Deloitte adding a space entity to its repertoire

The accounting firm Deloitte recently announced the launch of a formal space practice to connect organizations in rapidly growing global space ecosystem. It hopes to start consulting small and large organizations navigate an industry that’s forecasted to grow to more than $1 trillion by 2040. To find out more, I chatted with Brett Loubert who is principal of Deloitte Space.

Interview Transcript: 

Brett Loubert I would say this started, although we’ve been in the space industry for more than 15 years, this really started in earnest about five years ago. And what I would say happened five years ago is we started seeing a collective interest in this industry from multiple parts of our business and multiple parts of our practice. And what we also understood, and I should probably take a step back and tell you that I’ve had a 20 plus year career around space and defense and applications like that. We know that there’s a marriage of both subject matter, expertise and industry knowledge that has to go with tried and true offerings that we offer in this firm. Space is a complex technical matter, but we’re seeing it becoming more accessible to more parts of more disciplines, physically more accessible. We’ll get into that a little bit. And Deloitte space is our way of sort of organizing around that and signaling to our our clients that we understand the complexities that this industry brings and we can bring tried and true offerings that we have to this market.

Eric White Yeah, complexity is putting it mildly. So why don’t you talk to me a little bit about those complex areas? Are there any specific sectors of the commercial space industry that you all are really trying to hone in on or that you have clients already in that area?

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Brett Loubert Yeah, overarching theme I mentioned this before is around accessibility. So so space is easier to get to physically than ever. So the launch costs we’ve seen dropped dramatically over the last few decades. That’s for a number of reasons, including reusable launch. So physically it is a domain that’s more accessible. But I also like to talk about it virtually or or sort of logically as a more accessible domain. It’s pulling from more disciplines. So if you’re a space startup, you have to understand financials. You have to understand more than just the product that you’re engineering. If you’re trying to move from manufacturing one product to manufacturing thousands or millions of products. That’s a discipline that we can bring in from other other areas. But I think sort of the complexity side of it is we look at the market in three ways. We look at clients where space is their mission. So these are government organizations that have existed for a long time or government organizations that have new missions like we’re seeing with the Department of Commerce, the FAA taking on larger roles, more coordination with existing folks like Space Force and NASA around launch and other other parts of the industry. These are ones that have existed for a long time and they’re struggling with how do I modernize legacy systems, but also the opportunity that commercial and private investment is offering them in terms of as a service models, data and services that they can leverage from space in their missions and also augmenting the products that they’re already producing. We then look at space is a business, and these are companies where their primary business unit or part of their business unit or part of their company is focused on space or the entire company is focused on space. And these are ones that have existed like legacy prides and A and D companies that have been at this for many decades. And a lot of what you’re seeing, I think, around the startup community, we’re also seeing a lot more around like a proliferated low-Earth orbit. So proliferated LEO, in terms of the new constellations that are going up to provide connectivity to rural areas, to aviation, to maritime, to just regular consumers and even what’s emerging now and direct to handset through satellite that you’re starting to see even on your phone. And then the big one that we’re looking at now is that space is a growth opportunity. So what you always look at, like, what does that blue dot on your phone? That is a service that is delivered from space called G.P.S. It’s opened up entire industries. So the Department of Commerce estimates, I think $1.4 trillion of economic activity has been generated from making that service public. But we’re also seeing things in terms of earth observation and remote sensing. These are products and services that are being developed and delivered down here to Earth and then even in space. So it used to be if you wanted to do research and development, you’re looking at different use cases for drug manufacturing or manufacturing in general in space. Your one stop shop was the International Space Station. Well, now we’re starting to see companies that are launching commercial LEO destinations where you can purchase that space or that lab space as a service. And so a lot of the models that we see here on Earth, which I can talk about a little bit, are starting to work their way into the space industry. And that’s all part of that theme of accessibility that we like to talk about in terms of you don’t have to have an end to end completely vertically integrated space capability to be a space company or interact with the space industry at this point.

