Defense IT Spending Market Analysis, Size, Share and Outlook, 2024–2032

According to Fortune Business Insights™, the global defense IT spending market was valued at USD 81.28 billion in 2019 and is projected to grow from USD 82.12 billion in 2020 to USD 145.97 billion by 2032, exhibiting a CAGR of 5.00% during the forecast period. The steady growth is attributed to rising global military expenditure, increased cyber threats, and accelerating adoption of next-generation technologies such as AI, IoT, and cloud computing in the defense sector.

Key Players in the Global Market

• Leidos Holding Inc. (U.S.)

• Accenture (Ireland)

• IBM Corporation (U.S.)

• General Dynamics Corporation (U.S.)

• BAE Systems PLC (U.K.)

• DXC Technology (U.S.)

• Dell Inc. (U.S.)

• Northrop Grumman Corporation (U.S.)

• Unisys Corporation (U.S.)

• Atos SE (France)

• Capgemini SE (France)

• Fujitsu Limited (Japan)

• Oracle Corporation (U.S.)

• SAP SE (Germany)

• Microsoft Corporation (U.S.)

• Amazon Inc. (U.S.)

• AT&T Intellectual Property (Canada)

• CACI International Inc. (U.S.)

• Atkins (U.K.)

Source:

https://www.fortunebusinessinsights.com/defense-it-spending-market-105030

Market Dynamics

Growth Drivers

1. Surge in Global Defense ExpendituresAccording to SIPRI, global military spending rose by 3.6% in 2019 to USD 1,917 billion, with the U.S. spending USD 732 billion, up 5.3% from the previous year. Countries like China and India also increased defense budgets by 5.1% and 6.8%, respectively. This surge in spending has translated into increased IT investments to modernize military infrastructure.

2. Rising Demand for Secure Communication & Intelligence SystemsThe adoption of digital systems for C5ISR (Command, Control, Communications, Computers, Combat Systems, Intelligence, Surveillance, and Reconnaissance) is strengthening combat readiness across domains. Defense forces globally are investing in IT solutions to enhance data security, situational awareness, and battlefield efficiency.

3. Military Modernization and Technological AdoptionIncreasing use of artificial intelligence (AI), Internet of Things (IoT), big data analytics, and cloud computing in defense IT infrastructure is a key driver of growth. Programs such as the U.S. DoD’s JEDI cloud initiative reflect the high demand for scalable, secure, and agile defense IT systems.

Trends and Developments

1. Digitization in Military Platforms

Governments are shifting toward IT-based upgrades in traditional equipment to enhance efficiency. Technologies like augmented reality (AR), AI-powered drones, and real-time data processing are becoming critical for battlefield decision-making.

2. Focus on Cyber Resilience

Cybersecurity guidelines like CMMC in the U.S. and increased funding for cyber defense are leading trends, shaping procurement strategies globally.

Restraints

Lack of Standardized Certifications Among SMEs

Many small-scale defense IT providers lack international certification and compliance, hindering their ability to secure long-term contracts and partnerships with large defense bodies.

Key Market Segmentation

By Type

The hardware segment emerged as the dominant category in 2019, largely due to substantial investments in defense infrastructure, including data centers and secure communication platforms. One of the most significant contributions to this growth was the USD 10 billion JEDI cloud contract awarded to Microsoft, which underscored the strategic focus on hardware modernization in defense. Meanwhile, the software segment is projected to grow at the fastest rate, registering a CAGR of 4.71% during the forecast period. This growth is fueled by the increasing integration of advanced technologies such as artificial intelligence (AI) and the Internet of Things (IoT) into military operations. The adoption of enterprise resource planning (ERP) systems and defense-specific management software is also playing a key role in the expansion of this segment. In addition, the services segment is gaining traction globally, as defense departments prioritize IT consulting, systems integration, and managed services to enhance digital defense capabilities and operational readiness.

By Application

In terms of application, IT infrastructure remains the largest segment, driven by the high capital investments required to build secure, scalable, and mission-critical networks across defense organizations. These infrastructures serve as the backbone of military communication and data exchange systems. The cybersecurity segment, however, is experiencing the fastest growth. With rising concerns over cyber threats, countries like the United States have significantly increased their defense cybersecurity budgets—allocating USD 5.4 billion in 2021 alone. Initiatives such as the Cybersecurity Maturity Model Certification (CMMC) are further strengthening the importance of robust cybersecurity frameworks within defense IT ecosystems. Other emerging applications, including defense cloud computing, logistics and asset management, and real-time analytics, are also witnessing growing adoption. These technologies are increasingly integrated into modern defense platforms to enable efficient operations and strategic decision-making.

Regional Insights

North America (USD 30.16 Billion in 2019)

North America held the largest market share of 37.11% in 2019, primarily led by the United States, which continues to invest in next-generation digital defense infrastructure. In January 2020, SAIC secured a USD 727 million contract to streamline and migrate the U.S. Army and Air Force applications to a unified cloud platform.

Europe

Presence of major defense tech players such as Atos SE, BAE Systems, and SAP SE fuels the market. Germany and the U.K. are focusing on IT-driven modernization initiatives. For instance, in October 2019, the U.K. MOD awarded USD 31.3 million to Atos SE for the CORTISONE healthcare IT transformation program.

Asia-Pacific

Expected to exhibit the highest CAGR during the forecast period, driven by rising military budgets and cyber-defense initiatives in China, India, Japan, and Australia. India is making major strides with the procurement of advanced IT-integrated fighter jets and electronic warfare systems.

Middle East & Africa

Countries like Saudi Arabia, UAE, and Israel are increasing their digital defense investments, focusing on cybersecurity, smart surveillance, and autonomous systems.

Latin America

Growth is supported by modernization programs in Brazil and Argentina, with increasing government spending on defense communications and IT logistics systems.

Key Industry Developments

• July 2021: Atos SE and IBM Corporation jointly announced the creation of a high-tech digital infrastructure for the Dutch Ministry of Defense.

• June 2021: Atos SE successfully delivered the SICS command and control system as part of France’s SCORPION program, enhancing the close-combat capabilities of the French Army.