While there’s no easy way into defence as an SME, Peter Freed says the industry’s willingness to accept a “degree of risk” could allow small businesses like his own to successfully operate in that space.
Joining host Phil Tarrant for this episode of the Defence Connect Podcast, the managing director for software solutions provider Cirrus Real Time Processing Systems explains why he’s a champion for local SME talent and explores the challenges and opportunities that lie ahead for small businesses in defence.
Tune in to hear how Freed overcame his own challenges to establish a successful business in the defence industry, but why, despite his success, he won’t try to conquer the world.
Enjoy the podcast,
The Defence Connect team.
Listen to previous episodes of the Defence Connect podcast:
Episode 316: PODCAST: The worsening geostrategic environment
Episode 315: PODCAST: News wrap – Strengthening maritime capability
Episode 314: SPOTLIGHT: Unpacking the Aegis combat weapons system, with Lockheed Martin Australia’s Neale Prescott and Rob Milligan
Episode 313: PODCAST: Building a regional maritime hub, with Babcock’s Brad Yelland
Episode 312: SPOTLIGHT: Building a stronger RAN with Gareth Evans, managing director of Rohde & Schwarz Australia
Episode 311: PODCAST: The healing power of sport
Episode 310: PODCAST: Building a defence hub in Hunter, with Tim Owen
Episode 309: PODCAST: The long road to Invictus Games 2022
Episode 308: PODCAST: Assessing the government’s defence policy, with Senator Rex Patrick
Episode 307: PODCAST: Invictus Australia — Michael Hartung, OAM, CEO Invictus Australia
Phil Tarrant: Oh hi everyone, it's Phil Tarrant here. I'm the host of the Defence Connect Podcast. Thanks for joining us today.
Going to have another chat with ... If you've been keeping abreast of Defence Connect recently, we've a bit of a theme that we've been running on, and that's connecting with some of the leading SMEs within the Australian marketplace. Those which have been established for quite some time and seen a number of market cycles through defence, and I say market cycles both in terms of wider macro-economic factors, but also cycles through defence, which we've seen – let's be frank – a number of different Prime Ministers and cabinets coming through over the last period. And I think our guest today, Peter Freed, who's the managing director of Cirrus Real Time Processing Systems, probably got some observations on how the industry's changed over the period of time that his business has been in defence, which is over two decades now.
I think he mentioned before we come on air he's on his 21st year, which is good to see. And what I hope to do today is have a chat with Peter just about the evolution of his business, how it's changed over time, based on not only the needs of defence and the particular dynamics of the defence industry, but also, and probably in particular, the evolution in technology and the way in which people do today what they used to do yesterday, very differently.
Peter's business, and I'll get him to explain it in a second, is very much based on simulation type operations, particularly within defence space, but I think the crux of it all is pretty much, you guys provide solutions for real-time environments. Is that a fair and good description, Peter? Welcome to the show.
Peter Freed: Yes, thanks for inviting me here, and that's probably a good high level summary of what Cirrus does, and was originally intended do to, was to develop software solutions for applications that are running in real-time in typical military situations.
Phil Tarrant: So what is a real-time military situation look like – that has a software component or application to it?
Peter Freed: Sure. Well it's something which is running continuously. A good example from the sort of things which we were doing originally when we set the business up is the types of computer software which deals with sensor systems where information is coming in continually, and the information from the sensors has to be processed in some form to provide information which, hopefully, provides the operators an insight into what is going on in the tactical environment around their platform.
Phil Tarrant: I guess there's an application for that in every single defence situation, where information comes in, needs to be crystallised or synthesised, and then given an output which someone can use to make a decision. Is that pretty much how it works?
Peter Freed: Yes, that's a pretty good summary of how real-time software operates in the military environment and different platforms of different versions of pretty much the same concept. But yes, information comes in, has to be analysed by some sort of computer, which it cleverly knows what to look for, and presents information to military operators who then interpret that and do something with that information.
