Here, Matt Medley, Global Industry Director, A&D, IFS, highlights the four key trends impacting the defence sector throughout 2024. As budgets increase and the spectrum of conflict scenarios widens, swarm drones take to our land, air, and sea and the double-edged AI sword adds cutting edges to cybersecurity.
Conflicts and geopolitical volatility show no sign of abating – that means defence budgets are set to increase, but where will the spend go?
The conflicts of 2023 have impacted and caused major disruptions to military supply chains, leading to the inventories and resources of some military forces being drained and inadequate to combat hostile forces. It comes as no surprise that in 2024 defence budgets across the globe are set to increase—witness the UK defence budget set to increase by £5 billion and the U.S. defence budget which is set to increase by 3.2% from $816 billion in 2023 to $842 billion in 2024. As a result of this, the global defence market is expected to grow significantly, with a lot of the budget set to be focused on increasing production to help military forces regain control.
The Deloitte report on supply chain risk management identifies the real conundrum underlying the increase in defence budget on the manufacturing sector too: “As most A&D suppliers are highly specialised with unique expertise and complex equipment, they struggle to make quick changes to production in response to varying demands. The challenge is accentuated as many suppliers serve both commercial aerospace and defence. Any spillover risk from commercial aerospace could leave defence OEMs vulnerable to sourcing critical parts for their programs and platforms.” With rising budgets and increased procurement set to dominate the defence agenda throughout 2024—these are the four key areas I see large portions of these increased budgets being spent on.
Prediction 1: The widening spectrum of conflict calls for military forces to improve Total Asset Readiness
The last 12 months have given rise to a wider spectrum of conflict. The combat between Ukraine and Russia shows symmetric features, as it is between traditional Air, Military, and Naval forces on both sides trying to achieve dominance and territory. On the other end of the spectrum, a more modern asymmetric style of combat can be seen in the Israel and Hamas conflict which features combatants that are not typically a part of the military forces of a nation-state.
The difference in features of the warfare has called for defence ministries and departments to better prepare for a broader spectrum of eventualities—from natural disasters to full-scale theatre warfare. As well as a broad spectrum of military deployments ranging from high to low tech—tanks, boats, and boots on the group versus parasailing and jet skis, remote locations versus heavily populated areas with schools and hospitals.
As highlighted in a recent Global Security Review essay which paints a picture of the new challenges defence forces face, and advocates for an agile approach to be taken towards The Changing Face of Conflict: “The agile approach to hybrid warfare offers a promising framework for responding to these complex and evolving threats. It emphasises flexibility, adaptability, and rapid decision-making and incorporates the impact of technological developments on warfare.”This will even apply to the software infrastructure underpinning the military equipment supply chain, where disparate reporting mechanisms and software systems can be consolidated with an all-encompassing solution to track Total Asset Readiness—giving commanders a clear real-time view of the assets at their disposal, in the context of the mission they need to complete, wherever and whenever they are deployed. From this, we expect to see a 16.3% increase in total defence spending in the U.S. alone, with the IT spend in defence contractors rising from 3% of revenue up to around 5% of revenue as they invest heavily in AI and automation to help pursue optimised asset management and other technology-driven priorities.
Prediction 2: Recent conflicts highlight the lack of assets and inventories ‘at the ready’ – defence industrial bases must change
A radical re-think is required for Total Asset Readiness, as the conflict between Ukraine and Russia has highlighted the lack of assets, ammunition, vehicles, and inventories available to military forces in combat. This comes despite the mass investments made in ammunition and inventories by supporting countries. Current defence industrial bases (DIB) do not have the facilities to match the increase in recent demand as production rates were set up on non-large scale conflict replenishment. DIB expansion has never been so important!
This has been recognised by defence forces as for the first time ever the DoD is set to release a defence industrial base policy in late 2023. The policy outlines four key focus areas: building a resilient supply chain, improving workforce readiness, increasing flexible acquisitions, and economic deterrence. The U.S. is not alone here. The UK military has also refreshed its defence strategy as it will reallocate £2.5billion to bolster the ammunition stockpiles as it aims to increase military power and agility.
New manufacturing principles are likely to play a key role. The U.S. Army is already looking at logistics and readiness as the service examines more opportunities to boost those operations by using advanced manufacturing technologies such as Additive Manufacturing and 3D printing technology to improve and sustain readiness as highlighted in a recent Janes report.
