Major disruptions from COVID-19, competition, digital and the workforce are dramatically reshaping the Aerospace and Defense industry – and companies will need to adapt if they want to be ready for the future.
The impacts of COVID-19 have dramatically reduced the demand for commercial aircraft, while defense demand, more directly tied to longer-term government contracts and national defense priorities, is not as severely impacted.
Competition and consolidation
There is increasing competition in the industry as companies dramatically reshape their portfolios through consolidation and new revenue streams, particularly in the aftermarket and sustainment segments. The global aerospace and defense sector closed 2019 with another year of record mergers and acquisitions, and this momentum could continue, along with increased competition within and outside the industry.
Pace of innovation
Leaders have been turning more and more to digital business models to improve revenue generation, drive efficiencies, and improve supply-chain performance. This will only continue and will accelerate in a post-COVID-19 world.
93% of aerospace and defense executives report that the pace of innovation in their organizations has accelerated over the past three years because of emerging technologies.
Talent and workforce
Aerospace and defense companies must adapt to rapidly changing conditions and figure out how to match workers to new roles and activities in a dynamically changing market. If that wasn’t challenging enough, the industry is facing talent shortages as disruptive start-ups lure away STEM (science, technology, engineering, and mathematics) workers.
To overcome these mounting disruptions, aerospace and defense companies must harness the power of emerging technologies. But for many, moving ahead with that conviction is made difficult by their legacy IT systems and infrastructures. As enterprise software platforms and infrastructure mature, more features are added to legacy systems, and complexity grows.
Only 54% of aerospace and defense companies report that they’ve defined a new IT operating model that accommodates cloud.
To overcome their challenges and move ahead, aerospace and defense companies need to move decisively to the cloud. The good news is that many are making plans to do so. Two-thirds say that they have already done formal planning and analysis of legacy applications for cloud migration, with more than half having an application modernization strategy in place. 86% of aerospace and defense companies have evaluated IaaS solutions, but only half have identified a chosen solution at this point. There’s clearly more work to do.
Most successful technology transformations involve a strategic migration of key workloads to the cloud. While cost has in the past been a driver of cloud migration, with nearly three-quarters of aerospace and defense companies expecting to recognize major benefits from reduced tooling costs related to cloud adoption. But the benefits that businesses are realizing today from cloud are far wider and deeper.
Access to technology
The cloud enables companies to adopt a wider range of technologies – including machine learning, augmented and virtual reality, and analytics—that are proven to reduce complexity, encourage innovation, save costs, and spur collaboration.
The cloud is a critical tool for business resilience. During the current COVID-19 pandemic, aerospace and defense companies have rapidly scaled the use of cloud-based remote-collaboration technologies such as video conferencing, collaboration and file-sharing to maintain production and keep critical business functions intact while safely and efficiently displacing large numbers of workers to remote-only working environments.
Perhaps most critically for aerospace and defense companies, today’s cloud providers have platforms that can deliver more comprehensive security than the companies themselves. Through the use of cloud platforms, combined with integrated security throughout the IT supply chain, companies can secure their critical data well beyond traditional perimeter security practices.
While established procedures for safeguarding aerospace and defense data—which often involves government contracts and sensitive national security information—make some aerospace and defense leaders hesitate to embrace the integrated security capabilities of the cloud, 60% of aerospace and defense companies still expect better security in the cloud.
Four steps to reap the benefits of cloud
To reap the benefits from moving to the cloud, aerospace and defense leaders must move rapidly and decisively, considering four key steps as they progress:
Go wide, not just deep
Develop a business case and concrete plan for cloud adoption across the entire enterprise.
Retrofit the whole IT house for the cloud
Create an IT operating model that incorporates cloud.
Focus on systems resiliency
Ensure that systems can operate during a major disruption or crisis with minimal impact on critical business and operational processes.
Develop strength from within
Identify and cultivate dedicated cloud talent.