Thales Defense & Security's Export Journey With The U.S. Commercial Service
Thales Defense & Security’s Export Journey With The U.S. Commercial Service
This episode of Export Nation features Ron Huther, Director for International Development with Thales Defense & Security. We discuss the challenges and opportunities faced by defense industry exporters. We’re also joined by Paul Matino, a Senior International Trade Specialist with U.S. Commercial Service Baltimore.
Relevant Links
Company Information: Thales Defense & Security, Inc. - www.thalesdsi.com
Office: U.S. Commercial Service Baltimore
Senior International Trade Specialist: Paul Matino - Paul.Matino@trade.gov
Export Services - Gold Key Service, Trade Winds
Transcript
[00:00:00] Derrick Small: On this episode of Export Nation, we speak with Ron Huther, Director for International Development with Thales Defense & Security. We discuss the challenges and opportunities faced by defense industry exporters. We’re also joined by Paul Matino, a Senior International Trade Specialist with U.S. Commercial Service Baltimore.
[00:00:24] Derrick: Thank you for joining the Export Nation podcast, Ron and Paul. I appreciate it. Looking forward to hearing a little about your story. Ron, why don’t you please tell us about yourself and your company?
[00:00:38] Ron Huther: Good morning. My name is Ron Huther. I’m the Director for International Business Development for a company called Thales Defense & Security. We refer to them as TDSI, so that’s how I’ll talk about the company in the interview. TDSI is a US defense industrial base company. We’re located in the Washington DC Metropolitan area in a town called Clarksburg, Maryland. We have a state-of-the-art factory there where we manufacture most of our products. The company serves the ground tactical, airborne and avionics, naval/maritime, and the security domains.
One key domain that I want to focus on and is most of my contact with Paul and US exports is with the supporting tactical communications. We are really one of a handful of— There’s only a few companies in existence that can provide the US Armed Forces with the tactical communications they need to be able to operate effectively. I’ll give you some examples on some of the support that we’ve given to the US Armed Forces. When the army split up the Security Force Assistance Brigades 2017-2018, the chief of staff of the army gave them a mandate to have the most advanced, capable, tactical communications in the world, and they chose one of our products, the IMBITR.
We also support with the IMBITR, the army’s new Army Leader Radio program of record. We also support the US Army with charging all the different various batteries that they require to operate their tactical communications with the universal battery charger, which we are really excited about. Not only charges all the army’s batteries, it’ll charge it with solar panel. It’ll even charge the batteries in driving rain. For a soldier or a marine, that’s really important. Although I say we are a US defense industrial base company, we’re really an international defense industrial base company because we serve most US allies and friendly countries around the world with tactical communications.
We have communications equipment sold in customers on every continent. We are not one of the largest defense companies by any means in the US, but we are one of the most innovative. Our innovation has helped influence requirements and set the market for tactical communications. I’ll give you a couple of quick examples. There’s a radio called the AN/PRC-148 MBITR and then it was upgraded to the AN/PRC-148 JTRS Enhanced MBITR. What that radio did, soldiers and marines were carrying roughly 30 kilos of communications equipment on their operations, and we were able to get that requirement of the different kinds of radios whether they were VHF radios, UHF radios, Manpack radios, ground-to-air radios.
We were able to get that 30 kilos of communications equipment into a 1 kilo package, and this set the trend for all future software defined multiband radios. Now, we’ve upped our game even more with the next generation of the MBITR with the radio called the IMBITR. We took advantage of all that size, weight and power efficiencies we got with the MBITR, and now, we created a two-channel simultaneous radio. We have all the legacy wave forms, but now, you have this networking capability. Now, soldiers can share unprecedented amount of data among team members during operations and the kind of data. It could be voice. It could even be high-definition video and reports and images.
TDSI also has a couple of subsidiaries I’d like to make a note of. One is Tampa Microwave, obviously, located in Florida. They were global leader in design and manufacture of Manpack and Fly Away SATCOM terminals. Like all TDSI products, they really focus on size, weight and power. In Illinois, we have a company called Thales Visionix, which is also a subsidiary. They develop industry-leading helmet mounted displays and motion tracking technologies. That’s a little bit about Thales and TDSI, and I look forward to the rest of the interview.
[00:05:35] Derrick: Oh, perfect. Wonderful, Ron. Thank you for giving such a good overview. I really appreciate it. Now, that seems like a lot that your company covers. Maybe you could tell us a little bit about how you first were introduced to the US Commercial Service.
