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Michele Cimmino
Feb 27, 2026 • 11 min read
The defense industry is undergoing its most significant transformation since the end of the Cold War. Global defense spending reached $2.63 trillion in 2025, according to the IISS Military Balance 2026. The EU has committed to mobilizing €800 billion through its Readiness 2030 initiative. European defense-tech startup funding increased 13x from 2022 to 2025, according to DefenseOne. The Pentagon released an AI-first strategy memo in January 2026. The DoD published its Software Modernization Implementation Plan for FY25–26.
At the center of every one of these developments is software.
Modern defense is software-defined. Autonomous drones are distinguished by their algorithms, not their airframes. Command and control systems are software platforms, not hardware consoles. Cybersecurity is entirely a software discipline. Even traditional hardware platforms — ships, aircraft, armored vehicles — are increasingly dependent on the software that coordinates, protects, and optimizes them.
This guide is a comprehensive resource for understanding how software development intersects with the defense industry in 2026: the technologies, the market dynamics, the compliance requirements, and the opportunities for software companies that want to serve this sector.
The numbers tell the story of a sector in transformation:
| Metric | Value | Source |
|---|---|---|
| Global defense spending (2025) | $2.63 trillion | IISS Military Balance 2026 |
| EU Readiness 2030 mobilization target | €800 billion | European Commission |
| SAFE scheme first tranche approved | €38 billion | Euronews, Feb 2026 |
| European defense-tech spending growth | 13x (2022–2025) | DefenseOne |
| European defense VC funding (2025) | €2.6 billion | McKinsey |
| European DSR startups raised (2025) | €8.7 billion | NATO Innovation Fund |
| Global defense tech startup funding (2025) | $17.9 billion | DefenseNews |
| Pentagon cyber budget (2026) | $15.1 billion | PR Newswire |
| C4ISR market projection (2033) | $48.5 billion | MarketsandMarkets |
| Swarm intelligence market (2032) | $7.23 billion | AnalystView |
The shift from hardware-centric to software-centric defense is not a prediction — it is the current state. The organizations that build the best defense software will define the next era of military capability.
For a detailed analysis of European defense spending and its implications, see our article: Europe's €800 Billion Defense Rearmament: Why Software Is the New Battleground.
Artificial intelligence has moved from a promising technology to a mandated priority in defense. The Pentagon's January 2026 strategy memo calls for an AI-first approach across all defense operations, with substantial expansion of AI compute infrastructure from centralized data centers to the tactical edge.
AI touches virtually every domain in modern defense. In intelligence analysis, ML models process satellite imagery, signals intelligence, and open-source data to identify threats, track movements, and predict adversary actions. For autonomous systems, AI-driven navigation, decision-making, and mission execution power drones, ground robots, and underwater vehicles. Predictive maintenance algorithms analyze sensor data from equipment to predict failures before they occur, reducing downtime and logistics burden. In cybersecurity, AI-powered threat detection, behavioral analysis, and automated response counter attacks that IBM's 2026 X-Force report shows have surged 44% in application-layer exploits. Decision support systems present commanders with analyzed options, risk assessments, and recommendations based on real-time battlefield data. And in natural language processing, the Pentagon's $100 million drone swarm contest requires voice-to-digital-command translation for swarm control.
The February 2026 confrontation between the Pentagon and Anthropic exposed a fundamental tension: military organizations that depend on commercial AI providers face policy risk, supply chain risk, and sovereignty risk. Anthropic's refusal to remove restrictions on military use of Claude AI — despite being the only major chatbot approved for classified systems — demonstrated that commercial AI providers' priorities may diverge from military operational needs at any time.
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Custom-built AI solutions offer full ownership, mission-specific optimization, and no policy conflicts. Defense organizations increasingly need partners who can build bespoke AI systems tailored to specific missions, deployed on sovereign infrastructure, under the organization's control.
For the full analysis, read: AI Goes to War: How the Pentagon's Fight with Anthropic Reveals the Future of Military AI Software.
The war in Ukraine has provided the most extensive real-world validation of autonomous military systems in history. In January 2026 alone, Ukraine logged over 7,000 ground robot missions. The front line is increasingly held by machines — not as supplements to infantry, but as replacements.
The hardware of autonomous systems is increasingly commoditized. What differentiates an effective military robot from a remote-controlled toy is the software. Autonomous navigation in GPS-denied environments, sensor fusion across multiple input types (camera, LIDAR, radar, acoustic), and mission planning algorithms that translate tactical objectives into executable sequences — these are all software problems. So is multi-vehicle coordination, where one operator controls multiple autonomous platforms, and AI-driven target identification and classification. Even the operator interfaces — the intuitive control applications for complex autonomous systems — are fundamentally software challenges.