Phil Tarrant: Say in a real world operation environment, and you have this running, this continued process of new situations, new information, new outputs, you can actually drill and discipline for that in a sort of non-operational environment, in a simulation type context. Is that where your business starts to fit in to provide that particular mechanism, and then also see how it plays out in the real world environment?
Peter Freed: Yes, that's right. Over time we have found that the part of our business, which has become essentially the dominant part of our business, deals with developing simulation training products for our military customers, and for those types of products the computer software which we build will synthesise and simulate in that software what is going on, in a real military type world, and present simulations of the types of information that operators will be presented with their real world equipment.
Phil Tarrant: To create this type of technology ... I'll call it that, I don't know if it's the correct term Peter, but ... It all comes into the input, so what goes in to it to create something which can actually simulate a real world environment? Do you ever get a head rub? They probably work in collaboration with engineers versus operational expertise and the actual on-the-ground reality. How do those two live side by side comfortably?
Peter Freed: That’s a very good question. And to build these types of simulation systems effectively, we actually have to draw on two very different types of knowledge and expertise. On the one hand, our companies background and building systems that process sensor information, gives us an understanding of how these systems would work, and what their constraints would be, and what can and can't be achieved with those types of equipment, and then the nature of the types of information that they would be able to glean.
But on the other hand, we're not military operators, and the practical day-to-day nuances of how different types of equipment work, and which aspects and behaviours of those pieces of equipment are actually relevant to what you need to train operators on, that comes from our friends in the military in the schools to which we provide our training systems to. So we have to draw on both our own engineering and scientific knowledge of how the systems that we're simulating work, and the end-users concepts of how it is that the simulation should behave to allow them to effectively train the people who are going through their schools.
Phil Tarrant: The rigour of simulation, when you look at people who do what they do very well, you think it looks quite easy but there's often quite a lot of work in the background there to make things look simple. And I guess if you sort of juxtapose that into a military environment, practise makes perfect, but there's potentially a lot more different outcomes in a military context. So this whole rigour of perpetual practise and training using simulation: how do you balance the need to do that, but making it as simple as possible so you can get the quickest outcome that you want as fast as possible ... You know where I'm getting with that? How do get people to be capable quickly, based on good technology? Is that a -
Peter Freed: Yeah, no that's a fair question. And there's a trade there on how much complexity you want to put into the training system. What range of circumstances you want to be able to train military personnel to be able to deal with. And those considerations might lead you to having a more complex system, and against that you might want to also have a requirement to keep things as simple as possible to get people up to speed as fast as possible.
Where does that sort of trade of opposing type-wants end up sitting? Well, we generally wouldn't be the party that makes that call. Our clients would direct us to the appropriate spot.
Phil Tarrant: You talk about your clients. Who are you providing simulation sort of engine to at the moment – is it right across defence?
Peter Freed: Okay, so the primary client at the moment is the Royal Australian Air Force, and we have some contracts also for the RAN, the Navy.
For the Air Force we are the suppliers of the Air Combat Officer Training System, which trains, as you would suggest from the name, air combat officers, and that's installed and in continual operational use at RAAFs number one flying training school at East Sale. We now have contracts with the Royal Australian Navy to provide a training system for operators of Naval Communication Centres, and that will go for the Signals school down at HMAS Cerberus, and we have another contract to develop a tactical electronic warfare training system, which will be training naval electronic warfare operators and that will go to the school at HMAS Watson, here in Sydney.
Phil Tarrant: How often do you need to ... I guess I'll use layman's terms, put more into this simulation training in order for it to be current with the current situation, whether that's the training demands of Navy, or Air Force. Is it a weekly, a monthly, sort of dial up, dial in, upload new information? Or is it quite a static thing one you've built the simulation needs?
Peter Freed: There are different types of updates that occur, and they occur at different tempos. Certain types of data which is loaded into our systems does get updated every few months, so it's that sort of tempo. And as for functionality of the training systems themselves, unfortunately in the military world, the tempo is fast and things keep moving, and the adversaries keep on developing their technologies, and the training has to keep up with what our personnel are going to be faced with out on operations. So that is a somewhat slower tempo, but maybe every few years updates to the system generally need to occur.
