It is always interesting to see the spin placed on a cold hard business decision for the media.  Put simply, Eric Prince and his staff have played a blinder over the last 48 hours.  Inviting the press into their headquarters, Eric Prince explained that Blackwater Worldwide would be reducing the reliance on security, particularly as this part of the business was an unintended consequence and never part of the overall business plan.  The intention is to reduce security as part of the company’s revenue balance, immediately pushing below 30% with the eventual aim of single digit figures.  This would allow increased effort to be placed on logistics, transport and training.

I am interested to note that little has been made of this being a purely financial decision; Eric Prince and his staff know that the size of the PMC market in Iraq is decreasing and will hit the point where it decreases dramatically at a quick pace.  The same market is proportionally a lot less in AFG.  I strongly suspect that while the going is still good they are recommitting their resources within BW Worldwide to other, more lucrative and growing markets elsewhere. For those who are business school minded, they are going to continue to milk their cash cow, while limiting their exposure to that market (don’t forget the amount of capital investment required for high risk security provision) and exploring new opportunities.

This announcement was the most effective way to gain publicity for the increasing activities while making a solid attempt at defusing any negative comments about previous activities.  Bear in mind that the expansion into new environments creates a telescoping effect; their people on the ground can identify new opportunities which Blackwater Worldwide can exploit in the future.  You will note that Eric Prince didn’t write off the possibility of PMC activities in the future if the conditions were right.

Blackwater’s shift of emphasis is echoed by other PMCs looking for new opportunities; training for domestic (US) law enforcement is a popular area to increase effort, as is the widening of scope and subject material for training to DoD.  The PMC industry is about to suffer a contraction, and this will be seen in the eradication of generic, middle sized companies and the ‘bottom-feeding’ companies that have survived and made a bit of money in Iraq, but that will be closed out as the market shrinks.

The changes in the industry will be beneficial, but don’t imagine for a second that the PMC industry’s security capability is about to wither and die.  Providing security is a business opportunity, and as long as the opportunities exist, so will the companies willing to service that need.  The Government must ensure that when that need is met, whenever, wherever, under any conditions, the PMC and its employees maintain the highest standards, because it is against their actions that the US Government will be judged, whether they were involved or not.