European companies are active participants in the autonomous systems race. Helsing (Germany/UK/France) builds AI software for autonomous defense and won a €268M German drone contract. Auterion (Switzerland/US) demonstrated the world-first live-fire combat drone swarm through its Nemyx platform. Milrem Robotics (Estonia) produces the THeMIS unmanned ground vehicle for NATO forces. At the EU level, the ALTISS program provides EU-funded autonomous swarm ISR capability, while SABUVIS II — an EDA-managed underwater drone swarm project involving five nations and €3.7M in funding — has completed successful trials.
Read the full analysis: The Machine War: How Ukraine's Robot Army Is Rewriting the Rules of Autonomous Warfare.
Cybersecurity in defense has entered a new era defined by AI-powered attacks, quantum computing threats, and an expanding compliance landscape.
The numbers define the urgency. IBM's X-Force 2026 report shows a 44% increase in attacks exploiting public-facing applications. Kiteworks' 2026 survey found that 73% of organizations report feeling the impact of AI-powered threats. An estimated 90% of state-sponsored cyber operations are now automated, according to PR Newswire. The Pentagon's $15.1 billion cyber budget for 2026 reflects the scale of the challenge, and attacks that once took weeks now take minutes due to AI acceleration.
The Cybersecurity Maturity Model Certification (CMMC) 2.0 is reshaping how defense contractors operate. Phase 1 has been active since November 10, 2025, with self-assessment requirements. Phase 2 starts November 10, 2026, bringing Level 2 third-party certification. Organizations that fail to comply will be ineligible for defense contracts.
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The federal government faces a quantum cryptography gap that threatens billions in IT upgrades. Organizations delaying post-quantum cryptography migration risk retroactive decryption of today's encrypted data — meaning adversaries can harvest encrypted communications now and decrypt them when quantum computing matures.
Defense cybersecurity is not about adding security features at the end of development. It requires a DevSecOps approach where security is embedded from day one. This means automated security scanning in CI/CD pipelines, zero-trust architecture as the default, continuous monitoring and incident response, supply chain security with SBOM (Software Bill of Materials) compliance, and classification-level isolation for multi-tenant deployments.
For European defense organizations, the NIS2 Directive adds EU-specific cybersecurity requirements that complement (and sometimes differ from) US frameworks like CMMC.
Full analysis: Defense Cybersecurity in 2026: AI Threats, CMMC 2.0, and the Race to Secure Military Systems.
The Department of Defense has officially abandoned waterfall for software development. The DoD Software Modernization Implementation Plan FY25–26 mandates agile methodologies, continuous delivery, and DevSecOps across defense software programs.
The US military has built internal "software factories" that demonstrate what agile defense development looks like. Kessel Run (Air Force) delivers agile software for air operations and is now launching a Next-Generation Air Operations Center program. Platform One (Air Force) provides an enterprise DevSecOps platform with Iron Bank container hardening. Black Pearl (Navy) is removing DevSecOps platform silos across software factories, enabling horizontal integration.
In practice, DevSecOps for defense means CI/CD pipelines operating in classified environments, continuous authorization to operate (cATO) replacing periodic security audits with real-time compliance monitoring, infrastructure as code for reproducible and auditable deployments, automated security scanning with shift-left practices embedded in every pipeline stage, and SBOM mandates ensuring full software supply chain transparency.
The US has Kessel Run, Platform One, and Black Pearl. European defense organizations generally lack equivalent internal software delivery capabilities — creating demand for external partners who can bring commercial agile practices to defense projects.
The Pentagon's SWFT (Software Fast Track) program, which pushes for continuous software authorization and data-driven trust models, signals where the entire industry is heading. European defense organizations that adopt these practices early will have a significant advantage.
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Detailed analysis: Software at the Speed of War: How DevSecOps Is Becoming Defense's Secret Weapon.
Defense organizations are migrating to cloud-native architectures, driven by the need for scalability, interoperability, and rapid deployment.
The foundation of defense cloud computing is the JWCC (Joint Warfighting Cloud Capability) — the Pentagon's $9 billion multi-cloud contract with AWS, Azure, Google Cloud, and Oracle, with over $3 billion in task orders awarded to date. JWCC-Next, the follow-on contract, is expected to "open the door" to more vendors. DISA's new cloud environment provides three on-ramps (classic, private, commercial) to speed delivery of cloud services to warfighters. Separately, HPE won a $931M private cloud contract for a 10-year DoD engagement.
