For some space companies, vertical integration is the answer to a question they only have to ask after being let down by a supplier. And that response is understandable when you’ve just lost millions of dollars on a failed launch or mission, caused by an externally sourced component or subsystem. Moreover, companies like SpaceX have demonstrated that controlling every aspect of development, from propulsion to avionics, can be effective and provide significant competitive advantages.
Unfortunately however, for space companies without the resources and bravado of the world’s richest man powering them, full vertical integration is often too slow, complex and expensive to be commercially viable.
That’s why at Dcubed, we believe it’s time for the industry to shift towards a more pragmatic model: Vertical Integration 2.0. In this scenario, space firms work with component and subsystem vendors as true ”internal external” partners, rather than just suppliers. This approach allows them to retain the integration benefits of verticalization while dramatically reducing costs, risks, and time-to-launch. In essence, the idea is to integrate your partner, rather than the process or the production.
We believe that NewSpace companies embracing this model will move faster, iterate more efficiently, and stay ahead of competitors stuck in outmoded integration strategies.
Why Traditional Vertical Integration Fails
Vertical integration has been seen as the “holy grail” of space success when faced with slow, risky and expensive dependence on external suppliers. However, it comes with significant challenges of its own, including:
- Massive Capital Costs – Building in-house capabilities for a diverse range of subsystems demands enormous up-front investment.
- Slow Development Timelines – Relying on external suppliers meeting their timelines without them being properly integrated slows down development.
- Technical and Programmatic Risk – Working with unfamiliar technology without sufficient support from suppliers significantly increases the chances of failure.
- Reinventing the Wheel – Many companies end up duplicating existing, reliable solutions instead of leveraging industry expertise.
For these reasons, while some level of vertical control is always necessary, full vertical integration is simply impractical for most space companies. The smarter approach is to focus internal resources on core differentiators while leveraging external expertise for everything else. However, the key word here is “expertise” – choosing vendors that don’t just deliver the right reliable and cost-effective technology, but whose experts can also work intensively alongside in-house engineering teams to simplify and accelerate integration.
The “Internal External” Model: A Smarter Way Forward
The integration of vendors into engineering and production as long-term strategic partners delivers a range of significant benefits, including:
- Lower Costs – Avoiding the burden of in-house development experts and accessing the vendor’s economies of scale.
- Faster Development – Leveraging off-the-shelf or co-developed solutions to cut months or years off production and launch timelines.
- Reduced Risk – Using proven, flight-tested components rather than developing new ones from scratch.
- Stronger Innovation – Tapping into the expertise of vendors who specialize in their field, rather than stretching internal resources too thin.
This is how space companies that operate as smart systems integrators rather than trying to do everything themselves can outperform those clinging to outdated vertical integration models.
Making Vertical Integration 2.0 Work
Transitioning to an Internal External model requires a strategic shift in how space companies select and work with their partners. Best practices include:
- Identify Core vs. Non-Core Capabilities – Focus in-house efforts on mission-critical differentiators and source subsystems that don’t need to be proprietary.
- Select the Right Partners – Choose vendors with innovative solutions, proven expertise, strong reliability, and a commitment to collaboration.
- Move Beyond Simple Transactions – Establish long-term relationships where vendors are deeply involved in development and integration.
- Foster Knowledge Sharing – Maintain close engineering collaboration, treating external teams as an extension of your own.
- Integrate and Test Early – Bring partner components into the development cycle early to ensure smooth integration and avoid late-stage surprises.
What a Partnership Cooperation Looks Like
At Dcubed, we follow a simple 5-step procedure for partnering with our customers:
- Ensure mutual understanding of how mission critical “small but mighty” components and subsystems are.
- Get involved during the design phase, to ensure that we are fixing something that isn’t broken yet, rather than engaging in failure work.
- Deliver comprehensive product and integration materials to prove our expertise and support in-house engineering and production teams.
- Provide access to our product experts through calls, onsite or remote training, workshops, design reviews, and troubleshooting.
- Build trusted personal relationships that facilitate the collaboration and ensure confidentiality.
The Future of NewSpace Belongs to Agile Integrators
And let’s be clear: Vertical Integration 2.0 is not really about cost cutting on the client side, or revenue generation on the vendor side. It’s about building competitive advantage by enabling faster launches, rapid iteration, effective scaling and reliable mission success.
The message is clear: In space, partnership is power.
Additional resources:
February 2025
https://spacenews.com/dont-compete-with-or-emulate-spacex-investors-urge/
https://spacenews.com/the-evolving-case-for-vertical-integration-as-satellites-go-modular/