As we move forward in response to the U.S. DoD policy focusing on building a resilient supply chain, improving workforce readiness, increasing flexible acquisitions, and economic deterrence – I expect significant flow down requirements to begin quickly appearing in over 50% of all new defence contracts, as well as allied nations following suit with their own similar directives, requiring DIB organisations to transparently demonstrate supply chain resilience for not only themselves, but their suppliers as well. Due to the current munitions shortages with allies supporting ongoing global conflicts, that number will approach 100% for munitions suppliers.
Prediction 3: The rise in low-cost ‘swarm’ drones as the use of autonomous vehicles adapts to 2024 land, sea, and air requirements
As evidenced by recent conflicts, drones will continue to step up to the military plate and they are not alone, but in swarms. Drones can be produced quickly, and cheaply and have a range of features ranging from carrying out surveillance missions in previously dangerous areas to even carrying out light attack missions without putting warfighters at risk. As a result, they are becoming more prominent in military fleets and adoption rates are rising.
Drones are also hugely desirable for defence forces as they can be deployed on air, land, and sea making them very versatile. Enter the drone carriers, such as the Royal Navy’s HMS Prince of Wales, which aim to house drones to be able to transfer assets and supplies to and from vessels without requiring any manned vehicles. As an even cheaper alternative, some nations such as Turkey with their TCG Anodolu vessel and Iran with two old merchant container ships are converting previously manned vessels into drone-carrying vessels.
The U.S. DoD is also seeing the benefit of swarm drones, as seen when the Deputy Secretary of Defence Kathleen Hicks announced the ‘Replicator’ initiative at the 2023 Defence News Conference. The initiative aims to quickly build and field swarms of low-cost air, land, and sea drones or All-Domain Attributable Autonomy (ADA2) that are able to swarm hostile forces. The DoD aims to have these ready for deployment in the next 18-24 months. These ADA2 assets will help military forces overcome and overwhelm threats that are posed by large assets hosted by enemy forces, the drones will use Artificial Intelligence to autonomously “swarm” enemy forces.
Effective equipment alternatives such as drones will be the way forward in 2024 as military powers seek to keep costs low and maximise budgets – while reimagining the concept of mass in the sea/air/land battlespace.
Prediction 4: The AI boom forces cybersecurity to up its game
The increase in the use of autonomous vehicles and digital technologies comes with heightened vulnerabilities to cyberattacks across the military supply chain. As seen in a Deloitte report “National security concerns elevate the importance of data security for defence manufacturers. They share and exchange covered defence information (CDI) and controlled unclassified information (CUI) on program specifications, technology, and equipment performance as they collaborate across research, design, development, and deployment of defence products.”
The flip side of the AI boom has brought its own cyber threats, with AI-enabled hackers. AI has allowed hackers to carry out cyberattacks at much larger scales, quicker with increased anonymity. AI accelerates malware and changing codes making it harder for threats to be detected.
We must fight AI with AI. An AI-enabled defence can enable cybersecurity to stay one step ahead of hackers. Machine Learning (ML) technologies can be implemented by defence forces to boost threat detection accuracy and quickly automate responses to cyberattacks.
It is more important than ever for all organisations connected to the military supply chain to have penetration-tested underlying cybersecurity software, which can react quickly to prevent data breaches. Many forces have already been deploying cyber defence tools as seen in a recent European Defence Matters report which reported that some autonomous cyber defence tools using intelligent agents already exist today, monitoring network activities and ready to trigger immediate action when anomalous behaviour is detected. Early malware detection, crucial for cyber risk mitigation, is considered a high-potential activity in which autonomous systems could excel in the future.
In the year ahead I expect to see defence forces exponentially increasing their use of autonomous agents and specialised digital artefacts to enhance cyber defence, as seen with the Defence Information Systems Agency looking to immediately expand its use of AI-driven tools to automate penetration testing on defence networks.
Adapting to new military dynamics
The defence industry is poised for significant growth in 2024, driven by increased military spending worldwide as nations seek to modernise their equipment and capabilities. This growth is expected to be fuelled by a number of factors, including the widening spectrum of conflict, the lack of assets and inventories ‘at the ready’, and the rise in new equipment such as low-cost ‘swarm’ drones. This increased use of digital technologies will require cybersecurity to up its game. Overall, the outlook for the defence industry is positive as military forces around the world look to adapt to the changing landscape of warfare.