with as proposals are developed.

Endpoint Defense, the smallest segment and most relevant to IoT, grew the most by 68 percent in FY16. Its rise was fueled by a transition to Identity Credential and Access Management (ICAM) Software from Hardware. Spending in the third largest segment, Boundary Defense, grew by 39.7 percent to $2.4 billion primarily from increased investment in Boundary Defense Software. Virtualization Security, a sub-segment within Boundary Defense was also prioritized in FY16. Spending on Application Security, the largest segment of Cyber Defense, increased by 50.1 percent to $3 billion.

Exhibit 13: Spending on Endpoint Defense grew by 68 percent in FY16 to $2.5 billion. Endpoint is most critical for IoT solutions. Boundary Defense, which grew by 39.7 percent is most critical for Unmanned Systems. Application Security serves both solution and spending increased by 50.1 percent to $3 billion in FY16. UNMANNED SYSTEMS & IoT TAXONOMY: AUTOMATED SURVEILLANCE & DATA COLLECTION 14

Endpoint Defense is Evolving but Threat Remains: IoT and Drones Bring New Challenges Major disruption to traditional models brings its own set of challenges and chief among them for IoT and Drones is Endpoint Defense. Tiny cost-effective sensors often lack the memory and computing resources necessary to host malware. For the same reason, they also are unable to keep up with complex and evolving security algorithms run on networks connecting to the endpoints.

As the two technologies evolve so too should Endpoint Defense, but it should not be an afterthought. Sensor CPUs need to be designed to defend themselves and associated networks. Until this happens, smarter cybersecurity systems that include managed threat detection, anomaly detection and predictive analysis need to evolve.

Such smart cyber systems are part of Endpoint Software and Identity Credential and Access Management (ICAM) Software, two sub-segments that had explosive growth in FY16. ICAM Software grew the most by 198.2 percent and Endpoint Software grew by 72 percent. Leading providers of Endpoint Software include Arrow Electronics, UNICOM Government, Northrop Grumman and DXC Technology. Leading providers of ICAM Software are Quality Software Services, DXC Technology, Lockheed Martin, Accenture and Xtec.

Convergence of IP protocols and the emergence IPv6 makes it possible to connect billions more devices to the internet. However, IPv6’s security risks are unknown, especially as it relates to sensors. In this new IoT era, close monitoring is a must and it creates opportunity for industry.

Exhibit 14: Endpoint Defense is transitioning from hardware to software. DXC Technology is finding a way to manage while IBM is not. Arrow Electronics is well positioned in other sub-segments. UNMANNED SYSTEMS & IoT TAXONOMY: AUTOMATED SURVEILLANCE & DATA COLLECTION 15

Application Security Spending Surges in FY16 as Drone and IoT Technologies Advance User Interface (UI), a component of application software, allows interaction between humans and machines occur. UI is also referred to as the “front-end” of application software that surfaces data and analytics for real-time decision making.

Securing the UI of application software as it interacts with data stored in the cloud and users accessing the system is imperative and the Federal Government has acknowledged that fact. Overall spending on Application Security increased by 50.1 percent to $3 billion in FY16 from $1.9 billion in FY15. The largest sub-segment, Security Configuration which has to do with accessing UI, increased the most by 94.5 percent to $1.4 billion. Spending on the second largest sub-segment, Vulnerability & Event Response also increased significantly by 32.4 percent to $1.2 billion in FY16.

The leading contractors by revenue capture in the two sub-segments are either system integrators, technical engineering firms or providers of enterprise IT. These vendors have a competitive advantage in winning the work because they know the most about the current state of the networks, the software running on the networks and the vulnerabilities that need to be secured.

Leading vendors of Security Configuration, SGT, Harris, Arctic Slope and Boeing captured the majority of their work from NASA. Northrop Grumman’s market leading position in Vulnerability & Event Response comes primarily from its relationship with DISA. Booz Allen Hamilton’s capture in the sub- segment comes from a more diverse set of customers led by Navy and DHS.