[00:05:54] Ron: The US Commercial Service has been really a valuable partner of ours. I think most of your listeners in your groups know how difficult it is to do international business. There are so many— And it’s not just regulations, it’s really building the network. We were introduced to the Commercial Service, probably— I’ve been working with them 13, 14 years, as long as I’ve been with Thales. We started off working with the Trade Winds programs. We got invited to a couple of those. Then we started learning about some of the other services that we were able to work with the US Commerce, and stuff like company promotions. We’ve done many Gold Key services.
[00:06:43] Derrick: Paul, could you tell me a little bit about how you work with this sector and maybe some of the differences that you see in terms of initially starting to develop an export plan with this sector?
[00:07:00] Paul Matino: A real pleasure for me in working with Ron and his team, and he’s got a great team of managers that cover the globe, is that they really have an excellent operation. They know about the opportunities pretty early and they utilize the assistance of the Foreign Commercial Service to further explore the opportunity, make connections in country, and really the key there is identifying reputable partners to pursue the opportunity.
They’ve had a lot of success in doing this, and I’d really attribute that to their follow-up and their willingness to really commit to pursuing the opportunity through in-country visits, and then through training their partners, bringing them to the United States and making sure that they’re fully trained on the technology and the capability. Our office, myself and our director have been fortunate enough to participate in a couple of those training weeks at TDSI’s headquarters in Maryland. It’s been like Ron said, we’ve had a long relationship over the past— Well, my entire tenure with the US Commercial Service in Baltimore. We’ve seen them continuing to expand their reach around the globe and we’ve been fortunate enough to help contribute to some of their international success.
[00:08:43] Derrick: Great. Ron, has TDSI exported since the company’s inception, or did that come along later and maybe if you could go into why there was interest in exporting?
[00:08:59] Ron: The company was really focused and our core market as and continues to be the US defense market. The purpose of the company was— It was implemented to support the US defense market, but US defense market is only half the global defense market and security market. The other half is the rest of the countries in the world. Obviously, you have to focus on exports to be successful. The exports, now over the years, has grown to be a key part of our business. We see that as a way to drive not just revenue for the company, but help us develop technologies as well because it’s not always that they just buy exactly what the US is buying from Thales. A lot of the times, different countries we work with will want their own spin on the technology, and they’ll work with us develop that.
[00:09:58] Derrick: Well, then going down that lane are two questions for you there. In terms of staff that you have that support exporting, how many people do you have in the company that are working on the international side and generating that type of business?
[00:10:19] Ron: I’ve got three sales managers. They’re each assigned to various operational areas around the world. Under each of the sales managers, I don’t know how many we have. It’s probably 30 or 40 distributors and resellers and business advisors fall under each of these managers. Those business advisors, let’s call them, they focus on the specific opportunities in the different countries. Back at the TDSI headquarters, we have a robust export compliance section. There’s several people there. We have a robust program management section. All the international programs are managed by the same team of folks that manage the US programs as well. We share the staff.
[00:11:20] Derrick: In terms of TDSI being in the defense industry, I’m certain you face a good bit of challenges when it comes to exporting. Any particular hurdles come to mind, Ron, that you can discuss?
[00:11:33] Ron: Well, the COVID-19 has slowed everything down. That’s been a hurdle. Hopefully, that’s coming to an end soon and people start working less from home. The government folks will start going into the office. The license applications, everything, will be processed quicker than it is now. I believe that’s temporary. I always tell customers, and I honestly believe this, is that the export restrictions are way overstated. People get intimidated by ITAR, specifically in overseas countries. As long as you follow the regulations and the rules, which we adamantly do, it’s a process that you can manage, and I always tell people that.
Before the COVID-19— It’s a normal process. You apply for a license and it would take three, four months and you would get the license back. As Paul said, we know what’s going on with the different countries and we know our own technology and we know what the US will allow to be exported. We have a good handle on that.
[00:12:52] Derrick: Got you. Why do you feel that companies in your space think that the rules and regulations are a little too much to handle?
[00:13:02] Ron: It’s not US companies. Primarily, if we’re going to partner with a foreign company, as soon as they find out, “Oh, it’s ITAR restricted,” then they get a little bit nervous. Not so much US allies, but I would say, some of the friendly countries that we might want to sell radios to, they always gets concerned about past histories of sanctions and stuff like that. That’s always on the back of their mind. In the years I’ve been with Thales, we’ve never had a problem with a sanctioned country that we were trying to sell radios to. It’s just a perception, I think. I think it’s totally a manageable process. We’re not intimidated by it. The ITAR has not slowed down anything that we try to do when we work programs.
[00:14:04] Derrick: Understood. When you have maybe a customer that brings that up as a concern, do you deal with it mostly through educating them? How do you necessarily get to a common ground?
