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The continuing increase in geopolitical instability over the last few years has led to the re-emergence of great power competition. This trend will exert a primary influence on the defense arena in the near term. Defense forces are in a race to adapt and transform and the challenges to western dominance in national security will require a coordinated response to the many issues facing the sector. In this report – Future of Defense - we seek to imagine the world of defense towards the end of this decade, looking at rapid digital modernization, geopolitical forces, battle space and weapon systems, the emerging space and cyber domains, supply chains, the growing threat of climate change, and the future of work.

There is a critical need for defense organizations to accelerate digital adoption working in concert with alliance partners and commercial providers. By 2030 defense forces are expected to be significantly more digitally enabled than today, bringing fifth-and sixth-generation battlefield capabilities that can harness the full potential of new weapon systems and platforms. The war in Ukraine has highlighted the inadequacies of discrete units acting without full integration and support, which has led to an expensive, wasteful and broadly ineffective war of attrition.

Emerging weapon systems and platforms such as hypersonic missiles require defense forces to make quick, informed decisions and to adapt to changing situations, processing huge amounts of information. Thus, data management, which is reliant on fusing multiple data inputs across distributed systems and platforms, becomes a key component of future success. Achieving a connected force calls for scaled adoption of the capabilities that KPMG has developed for successful, digitally- driven organizations, with particular focus on cloud transformation, connectivity and data.

Departments of defense are expected to undertake more procurement faster, funded by increased defense budget allocations. This will require more agile and responsive procurement approaches, including the build-up of sovereign defense capabilities aimed at reducing reliance on challenged global supply chains and boosting domestic industries. Supply chain and procurement are critical areas that can benefit greatly from digital transformation. For instance, by enabling supply chain automation and planning tools to support their core logistics operations. Or, by adopting near real-time systems that provide accurate and reliable data on assets, spare parts and weapon systems, which are delivered via an integrated control tower.

Future weapon systems introduce a new dimension in range, lethality, and speed. Connectivity between weapon systems, fighting platforms and decision makers is key, with the Internet of Things (IoT) sensors gathering data on humans and equipment. However, the benefits of connectivity come with a number of challenges, including security of data held in other countries and the ability to act without another government’s consent, achieving cyber-worthiness, or helping to ensure that a system can operate securely and effectively in a range of environments. Interoperability with allies is a key strategic strength.

These transformations will require the future workforce to integrate humans and machines, calling for both technical and creative skills. New types of leadership would be required to empower people and attract talent.

Defense organizations should examine the organizational barriers that could be preventing them from taking advantage of this digital future. It is easy to agree that speed of adoption is a key goal for many defense forces, but it can be much harder to address the root cause of barriers in structure, governance and legacy practices that can inhibit progress.

The Ukraine war has triggered a re-evaluation of defense strategy in Europe. Ramona Jurubiță, Country Managing Partner at KPMG in Romania, notes that “Russia’s invasion of Ukraine has led most member states, including Romania, to commit more investment to defense, at a faster rate. Although defense spending has been increasing in recent years in many countries across Europe, partly due to members’ pledges to achieve NATO’s commitment target of 2% of GDP, the war in Ukraine has brought defense and security aspects to the fore.”. In 2023 Romania will spend RON 38.8 Bn. on defense, the equivalent of 2.5% of GDP, up from 1.8% of GDP a year before – which represents a 50% increase in nominal terms. Moreover, the amounts committed for defense spending over the next few years have doubled to RON 72.5 Bn., the equivalent of 5% of 2022 GDP. As Ramona Jurubiță notes: ”Higher defense spending would facilitate the continuing modernisation of Romania’s defence forces, as outlined in the country’s most recent military strategy. It is also relevant that stated areas of increased defence spending in Romania follow the trends observed at NATO and EU level. Notably, these relate to augmenting the reaction level of military forces, digitalisation, and development of high-technology capabilities with an enhanced striking power and elevated manoeuvrability. This is important as Romania’s membership of NATO, the EU as well as a counterparty of other strategic partnerships, especially with the US, offer increased security guarantees.”