Exhibit 15: Security Configuration and Vulnerability & Event Response accounted for 86.4 percent of Application Security spending between FY11 and FY16 and the two sub-segments’ share is growing. UNMANNED SYSTEMS & IoT TAXONOMY: AUTOMATED SURVEILLANCE & DATA COLLECTION 16

Boundary Defense Market in Transition From Legacy On-Premise to Cloud Much like Endpoint Defense, Unmanned Systems and IoT present challenges for Boundary Defense. The technologies proliferate the flow of data between networks creating greater vulnerability in controlling access to networks.

Boundary Gateway & Switch, the largest sub-segment of Boundary Defense is associated with legacy on-premise networking. The hardware works with software to defend against unauthorized access and malware. Much of the networking hardware will need to be upgraded or transitioned to the Cloud.

Regardless of which path is pursued, the Boundary Defense market is poised to thrive in future years. Deployment of digital operating models such as Cloud will fuel spending on Virtualization Security and Boundary Software. Whereas a refresh of on-premise server and storage will lead to increased spending on Secure Router and Boundary Gateway & Switch. Spending on Network Traffic Protection, a services that cuts across the two models but is more heavily focused on-premise networking for now, will rise in-line with overall market spending.

Legacy on-premise network computing sub-segments accounted for 76.6 percent of overall Boundary Defense spending between FY11 and FY16. This share will decrease as more Cloud deployments are made. Boundary Software and Virtualization Security grew the most in FY16 by 126.8 percent and 66 percent respectively.

Exhibit 16: Dell the leading provider of Boundary Gateway & Switch also leads Virtualization Security. Northrop and Leidos accounted for 29.2 percent of Network Traffic Protection spending and General Dynamics and Harris accounted for 23.5 percent of Secure Router spending. UNMANNED SYSTEMS & IoT TAXONOMY: AUTOMATED SURVEILLANCE & DATA COLLECTION 17

Conclusion The U.S. Government is pretty good at collecting data, particularly defense and intelligence agencies, but humans still play a large role in synthesizing, analyzing and drawing conclusions on that data. The role of humans should diminish now and certainly in the future as the spray of data is so great that people cannot possibly keep up.

The usefulness of Unmanned Systems is already being bottlenecked by an antiquated approach that relies heavily on humans to process, exploit and disseminate ISR data for military missions. The DoD finds itself in this position having evolved unmanned technology for specific mission sets requiring that the platforms operate independent of each other. However, technological breakthroughs in autonomy now makes it possible for platforms to communicate with each other acting as a unified networked system that collects and processes data for real-time decision making. The capabilities of the data architectures that support such systems will determine the future effectiveness of Federal Unmanned Systems.

Civilian Agency adoption of Unmanned Systems should move forward with a strong focus on PED architectures. Developing custom required systems would not only be short sighted but also much more costly that the commercially available options.

IoT is very similar in that cost-effective commercial sensing platforms already exist, particularly for industrial applications. Where agencies could custom require, if at all, would be with the sensor itself. Because of the level of customization still required, Data Collectors and Cloud will capture the largest share of IoT spending.

Cyber Defense is evolving as it should along with advanced cyber threats. Greater adoption of Unmanned Systems and IoT is forcing the Federal Government’s Cyber posture to change. Unmanned Systems is prompting more investment in hardening networks, boundaries and data links, while IoT is forcing focus on endpoints, networks and application security.

Utilization levels of Unmanned Systems and IoT by the Federal Government is not where it should given the readiness level of associated technologies. Granted there are bright spots for both capabilities, but by in-large the Federal Government has been slow to embrace the future of automated data collection and surveillance. This presents an opportunity for greater involvement of existing commercial solutions now and into the future. Govini is the leading business intelligence platform for companies that sell to the public sector. Across the entire business development lifecycle, Govini creates proprietary analytics which answer critical questions pertaining to addressable market size, opportunity qualification, competitive positioning and partner profiling. Govini’s database of record gives companies in every industry a distinct advantage when working with the government.