Geopolitical tensions, commercial air travel increase demand for specialized components, services, ISG Provider Lens^® report says

Aerospace and defense enterprises are turning to midsize and specialist providers to accelerate modernization and improve supply chain resilience in a growing and changing industry, 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^® global Aerospace and Defense Services and Solutions report finds that companies and governments are investing in new technologies to meet the demands of defense modernization and a rebounding commercial aviation sector. As international conflicts grow, many countries are working to more quickly deploy new military platforms such as unmanned systems and hypersonic weapons. By partnering with midsize providers, they are addressing shortages of raw materials and skilled labor by acquiring specialized components and services with less overhead.

"Governments are watching new and growing threats while defense systems rapidly advance," said Bob Krohn, ISG partner, Manufacturing. "For many, the answer is to increase budgets for technology upgrades to improve their readiness."

Global military spending has risen significantly over the past decade and is expected to continue rising until at least 2030, fueling a growing arms industry. Investments are increasing in all regions, particularly in Europe and the Middle East, partly due to increased spending commitments by NATO member countries. In Asia Pacific, governments are raising funding for defense capabilities and research and development to develop self-reliance as trade frictions increase.

Emerging defense technologies include autonomous systems and AI integration, which specialized companies are supplying to large enterprises for aircraft programs that require modular, upgradable technologies. Digital twins and predictive maintenance are becoming important tools to ensure mission readiness in both legacy systems and next-generation platforms. Defense companies are also investing in sustainability through investments in innovations such as new propulsion systems with lower emissions.

The commercial aviation industry is rising on increased passenger demand, with more than 42,000 new aircraft deliveries expected by 2043. Production lags aircraft orders, held back by shortages of labor and raw materials. This growth is generating demand for sustainable fuels and for aftermarket aircraft services based on predictive maintenance. Long-range trends such as the commercialization of space and the prospect of electric vertical takeoff and landing aircraft for urban mobility are drawing significant investment.

"The need for new solutions is expanding the aerospace and defense industry — even where economic challenges are growing," said Swadhin Pradhan, ISG principal analyst and lead author of the report. "Agile midsize providers play a critical role by contributing specialized innovations around cybersecurity, AI and sustainable systems."

The report also explores other trends in the aerospace and defense industry, including the impact of critical mineral shortages and a shift by governments from cost-plus procurement to fixed-price incentives.

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

The report evaluates the capabilities of 24 providers across one quadrant: Midsize and Specialists IT Services.

The report names AXISCADES, Cognitus, Cyient, eInfochips, Hitachi Digital Services, IndX, LTTS, Quest Global, Siemens Advanta and Tata Technologies as Leaders in the quadrant.

In addition, Microland is named as a Rising Star — a company with a "promising portfolio" and "high future potential" by ISG's definition — in the quadrant.

The 2026 ISG Provider Lens global Aerospace and Defense Services and Solutions report 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.

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Press Contacts:

Laura Hupprich, ISG

+1 203-517-3100

laura.hupprich@isg-one.com

Eric Arvidson, Matter Communications for ISG

+1 978-518-4542

isg@matternow.com

Midsize Providers Bolster Aerospace, Defense Innovation