DOD's IT and cyber priorities for fiscal year 2025

The Defense Department is undergoing a massive effort to modernize and improve its ability to counter well-organized and well-funded adversaries.

This is in stark contrast to DODD’s focus of the previous decades, which was on counter-terrorism operations and capabilities. Executing this transformation requires significant investment toward modernization efforts, innovation adoption and deterrence capabilities.

One of the primary points of competition between the United States and its adversaries is in cyber capabilities. Both of its major adversaries are capable of cyber attacks and infiltration that are more sophisticated than threats posed by independent terror groups of the past.

This has driven significant investment in both offensive and defensive cyber capabilities throughout the department, as well as the development of a cyber resilient information architecture.

Focus on IT and cyberspace

The Information Technology/Cyberspace Activities’ (IT/CA) fiscal 2025 budget estimate of $64.1 billion is a subset of the DoD overall budget request and represents about 7.5% of the department’s entire budget.

More than half of the IT/CA budget is dedicated to operations and maintenance funding and totals $33.4 billion. The next two largest IT funding areas — research, development, testing, and evaluation, and procurement — account for $10.4 billion and $9.1 billion, respectively.

The single largest non-national security mission area is the Enterprise Information Environment, which is receiving $27.2 billion in fiscal 2025. The cyberspace budget has increased by $1 billion from fiscal 2024.

Almost half of this additional funding supports Air Force cyber activities. Army remains the single largest recipient of funding out of the three branch agencies, with the majority of IT funding going into non-cyber investments.

European spending drops while Pacific spending grows

With DODs dedication to improving its capability to deter adversaries, two initiatives have been underway for several years — the European Defense Initiative (EDI) and Pacific Deterrence Initiative (PDI) — which receive material support from all branches of DOD.

With the European Defense Initiative, the Army is the primary contributor, and investments include building new physical defensive infrastructure as well as expanding on existing information systems.

Outside of these investment areas, EDI’s overall budget is decreasing year over year as more resources are shifted to invest in the Pacific theater. Fiscal 2025 funding for EDI is at $2.9 billion, down from $3.6 billion in fiscal 2024.

The majority of EDI funding is focused on physical infrastructure, but IT requirements remain in the form of information system implementation. EDI priorities include increasing presence, supporting exercises and training, improving infrastructure and building partner capacity.

Outside of individual branch of service budgeting, DOD will spend some $12 million on intelligence enhancements, specifically for analytical support to provide timely Indications and Warnings (I&W) and exercise planning. This initiative also funds intelligence sharing of immediate and midrange I&W, all-source analysis, and open-source information supporting U.S. and NATO operations, exercises, and training.

While European spending is decreasing, some $9.8 billion is planned to be spent in fiscal 2025 on Pacific Deterrence Initiative needs. This represents an increase from $9 billion spent during fiscal 2024. In the Pacific overall, the Air Force and Navy are the leaders of efforts to improve missile deployment capabilities, implement new training methods and support cyber operations.

This shift in investment focus reflects a growing concern within DOD about the potential strategic threat posed by its main adversary in Asia.

At a program level, PDI is a long-term investment to address capability gaps not being filled by service components.

PDI priorities include modernized and strengthened presence in the Pacific, along with improved logistics, maintenance capabilities, and prepositioning of equipment, munitions, fuel and materiel.

Infrastructure improvements are being planned to enhance responsiveness and resiliency of U.S. forces, along with a commitment to building defense and security capabilities, capacity and cooperation of allies and partners. PDI will also improve capabilities available to U.S. Indo-Pacific Command, i.e. joint and enabling headquarters capabilities.

AI budget: Spotlight on DLA

The DoD is adopting AI tools to improve efficiency and maintain a competitive edge in the technology race with adversaries. The first step in the AI adoption effort is improving the department’s ability to collect, manage, and analyze all data resources to ensure the efficacy of AI tools, which rely on clean data streams, and to provide decision makers with accurate and timely information.

Among the more significant players in AI is the Defense Logistics Agency (DLA), with an IT budget of $1.76 billion. The majority of IT spending is flowing through DLA’s Research and Development program, with a focus on AI tool adoption and improved enterprise resource management.

AI Tool Adoption. DLA’s AI tool adoption is divided into several categories, including tech data modernization, which is budgeted at $8.7 million, and predictive analytics, which is budgeted at $3.9 million.

Funding for tech data modernization is split between two programs: Military Unique Sustainment Technology (MUST) and Defense Logistics Information Research (DLIR).

DLIR is focused on supporting DLA’s Technical Data Management Transformation efforts, and on completing digital twin projects to identify bottlenecks and root causes in DLA processes.

Funding for predictive analytics will continue to develop more AI/ML models for supply chain risk management and supply chain security. DLA is also exploring options for the integration of AI/ML to include large language models (LLM), such as ChatGPT.

Further efforts will also be made for the integration of blockchain for some of DLA’s business processes, and the use of digital twins, i.e., modeling and simulation, to improve various business processes.

Enterprise resource management. In terms of enterprise resource management, focus is divided between the DAI financial system, which is budgeted at $31 million, and smart warehouse modernization, which is budgeted at $6.2 million.

The mission of the DAI financial system is to deliver an auditable, CFO Act-compliant business environment for defense customer organizations, supporting the DOD goal of standardizing financial management practices, improving financial decision support and supporting audit readiness.

Smart warehouse modernization will test cybersecure smart warehouse technologies to transform and modernize distribution and disposition operations. Funding supports working with industry in researching 5G networks and technologies, sensor Internet of Things (IoT), blockchain, quantum computing, and AI/ML. This research is aimed at creating pilot technologies to support DOD supply chain management.

Because of the sheer scope of DOD budgeting in IT, it’s only possible to describe the overall investment DOD is making in IT at an agency level, including some key investments.

But suffice it to say that DOD spending in fiscal 2025 will continue to build on increased IT spending for national defense needs.

Grier Eagan is senior market intelligence analyst for immixGroup, the public sector business of Arrow Electronics. immixGroup delivers mission-driven results through innovative technology solutions for public sector IT. Visit immixGroup.com  for more information.

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