Eric White Yeah, it’s really a unique area for Deloitte because you all are usually providing professional services for agencies that they kind of know their mission already. And this is sort of new ground for everybody. And so what are you telling folks on the public or private side when they ask for your help in areas of breaking down certain economic barriers of getting into the market or, as you mentioned, updating those legacy systems so that more people can participate and have more of a bigger array of ideas.

Brett Loubert One thing that I feel like is a lot of my job and it’s something I really enjoy, and I think it’s something that naturally someone in professional services does for a living is, it’s all break down concepts and help articulate things in a way that are digestible and people understand. And so when I started my career in space, I was working satellite design and launch systems, and that the barrier to entry was a Ph.D. in engineering or you’re a rocket scientist, like there was a credentialing thing, that was like, if you’re going to work on these types of applications, then you have to add these systems. You have to understand all the nuances and all the testing that goes into them and all the physics and all that kind of stuff. The accessibility theme again starts to open up now, but I start to look at what other models that the space industry is starting to look like now. I’ve spent a lot of my career working in I.T. and things that I’ve seen over my career in I.T. I think are very similar in the space industry. So the move in this I have to go back a little bit, but, the move from like a centralized computing or mainframe type environment where you had one system largely maybe a backup, and it had to work all the time, highly reliable work all the time, 100%. That looks a lot like what the space industry used to look like. Now you’re looking at a much more distributed model for computing. You’re looking at service models, you’re looking at cloud as a way to deliver services. If you want to stand up a tech company, if you want to stand up any company, you no longer have to build yourself a data center where you’re going to get those things. We take that for granted. Now, it’s just the way the industry works. I think that’s what you’re starting to see is a parallel in the space industry. And with that comes so if I’m looking at Deloitte Space, that’s a great example of where we play to be able to bring some of those lessons learned from other industries into the space industry. Like I mentioned it before, if you’re manufacturing more than a handful of things, you’re probably going to want to look at an at scale, large scale manufacturing operation and what you can learn from it. If you are a space startup and you’ve never had to audit your financials or you’ve never had to present, like that’s something that you’re going to need help with. That is not a core space capability that someone like a Deloitte can help you with. When you start to now go to those out of the service models, if you’re trying to do that in a space application, why wouldn’t you look at like a cloud model as an example of how it works? A broker model, if you’re not interested in being a national service provider? How do you access those services in a way that is, to me, the burgeoning part of the space industry and that’s where one of the really main reasons of Deloitte Space is to help clients navigate all these different issues that the accessibility opens up, but also creates both challenges and opportunities on the business side and on the mission side of space.

Eric White All right. So we’re at that end of the spectrum where people are just trying to get their foot in the door. For the big players who are looking to make some investments in the future and make sure they spend those R&D dollars right. And I’m sure you have clients who fit that realm as well. What would you be telling them at a time like this? That kind of the precipice of what is possible is not even known yet?