Phil Tarrant: We sort of spoke about you've got over a couple of decades’ experience now working within defence. Some new SMEs coming into defence space. How would you describe the culture of working within a defence environment versus perhaps other industry sectors in Australia? Is it one which is I guess bipolar in terms of it's very needy and very fast but also quite slow at the same time? How would you describe it?
Peter Freed: It's a different world to, say, the commercial world. I mean defence is a large organisation, and decision making processes have to be adhered to, and all businesses who are interested in being in this space have to understand and accept that is the way it is. But once one is accustomed to the way the processes work, familiarity does allow one to manage that approach quite adequately.
Phil Tarrant: You must have seen some changes over the years in terms of a growing demand for Australian, local, content. We've got some great innovators here in Australia, some great technology businesses, some great software businesses. Traditionally government or primes have looked external to Australia to acquire some of this technology. You've been flying the flag for local content for quite a few years. What's your thoughts on a shift towards trying to, I guess, build our local talent, our sovereign capabilities in this space? I imagine you champion as much as possible, but we've probably got some way to go.
Peter Freed: Yes to all of that. I have championed exactly that over a long period of time. My observation is that it's been something akin to a pendulum. When I first started this business two decades ago, defence had a reasonable willingness to work with local players on small projects to do things which have a risk of technical failure. And there was an acceptance that that risk was worthwhile for the benefits for those cases where there was technical success. And there were some very prominent examples of technical successes which did make that business case quite worthwhile.
Over the middle period of our business, we observed a pendulum swinging against that, and quite an aversion from defence overall to undertaking any developmental risk with organisations in Australia, and a preference to buying things essentially off the shelf from overseas. In my view that was a fraught approach, but that is the approach that was taken.
Now in the last couple of years though, I'm pleased to see that the pendulum is swinging back, and a willingness to accept a degree of technical risk. Obviously on smaller size projects it's more reasonable to accept a degree of risk than it is on mega-billion dollar projects, and that is creating a space for organisations like mine to participate in. But we are cognizant that a reward needs to be there for the Commonwealth to take on some risk, and where projects are successful, the Commonwealth should gain an upside overall from taking that approach. And we believe that is the case.
Phil Tarrant: Okay. In terms of development of, say, simulation software, 20 years as technology's changed rapidly in our space, and I'm sure if we had more time we could talk about some of the major changes in the development of software during that period. Do you think the change that we've had over the last 20 years, and we look forward another 20 years, do you think we gonna get that much change moving forward? Or do you think sort of the wholesale shift from a, I guess an analogue world, into a true digital world has happened and now it's really just little tweaks on top of that?
Peter Freed: Well I'm not sure I'm brave enough to make a 20 year forecast. I'm just happy that I've survived 20 years so far. But I will observe that one of the changes we have seen in the last 20 years is that a lot of the military systems which my company is now simulating, they were originally a lot of proprietary hardware that was designed to do one purpose and one purpose alone. Whereas nowadays, because computers are so powerful, a lot of those very niche applications may actually be implemented just as software running on fairly normal computer systems, and that change actually makes the task for an organisation like ours which seeks to represent what is going on within military systems, substantially more straightforward. We can build software which runs on standard computer equipment, which does a very good job of representing what is going on in these large military systems.
Phil Tarrant: And for you as a business, and other businesses involved in your particular sector, how do you see the world moving forward in the sense of business opportunities? The white paper has indicated substantial investment in defence moving forward. Do you see your business growing considerably during the next 10 years? Do you look to capitalise off some of the major work which is going to be undertaken soon, particularly naval ship building programmes?
Peter Freed: It clearly is a substantial uptick in defence business at the moment, and we're already seeing growth in our business with the types of projects which have gone onto the market, and which Cirrus has been fortunate enough to secure. So we do have growth in our engineering team and our capability. So I'm very pleased about that.