[00:14:19] Ron: No, we give them the procedure. We give them the timeline. Of course, it’s very regulated. The US government has a lot of regulations. If you comply with the regulations, prior to the COVID, things were done in a relatively timely manner. A lot of people get intimidated by the ITAR and the amount of time it takes and the concerns about the US regulations. In fact, I have found that many of our European allies, all of them have some kind of equivalent to ITAR, and they are just as challenging. I’ll be honest with you, in most cases, we got our US export licenses before our foreign colleagues.
[00:15:03] Derrick: That’s a very good point you bring up. Every country is going to have their—
[00:15:07] Ron: Every country has got it, and ours is, by no means, the hardest.
[00:15:11] Derrick: Has the Gold Key Service been the go-to for you in terms of market entry, or what primarily do you use it for? To find partners?
[00:15:23] Ron: Yes. What we do is, when we look at a market, we look at— Because we’re in the defense and security business, is there a threat to this country that’s significant enough where they’re willing to buy state of the art products? Do they have the budget, and do they have the will to spend that budget to buy these products? We use the US Commercial Service after we do this analysis. We’ll identify a country. We’ll do this analysis, “Is this a good country for us to do business?” If we say, “Yes,” then we’ll approach. I usually approach Paul and we’ll have a call with the commercial attaché in the embassy. We’ll tell them what we want to do.
Often the case, to your question, it does result in a Gold Key Service, but that’s not the only tool that we use. We’ve also used the Single Company Promotion. We found that to be very effective and very valuable. We’ve been invited to trade missions by commerce. We’ve participated on it and gone overseas as part of commerce events. We’ve also participated in events like TradeWinds when they have these annual events in different parts of the world, where they bring in all the commercial officers and key elements from the region, businesses from the region. That has helped us a lot in defining our market.
[00:17:03] Derrick: Oh, great. Could you tell me a little bit about your experience at TradeWinds?
[00:17:09] Ron: Yes. I’ve participated in several in most of the corners of the world because they rotate them around the world. We find it valuable. To me, the best thing about the TradeWinds is— There’s a couple of things that I really like. One is you get a good read on the market conditions in that country, from the US Embassy, from the military guys, and from the commercial guys. You get a good insight on what’s going on in that country and in that region. The other thing that I like is there’s a lot of local companies that are participating in that. You get to meet them. You get to interview with them.
The last thing I like is, these are usually regional events. US Commerce brings all their commercial officers. It’s sort of like a speed dating drill. You get like 15 minutes with each commercial officer. In 15 minutes, you can actually say a lot. You tell them what you want to do in this country. You don’t make any decisions in those 15 minutes, but it sets the stage on what they’re going to do. I found that that round-robin discussions, that speed dating, so to speak, with the commercial officers to be priceless, actually.
[00:18:35] Derrick: Wonderful. Perfect. Good to know. What countries are you in right now?
[00:18:43] Ron: Just think of the traditional US allies. We’re in NATO, of course. We’re actively in what we call the Five Eyes markets, which is all the English-speaking close allies of the US, like Australia and the United Kingdom and Canada and New Zealand. Then if you look at the traditional, the important non-NATO allies, whether it’s in the Middle East, which was the focus for— It still is, but was a heavy focus, obviously, a few years ago. Now, there’s a large focus on the Asian-Pacific markets. We’re spending a lot of time and energy looking at that market.
[00:19:29] Derrick: Perhaps this is not the greatest question, but what has been the most satisfying exporting experience thus far? And I said maybe not the best question because you’re, clearly, in a lot of territory, so maybe there is no favorite. If there isn’t, maybe what country has surprised you in terms of either ease of working with or just there was one perception and then it changed?
[00:19:55] Ron: We’ve been really successful in the Kingdom of Saudi Arabia. It’s a tough market. There’s a language barrier. It’s very, very regulated market in terms of getting to see people and meet customers. It’s not at all like the U.S. market, but we’ve been successful. We have an in-country partner. We’ve had a great deal of success. We really enjoy supporting the Saudis.
[00:20:35] Derrick: What pieces of advice would you share with companies in the initial stages of formulating an international strategy?
[00:20:46] Ron: I don’t want to sound cliché or anything, but it’s a really complicated, difficult enterprise to undertake. The first thing I would tell a company is when you start looking at doing international business, you have to be patient. It’s a marathon, it’s not a sprint. You talk in years, not months to develop a market and to be able to be successful in that market. The first thing, I’ll call it strategic patients. If you think you’re going to go into a market and make a lot of money fast, unless you have the newest, most cutting edge product, it’s very difficult to do.
