Game Technology Disruption in the Rear View Mirror

The interactive simulation industry, particularly that serving the military, is being disrupted Clayton-Christensen-style right now. We have created a foundation of technologies that largely rely on government investment or defense-specific companies for their creation. While we have grown very well over the last 10 years, we have seen the game industry and the IT community coming up fast in our rear view mirror. Game graphics engines, network methods, persistent worlds, artificial intelligence, and physics modeling have grown so quickly that they are now at a quality level that they can perform many of the operations that were previously reserved for military contractors.

What does a defense company do when disrupted in this way? As I said in a recent conference presentation, there are 3 choices:

1. Adopt the technologies and mix the best of the current tech with the best of the new game tech. There are a number of companies bringing the two together and there are companies emerging specifically to create and deliver game technologies to simulation customers.
   
2. Move Up Market by selling the simulation technologies to more demanding customers. Rather than targeting the military, use high-power tech to go after weather, population, and cultural simulation. Of course, there is much less money available from those customers.
   
3. Move Down Market by selling the old technologies to much smaller customers, shift to lower price and higher volume.
   

Game technologies are so close in the mirror that there is no doubt that they are in the simulation space and will grow there. IT service technologies like SOA are further back. But possibly headed in the same direction, right up the simulation tailpipe.