I would say that our ambition is not to conquer the world. We have limits of how far we would want to grow. We are a small company and that is our culture. We don't necessarily want to move too far from that which has worked so well for us previously.
Phil Tarrant: That's good. And for you, describing that culture, I imagine you're quite particular about the type of engineers you bring into the business to help support the contracts you secure. How do you go about finding and retaining the best talent to best equip you to deliver your simulation systems to defence? Is there a secret to your recruitment process that other people would try and emulate, or you want to keep your cards close to your chest on that, so you don't want to give away the secrets to get the top guys in the market?
Peter Freed: Yeah well. I won't fully answer the question, but we're very choosy on who we select. However, in terms of retention of our staff, we do find that we do tend to keep our engineers and they stay with us for long periods of time, 'cause we have a pretty fun culture internally within our organisation. Obviously we're very serious in terms of meeting all of our obligations, but we do have a group of people who are fairly like-minded, wanting to crack on and get the job done, but it's a good culture and everyone gets on very well within our organisation, and people really don't want to leave that.
Phil Tarrant: What is it you think most excites engineers and gives them job satisfaction? Is it creating something that solves a problem, or is it new and wonderful stuff that they can take to market? What is it?
Peter Freed: Taking on very challenging problems and coming up with solutions that are effective within a commercial context. I think that's what keeps people interested.
Phil Tarrant: Interesting. If you were to try and tackle some of the key issues or frustrations you think SMEs have in the market today in dealing with defence or defence industry, so primes or the commercial custom of the Australian government, what would be those couple of bits of advice you would give them to help support them as they potentially seek new contracts within defence or look to expand their business to meet the needs of some of the procurement opportunities out there right now? Is there any secret sauce you can give them?
Peter Freed: 'Fraid not. The sad truth is everyone has to fight their own way in. There is no easy pathway into a stable piece of defence business. Credibility has to be established. Small businesses in the defence space will be confronted with a very difficult chicken and egg problem, that they can't establish their credibility until they get to do serious contracts, and they don't get to do serious contracts until they have credibility. And how individual businesses manage to get through that particular chicken and egg problem will be essentially up to the leaders of those businesses, to find their own pathway through.
Phil Tarrant: It's a bit of a conundrum isn't it?
Peter Freed: It's just the way the world is.
Phil Tarrant: It's just the way the world is.
And you're doing some work involved out at the Woomera range programme there, working with Raytheon. Did you have any advice for SMEs for how you can most effectively work with primes to facilitate the best relationship, so you can produce or provide a collaborative project outcome? Is there any tips you have there?
Peter Freed: I don't really see that it's different as regards working with primes than working for defence direct. The engagement has to be based on what value is getting brought to the table, and that piece essentially has to be solved prior to the engagement happening. So it has to work for the prime, it has to work for the SME.
Phil Tarrant: That's good. And the future for you guys. Are there any particular programmes that you've got your eye on? That you hope to gear up to move into in the future?
Peter Freed: Of the things which we'd be willing to discuss, we've had a long involvement with everything to do with submarines. C1000 is a very substantial submarine programme. We're not really associated with the platform type issues, but we've had a long association with the development of the combat systems and their associated equipment across Oberon class submarines, the Collins class submarines, and we'd be pretty keen to maintain that involvement through to the new class of future submarine.
Phil Tarrant: Good. Interesting.
We're running out of time, Peter. Just wondered if there's anything you'd like to cover off before we close up. Any visions, or words of inspiration for our defence industry looking to enhance capability building for our war fighters?
Peter Freed: What I would suggest is, we do have capabilities in this country which are not fully utilised, and often the reason they're not fully utilised is considerations of risk. Sometimes those considerations are well placed, but not always. Sometimes it's a case of you have no risk to fear but the management of risk itself, so I would suggest that maybe a greater exploitation of the capabilities resident in the high technology, SME sector would overall lead to better value for money for defence.
Phil Tarrant: Very succinct. It's good.
Peter I've really enjoyed the chat today. Thanks for coming in. If you want to check out Peter’s business, have a look at the website. It's cirrusrtps.com.au
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