Brett Loubert That’s right. So I also look to sort of the industry numbers. So there’s many analysts that will say that this is going to be a trillion dollar industry in the next 10 to 15 years. People love that trillion dollar number. I’ve talked to as many people who say that number is… Yeah, well, it’s great, right? It sounds good. As many people who say that, that sounds incredible and as many people as that sounds woefully small, considering what they’re seeing to be the projection of it now. What I like to remind people of people love to talk about space and all this growth. It’s a four or $500 billion industry today. So if you’re looking at what is the growth path to get from four or 500 billion to one trillion, I mean, that’s that’s a single digit CAGR year over year. So I like that number because it talks to the aspiration of the industry, but it’s also well grounded in a very, very robust market that exists today and a steady growth pattern to get there. And I think that’s the thing that most people underestimate about the space industry is just how established it is. Okay. So now you go to your question on what about those established players? There are an inordinate number of opportunities that that this new space economy starts to open up. Right. We talked about those proliferating LEO constellations, right? So you have space companies that are starting to look more like telcos and providing access, bandwidth, connectivity to all parts of the earth, if not the most disadvantaged or remote ones that haven’t had that level of connectivity before. We’re looking at some of the other in the spectrum, some stuff that even a year ago, two years ago, five years ago seemed really far out there like lunar cislunar or Extra Planetary. There are significant investments by aerospace and defense companies into the lunar industry. And looking at what that looks like and what are those ventures look like. We’re returning to the moon. So you watched the Artemis launch, like NASA is making a big play to get back there. And so there’s business opportunity on that end of the spectrum. So there’s a ton in between there. But I think you’re starting to see that the tried and true offerings and things that affect us here and then some of those really aspirational things that we’re going to provide skilled growth that are becoming more and more a reality. Another thing I also want to talk about is how much of space actually happens here on Earth. So, yes, there are satellites that are orbiting the Earth. They’re providing imagery, they’re providing comms, they’re providing radio, TV, I mean, you name the application that’s coming from space. But all of that is supported by a ton of infrastructure here on the ground. That infrastructure, by the way, it needs to be managed, operated. It needs to be upgraded, modernized. It needs to be protected. Cybersecurity of space systems is an incredibly important topic right now. We’re seeing that on both the government side and the commercial side. And an area that not only are we playing it heavily and working directly on these systems, but also imagining what the future state looks like for some of those cyber operations on the in space side of things as well. So in general, I think it’s it’s a wealth of opportunity and it’s more than just billionaires and rockets and people going into space. It’s an entire industry that’s been operating for decades and I think is going through kind of a renaissance of how it gets to the next scale growth phase.

Eric White And so the industry is made for and by innovators. Are there any times when you have to sort of tamp down and keep people on the ground, pun intended, and keep things realistic? Because people have been lamenting about Mars for so long and all these other ideas that they may have for what space capabilities could be achieved in the next few years. Are there any times that you feel as if you have to be the bad guy when you’re advising clients?

Brett Loubert Yeah, I think I’ll look at it maybe a couple of ways. One way is we always talk about this bringing bringing space down to earth, right? And I think that’s probably a tagline for about 100 companies at this point. But it’s a really good way to talk about the fact that this is is not it’s something that is increasingly accessible. It’s something that you can aspirationally integrate in your business. I think it’s also something that you’re seeing entire industries that are being generated by space that people don’t even think about. So the blue dot on your phone is GPS, right? And there’s like, if you look at a rideshare company, I’ll have to ask the question like, is that a space company? And your instant answer would be no. But their entire business model is based on a service delivered from space, right? So there’s some level of just making it physically accessible, the data that becomes accessible, but also being able to articulate these stories in ways that people understand that so much of it affects their daily life. They can’t get a cup of coffee without the GPS Constellation. They wouldn’t be able to navigate to work without the GPS. It’s like these are really good ones. And if I look at a client that I work a lot with, like Space Force, I wonder how many people even know Space Force provides that service to them. Right. So this is a great example of a government service that is really pushing the commercial industry forward. And the second one is we kind of hinted on is every company in some way is or will become a space company. So you don’t have to be a major aerospace and defense corporation to be considered a space company, like I mentioned in that rideshare app. You need a space strategy. What are you going to do? How are you going to leverage data that’s coming down from space? What different alliances or how do you work in your ecosystems of partnerships around space? What are the different opportunities that provides you a different market segment? So all of these are things that we’re getting a lot of questions on. I love talking about it. It’s the best part of my job. And I think the excitement, the trajectory is extremely high, I think in terms of that excitement. And it’s really about making sure that people understand what it is about space that’s relevant to them as a person and their business as they do it. Or if you’re on the government side, how you interact with those businesses, the commercial side, and   your do your new consumers of your data or service that can provide increased level of importance to what you’re doing. We’re seeing a lot from a political standpoint discussing I think there’s a stat I believe I saw with the Artemis program is is doing work in all 50 states as an example. So there’s state legislative side. There’s all kinds of things that are happening for for all different parts of the ecosystem and really that from the business side, all companies are space companies. It’s something that I think folks are going to increasingly see over the next 5 to 10 years.

 

        Read more: The Space Hour

 

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