U.S. Aerospace, Defense Firms Accelerate Digital Strategies

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Key Terms

digital engineering technical

Digital engineering is the use of computers, simulations and data models to design, test and manage products, systems or processes in a virtual space instead of only on physical prototypes. For investors it matters because it speeds development, cuts upfront costs and reduces the risk of costly surprises—similar to an architect using detailed digital blueprints and a scale model to find problems before construction—helping companies bring better products to market faster and with clearer cost forecasts.

model-based systems engineering technical

Model-based systems engineering is a way of designing complex products by creating and using shared digital models rather than relying mainly on separate documents. Like building from a detailed 3D blueprint or simulation that everyone can test and update, it helps catch problems earlier, speed development, and reduce costly surprises. Investors care because it can lower development costs, shorten time-to-market, improve reliability, and make regulatory or integration risks easier to manage.

digital twins technical

Digital twins are virtual replicas of physical objects, systems, or processes that simulate their real-world counterparts in real time. They allow users to monitor, analyze, and predict how the actual entity will behave under different conditions. For investors, digital twins can provide valuable insights into performance and potential risks, helping to make better-informed decisions.

unmanned platforms technical

Unmanned platforms are vehicles or systems that operate without a person physically on board, such as aerial drones, robotic ships, or automated ground vehicles. Investors watch them because they can lower labor costs, enable operations in dangerous or remote places, and scale services quickly, but they also bring long-term risks and opportunities tied to safety rules, technology reliability, and government approvals—think of them as self-driving tools for specific tasks.

supply chain technical

A supply chain is the series of steps involved in producing and delivering a product or service, from raw materials to the final customer. It includes all the processes, such as sourcing materials, manufacturing, and distribution, that ensure products reach consumers. For investors, understanding the supply chain helps gauge how efficiently a company can meet demand and manage costs, impacting its profitability and stability.

05/12/2026 - 11:00 AM

Major digital engineering and supply chain investments help enterprises improve performance, adapt to evolving risks, ISG Provider Lens^® report says

STAMFORD, Conn.--(BUSINESS WIRE)-- U.S. aerospace and defense enterprises are adopting integrated digital practices, AI-enabled design and software-centric development approaches as the requirements for competitiveness change, according to a new research report published today by Information Services Group (ISG) (Nasdaq: III), a global AI-centered technology research and advisory firm.

The 2026 ISG Provider Lens^® Aerospace and Defense Services and Solutions report for the U.S. finds that enterprises are prioritizing resilience and execution speed as geopolitical pressures, supply chain constraints and regulatory demands reshape industry dynamics. Organizations are adopting technologies and processes for faster delivery while maintaining reliability and cost control.

“Execution discipline has become as important as technological capability in aerospace and defense,” said Bob Krohn, ISG partner, Manufacturing. “Enterprises are integrating engineering, production and predictive fleet sustainment into unified operational models that support continuous delivery.”

Aerospace and defense companies in the U.S. are steadily expanding the use of digital engineering in design and production. They are deploying technologies such as model-based systems engineering, AI-based design methods and digital twins, once limited to pilot projects, at enterprise scale. These capabilities allow organizations to shorten development timelines, increase production efficiency and improve asset availability over time. Using software-centric practices, companies can deliver incremental updates in critical systems, including command and control and unmanned platforms, with greater speed and consistency.

At the same time, organizations are restructuring supply chain strategies to balance resilience with cost considerations. Many are reassessing their approaches to sourcing, increasingly exploring reshoring and nearshoring options in key segments such as electronics, propulsion and advanced materials. These moves are in response to ongoing supply disruptions, workforce shortages and aging infrastructure, which continue to slow production and raise costs.

Cybersecurity and infrastructure protection have become even higher priorities for U.S. aerospace and defense enterprises as regulatory scrutiny intensifies. Companies are investing in advanced security measures to protect critical systems and communications from evolving threats. At the same time, they are adapting to stricter environmental and export requirements that increase operational complexity. These efforts are leading to more integrated and secure digital environments across both defense and commercial operations, ISG says.

“Enterprises are applying dramatically new technologies and development approaches to large-scale defense programs and commercial aviation platforms in the U.S.,” said Swadhin Pradhan, ISG principal analyst and lead author of the report. “Providers are helping clients take on major digital engineering and supply chain initiatives, often through outcome-driven engagements and managed services models with performance guarantees.”

The report also explores other trends affecting the U.S. aerospace and defense sector, including the ongoing recovery in commercial aviation, focused on reliability and efficiency, and increased investment in space-based capabilities such as satellite systems and launch services.

For more insights into the challenges faced by aerospace and defense enterprises in the U.S., along with ISG’s advice for addressing them, see the ISG Provider Lens Focal Points briefing here.

The report evaluates 48 providers across four quadrants: Engineering, Design and Innovation; Maintenance, Repairs and Overhaul (MRO) and Aftermarket; Supply Chain Operations and Logistics Management; and Technology Transformation and Consulting.

The report names Accenture, Capgemini, Cognizant, HCLTech, IBM, Infosys and TCS as Leaders in all four quadrants. It names LTTS and Tech Mahindra as Leaders in three quadrants each. Akkodis, Cyient, Deloitte, DXC Technology, EY, General Dynamics IT, PwC and Quest Global are named as Leaders in two quadrants each. Alten, CGI, Cognitus, Genpact, Kyndryl and Thales are named as Leaders in one quadrant each.

In addition, Hitachi Digital Services, Quest Global and Tata Technologies are recognized as Rising Stars — companies with a “promising portfolio” and “high future potential” by ISG’s definition — in one quadrant each.

The 2026 ISG Provider Lens Aerospace and Defense Services and Solutions report for the U.S. is available to subscribers or for one-time purchase on this webpage.

About ISG

ISG (Nasdaq: III) is a global AI-centered technology research and advisory firm. A trusted partner to more than 900 clients, including 75 of the world’s top 100 enterprises, ISG is a long-time leader in technology and business services that is now at the forefront of leveraging AI to help organizations achieve operational excellence and faster growth. The firm, founded in 2006, is known for its proprietary market data and research, in-depth knowledge and governance of provider ecosystems, and the expertise of its 1,500 professionals worldwide working together to help clients maximize the value of their technology investments.