U.S. Aerospace, Defense Firms Innovate Amid Rapid Change — ISG - June 26, 2025

Aerospace and defense enterprises in the U.S. are using AI and other new technologies to enhance efficiency and client experience amid rapid changes affecting the industry, according to new research reports published today by Information Services Group (ISG), a global AI-centered technology research and advisory firm.

The 2025 ISG Provider Lens™ Aerospace and Defense Services and Solutions reports for the U.S. find that technology advancements, geopolitical disruptions and a skills shortage are forcing companies to adapt and innovate. Enterprises are investing in digital transformation, workforce development and new supply chain strategies to remain competitive in an increasingly complex business environment.

“The U.S. aerospace and defense landscape is changing quickly, and companies need to respond on multiple fronts,” said Bob Krohn, partner and manufacturing industry lead, Americas, at ISG. “Actions they take now will determine their future success and resilience.”

Rising geopolitical tensions are driving increased military spending in many countries, causing more capital to flow into the aerospace and defense industries, the report says. This trend is accelerating the modernization of existing systems and encouraging development of next-generation technologies. An increasingly global supply chain and growing cross-border collaboration on manufacturing and technology in recent years have accelerated this trend.

Clients of U.S. aerospace and defense manufacturers are growing more concerned about supply chain challenges, including parts shortages and labor issues, especially as demand for new aviation products increases. Enterprises are responding to these concerns by implementing innovative solutions that increase supply chain agility and optimize inventory management.

The industry is integrating AI and generative AI into some aerospace systems even as regulators emphasize the need for enhanced AI safety protocols and risk management in safety-critical functions, the report says. Technology companies are facilitating AI adoption in areas including airport operations, maintenance, repair and overhaul (MRO) and supply chain management. Cost reduction and improved CX are the central goals of these initiatives.

As they accelerate digital transformations to become more competitive, aerospace and defense companies are increasingly adopting solutions such as cloud platforms, digital twins and predictive analytics, ISG says. In many cases, they are also modernizing legacy systems, especially enterprise resource planning (ERP) platforms. Investments in workforce training are surging as enterprises prepare employees to work with emerging digital tools.

Mid-sized and specialist providers of solutions and services can be instrumental in helping companies implement new operational processes, the report says. They offer innovative, customized solutions in areas including product lifecycle management, fleet optimization, client engagement and advanced supply chain analytics.

“To benefit from new technologies, aerospace and defense companies need to invest in organizational change management and significant skills development focused on new technologies,” said Swadhin Pradhan, assistant director and principal analyst at ISG, and the lead author of the reports. “Providers help them develop broad-based strategies for long-term competitiveness.”

The report also explores other aerospace and defense industry trends in the U.S., including efforts to reach aviation decarbonization goals and growing cybersecurity concerns around using cloud resources.

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