The Defence Sector Is Becoming a Software Industry
STRAGO International · 23 July 2026
Capital, budgets and doctrine have all moved. The constraint is no longer technology or funding — it is the availability of engineers who are both technically current and contractually eligible.
The capital signal is now unambiguous. Global venture funding into defence technology reached a record US$9.6 billion across 2025 — and was surpassed within the first five months of 2026 alone, which drew US$14.6 billion. Deal count has barely moved, meaning capital is concentrating into a small group of scaled companies rather than spreading across the sector. Anduril Industries alone raised a US$5 billion round in May 2026 at a US$30.5 billion valuation. The practical consequence for the labour market is that a handful of firms are now hiring at a pace and compensation level that traditional prime contractors were not built to match.
Public budgets are reinforcing the same direction, and doing so in a way that specifically rewards software. NATO members committed at the 2025 Hague Summit to 5% of GDP on defence annually by 2035, structured as 3.5% for core defence requirements and up to 1.5% for broader security investment — a tranche explicitly covering network defence, critical infrastructure protection, resilience and innovation. European Allies and Canada raised expenditure by close to 20% in real terms in 2025 against 2024, exceeding US$571 billion combined. The pattern is not confined to the Atlantic. SIPRI put United States military spending at US$954 billion for 2025, while the IISS projects Asian defence budgets rising a further 3.4% in real terms in 2026, with South Korea alone planning an increase of 7.3%. Money allocated to networks, autonomy and innovation converts into demand for engineers, not for tonnage.
The bottleneck is eligibility, not enthusiasm
Governments are no longer simply buying capability; they are legislating that it be built domestically, which multiplies the same shortage across jurisdictions. Japan approved a record defence budget of approximately US$58 billion for its 2026 fiscal year — a fourteenth consecutive record — alongside continued investment in a next-generation combat aircraft developed with the United Kingdom and Italy and associated uncrewed systems. Saudi Arabia is targeting localisation of more than 50% of military spending by 2030, from a baseline below 5% at programme launch, and in February 2026 established a dedicated national company for unmanned aerial, maritime, ground and robotic systems. European rearmament carries comparable industrial-participation expectations. Each of these programmes requires the same categories of specialist, at the same time, under national workforce and offset obligations that constrain where those specialists can be sourced and how long they can be retained.
Sovereign capability multiplies the problem
Governments are no longer simply buying capability; they are legislating that it be built domestically, which multiplies the same shortage across jurisdictions. Japan approved a record defence budget of approximately US$58 billion for its 2026 fiscal year — a fourteenth consecutive record — alongside continued investment in a next-generation combat aircraft developed with the United Kingdom and Italy and associated uncrewed systems. Saudi Arabia is targeting localisation of more than 50% of military spending by 2030, from a baseline below 5% at programme launch, and in February 2026 established a dedicated national company for unmanned aerial, maritime, ground and robotic systems. European rearmament carries comparable industrial-participation expectations. Each of these programmes requires the same categories of specialist, at the same time, under national workforce and offset obligations that constrain where those specialists can be sourced and how long they can be retained.
The STRAGO View
The roles that clear slowest are rarely the most publicised ones. Demand for autonomy researchers is well served; demand for mission systems engineers, RF and electronic warfare specialists, test and evaluation leads, and safety-critical software and certification engineers is not. These are the people who translate between two-week development cycles and fifteen-year acquisition programmes — and they are simultaneously being bid for by the data centre and power infrastructure build-out competing for the same electrical, controls and systems skill base.
Placing them is a compliance exercise as much as a search exercise. Eligibility screening, export-control awareness, mobilisation and sponsorship all sit on the critical path, and a candidate who cannot be deployed is not a placement. STRAGO International operates retained and engaged search across Defence & Government with an integrated operational wrapper covering employer of record, immigration, mobilisation and site compliance, through nine country offices.
Important notice
General information only. This brief is published by STRAGO International for general information and market commentary purposes. It does not constitute professional, legal, financial, investment, employment or recruitment advice, and it should not be relied upon as the basis for any decision. Readers should obtain independent advice appropriate to their own circumstances before acting on any matter referred to here.