The second thing I would tell people interested in going at the foreign markets is you have to know that market. So, do a lot of research. I touched on it a little bit. You have to look at the spending patterns of these different markets. Do they have the budget? And in the defense market, do they have a threat? Because if they don’t have a threat, even if they’re a rich country, is always other demands for their funds. Do they have the resources? Are they willing to spend the resources on your product? Do your homework on the country.
The third thing I would tell them is leverage the support that you can get from the US government. We’ve talked about a lot of the things that US Commerce does. These Gold Key’s matchmaking services, they’re not expensive. They’re a couple of thousand dollars. For a couple of thousand dollars, you save months if not years’ of time. You get instant credibility as well. Then when you go to these meetings, there’s somebody from the US government with you that gives you instant credibility with whoever you’re talking to. That matchmaking service is really important.
Take advantage, like I said, of the Single Company Promotion. This is a great way to promote your company. Also, the other members of the country team. This, again, is where Commerce can help you. I work in the defense market, so the military group, the ODC, the Security Assistance Office. They go by various different names, but forge your relationship with the other key elements of the country team. There’ll be the military side, but there’s also others. There’s people there from Narcotics Affairs. There’s FBI. Whatever market you’re serving, forge your relationship with the other members of the country team.
Then lastly, if you do all this, you have to identify an in-country partner that can help you bridge the distance between you being in the United States and your customer being in whatever foreign market they’re in. That local company can be your eyes, your face, your ears. It’s like getting married. Again, going back to the Gold Key Service. You get married to this foreign partner. You want to pick the right one because if you pick the wrong one— I already told you, this is a marathon, not a sprint. If you pick the wrong partner, your marathon is even longer now because at some point, you might realize you need to replace that partner. Picking the right partner, that can help get your message to your customer in that country, is also very important.
[00:24:42] Derrick: I heard you were on the DEC. Could you tell us a little bit about your role with the DEC and your experience as part of it?
[00:24:53] Ron: I’m really excited. I was a friend of the DEC for a few years and then I decided to apply to become a member of the DEC. A little bit over a year now I’ve been on the DEC. I find it great. There’s periodic meetings, the pandemic took away the opportunity to meet in-person for this past year, but there’ve been periodic meetings where we share insights with all the different companies in the local Baltimore, Washington D.C. area. I’ve participated in some trainings to both commercial officers and I’ve done some training for some of the other companies that are just starting. Sort of like this discussion we’re having. Giving guidance to companies in the local area that are trying to get involved in international sales. I found being on the DEC, I plan to be on it for several more years. I really enjoy it and I enjoy meeting the other companies in the local area. I have made some great contacts. It’s helped my company too.
[00:26:08] Derrick: To our listeners the DEC is the District Export Council. Paul is there a specific one in Maryland?
[00:26:20] Paul: Yeah that’s right Derrick, we have the Maryland D.C. District Export Council.
[00:26:25] Derrick: Can you tell the listeners a little bit about what DECs do and how they function with you? Just briefly.
[00:26:34] Paul: The DECs are members of the international business community, they’re leaders within their industries. There’s a formal process where they’re appointed by the Secretary of Commerce for a two-year term and they are really a key partner to the U.S. Commercial Service in counseling companies, executing programs like ExporTech and developing programs on international business and international trade. It’s been terrific to have Ron and his expertise on the DEC and we’ve really enjoyed counseling companies and working on programs together.
[00:27:20] Derrick: Do you have anything else you wanted to speak about that maybe we didn’t touch on?
[00:27:24] Ron: Yes. The last point, it’s not always that the high-tech US company or European company or Australian company you might be facing off against. You could face off against some other competitors from countries like China, some other countries that might have some price advantages on you, maybe not a technological advantage, but a price advantage. Again, you could use your contacts at US Commerce to help shape your message to your customers.
[00:28:02] Derrick: Ron, if you could just tell people where to connect with you or TDSI, if they’re looking for anything else in particular. If you have a way, just let us know.
[00:28:14] Ron: Okay. We’re online, obviously. It’s www.thalesdsi.com.
[00:28:22] Disclaimer: This podcast is intended to provide information that may be of assistance to US companies. Statements made by Export Nation podcast guests reflect the views and opinions of that individual. This podcast does not constitute an endorsement by the US Commercial Service of the individual, his or her employer, or affiliated entity, the specific information provided, resources mentioned, or products or services endorsed or offered by that individual and his or her employer or affiliated entity. The US Commercial Service assumes no responsibility for the accuracy, completeness, or timeliness of the information provided by the guest, or for the decisions made and reliance on any information provided by the guest in this podcast. The information provided in this podcast does not constitute legal advice.
Thank you for listening to this episode of Export Nation brought to you by the US Commercial Service. For more information on how you can get started exporting, please visit www.trade.gov.
[00:29:22] [END OF AUDIO]