Defense cloud deployments must meet specific impact levels. IL2 covers publicly releasable information. IL4 handles Controlled Unclassified Information (CUI). IL5 encompasses CUI plus National Security Systems. IL6 serves classified (SECRET) environments.
DefenseOne reported in February 2026 that "the biggest hole in Europe's plans for technological independence may be the cloud." European defense remains heavily dependent on US hyperscalers. Building sovereign, European-controlled cloud infrastructure for defense applications is a critical capability gap — and a significant opportunity for European technology companies.
Defense Unicorns demonstrated that SaaS-native vendors can deliver applications directly within the Army's secure cloud (cARMY Cloud), with ATO timelines compressed from months to weeks. Axon's 39% revenue growth, driven by AI and SaaS in public safety, proves the subscription model works in defense-adjacent markets.
Read more: The Military Cloud Race: How SaaS Is Reshaping Defense Operations.
C4ISR — Command, Control, Communications, Computers, Intelligence, Surveillance, and Reconnaissance — is the nervous system of modern military operations. And NATO's own exercises have exposed that it's broken.
NATO's Hedgehog exercise revealed critical gaps in drone integration and decentralized C4ISR. Legacy systems from different vendors, different eras, and different standards cannot keep pace with modern multi-domain operations. The C4ISR market is projected to grow to $48.5 billion by 2033, according to MarketsandMarkets, with the software component growing faster than hardware.
Next-generation C4ISR systems need microservices-based architecture for modular, upgradeable components and API-first integration across legacy and modern systems. Edge computing enables operation in tactical environments with limited connectivity, while real-time data fusion processes inputs from multiple sensor types across multiple domains. AI and ML provide decision support through pattern recognition, threat prioritization, and predictive analysis. And mobile, deployable systems must be set up and operational in hours, not days.
Full analysis: The Nervous System of Modern Defense: Why C4ISR Software Is the Most Critical Technology in NATO.
The drone revolution in warfare is fundamentally a software revolution. The Pentagon is spending $100 million on a six-month drone swarm contest — requiring voice-to-digital-command translation for swarm control. The swarm intelligence market is projected to reach $7.23 billion by 2032, growing at a 41.2% CAGR, according to AnalystView.
The drone software revolution spans several capability areas. Swarm coordination algorithms enable multiple drones to operate as a unified force. Autonomous navigation allows operation in GPS-denied, electronically contested environments. AI-powered target identification provides real-time detection and classification. Counter-drone systems deliver AI-driven detection, tracking, and neutralization of hostile drones. And multi-domain integration coordinates air, ground, and underwater autonomous vehicles.
Europe is actively investing in drone software. ALTISS is an EU-funded autonomous swarm ISR system. SABUVIS II, the EDA's underwater drone swarm project, involves Poland, Germany, Portugal, Latvia, and Estonia. Helsing and Stark won €540M in German drone contracts awarded to European startups. And the Auterion/Airlogix German-Ukrainian joint venture is scaling NATO autonomous drone production.
Read more: The $100 Million Swarm: How Drone Software Is Rewriting Modern Warfare.
The GAO has flagged 10 critical legacy IT systems in the Department of Defense. Years later, only 3 of 10 modernization efforts have been completed. Of 69 federal legacy IT systems reviewed, the 11 most in need of modernization are all maintained by the DoD.
The pattern is consistent: over-engineered requirements that lock programs into legacy solutions, waterfall development cycles that take years to deliver, limited competition from entrenched vendors, lack of centralized authority and coordination, and "lift-and-shift" cloud migrations that don't actually modernize anything.
The regulatory landscape is shifting significantly. The NDAA 2026 is described as "one of the most significant shifts in defense acquisition in more than a decade." Executive Order 14265 reforms defense IT acquisition. The Pentagon's FY26–30 Digital Modernization Roadmap provides an official 5-year plan. And SWFT (Software Fast Track) is replacing checklist compliance with continuous authorization. The regulatory environment is actively opening doors for commercial technology companies, and the 2026 NDAA is designed to lower barriers for commercial software companies entering the defense market.
Full analysis: Why the Pentagon Keeps Failing at Digital Transformation — And What Actually Works.
Software companies entering the defense sector must navigate a complex compliance landscape:
In the United States, the primary frameworks include CMMC 2.0 (Cybersecurity Maturity Model Certification, with Phase 1 active and Phase 2 starting Nov 2026), NIST 800-171 for protecting Controlled Unclassified Information, FedRAMP for cloud service authorization for federal use, ITAR (International Traffic in Arms Regulations), and impact levels IL4 through IL6 for cloud deployments.
European defense operates under its own compliance layer. The NIS2 Directive imposes EU cybersecurity requirements for essential services. GDPR data protection requirements apply to defense data involving personal information. NATO STANAG standardization agreements ensure interoperability. The EU Cyber Resilience Act establishes security requirements for digital products with network connectivity. And national security clearances impose country-specific requirements for personnel and facilities.
Compliance should not be treated as a checkbox exercise. The most effective approach is to build security and compliance into the development process from day one — a DevSecOps model where automated compliance checking is part of every deployment pipeline.
Europe's defense sector presents a unique and largely uncontested opportunity for software companies:
The demand is proven. €800 billion in committed spending, €38 billion already approved, 13x growth in defense-tech investment.
The competition is thin. Almost no mid-size European software companies have positioned themselves for defense. The SERP for "defense software development company" is dominated by US primes, Eastern European outsourcers, and niche players.
The preference is for European suppliers. The SAFE fund, ReArm Europe, and EU procurement policies explicitly favor European companies. Data sovereignty concerns — amplified by the Pentagon's Anthropic standoff — reinforce the strategic logic of European partners for European defense.
The capabilities needed are mainstream software skills. AI/ML, cloud-native development, agile methodology, mobile applications, SaaS platforms, real-time data processing, API integration — these are not exotic defense skills. They are the core competencies of modern software development companies. The defense context adds compliance, security, and domain knowledge requirements, but the technical foundation is the same.
Organizations looking for software development partners for defense projects should evaluate several critical dimensions. Technical depth is paramount — production-ready capabilities in AI/ML, cloud, mobile, and real-time systems, not just prototypes. A security-first culture matters, where DevSecOps is a default methodology, not a marketing label. Agile maturity should be demonstrated through experience delivering iterative, sprint-based development with continuous delivery. For EU and NATO projects, European identity — European governance, European data processing, alignment with European strategic interests — is increasingly important. Integration capability, the ability to connect with legacy systems, multiple platforms, and multi-vendor environments, is essential given the fragmented landscape. Domain willingness — a genuine commitment to understanding defense requirements, not just applying commercial patterns without adaptation — separates effective partners from generic vendors. And scalability, the ability to grow with the program from prototype to production to sustainment, ensures long-term success.
Lasting Dynamics is a European custom software development company, founded in Italy, with deep expertise in AI, mobile applications, SaaS platforms, and agile development. Our capabilities map directly to what defense modernization requires: custom-built, mission-critical software delivered with the speed and flexibility of commercial best practices, and the security rigor that defense demands.
Defense organizations need software across virtually every domain: AI and machine learning, autonomous systems control, cybersecurity, command and control (C4ISR), cloud platforms, SaaS applications, mobile tactical applications, data analytics, simulation and training, logistics management, and more.
Yes — and defense organizations are actively seeking them. The 2026 NDAA, the Pentagon's innovation reforms, and the EU's SAFE scheme all explicitly aim to bring non-traditional, commercial technology companies into the defense supply chain.
Requirements vary by country and project. In the US, CMMC 2.0 is the primary framework. In Europe, NIS2 and national security frameworks apply. NATO projects require STANAG compliance. Cloud deployments must meet appropriate impact levels (IL4/IL5/IL6 in the US).
The technical fundamentals are the same, but defense adds layers of security architecture (zero-trust, classification-level isolation), compliance (CMMC, ITAR, FedRAMP), availability requirements (mission-critical reliability), and operational constraints (low-bandwidth, GPS-denied, edge environments).
European defense sovereignty requires technology partners whose operations, data processing, and corporate governance are subject to European law. Dependence on non-European technology for defense applications creates strategic risks — as demonstrated by the Pentagon's ability to pressure US AI companies to change their policies.
Lasting Dynamics is a European custom software development company specializing in AI, mobile applications, SaaS platforms, and agile development for mission-critical environments. To discuss how our capabilities can serve your defense technology requirements, contact our team.
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Michele Cimmino
I believe in hard work and daily commitment as the only way to get results. I feel an inexplicable attraction for the quality and when it comes to the software this is the motivation that makes me and my team have a strong grip on Agile practices and continuous process evaluations. I have a strong competitive attitude to whatever I approach - in the way that I don't stop working, until I reach the TOP of it, and once I'm there, I start to work to keep the position.
