Croatian Companies Have an Opportunity to Enter the European Defence Value Chain

The European Defence Fund is increasingly being mentioned as one of the more important opportunities for Croatian industry, but its real value does not lie only in the possibility of financing projects. For domestic IT, software and security companies, the EDF represents an entry point into the European defence innovation ecosystem, where software, data, artificial intelligence and cyber security are becoming just as important as traditional industrial production. In an interview with ICTbusiness Media - ICTbusiness.info, Marko Kornfeld, Director of Alfatec, points out that the greatest opportunity for Croatian companies is opening precisely in specialised technologies with high added value. These are areas in which the size of a company is not decisive if there is knowledge, development speed, integration capability, and an understanding of operational requirements.

Alfatec’s experience through the HYBRID and LODESTAR II projects shows that Croatian companies can participate in technologically demanding European consortia and offer concrete solutions in artificial intelligence, video analytics, data processing, system integration and security platforms. Kornfeld emphasises that EDF projects do not always require the development of entire complex platforms, but often precisely the key software modules, algorithms and components that are embedded into larger systems. In a defence environment, it is especially important that technology does not remain merely a laboratory demonstration, but that it is robust, secure, applicable and compatible with existing military systems. That is why artificial intelligence in this field is not an end in itself, but a tool that must help provide faster situational understanding, process large volumes of data and support better decision-making.

The European Defence Fund is often described as a major opportunity for Croatian industry, but where is that opportunity most visible today, specifically for IT, software and security companies? Which segments have the greatest growth potential: artificial intelligence, sensor systems, video analytics, cyber security, autonomous systems or integration platforms? How realistically can Croatian companies compete today in areas that require top-level software development, real-time data processing and a high level of security reliability?

For Croatian companies from the IT and security sector, the European Defence Fund is not only an important source of funding; it is also a direct entry point into the European defence innovation ecosystem. Software is becoming a key component of defence capabilities, not only in Europe but globally, from artificial intelligence, video analytics, real-time data processing and cyber security to sensor integration, autonomous systems and decision-support platforms. This is precisely where the greatest opportunity for Croatian industry lies.

Croatian companies can very realistically compete in these areas, especially when it comes to specialised solutions that deliver exceptional value within a project. It is important to understand that participation in EDF projects does not necessarily mean that one company must produce entire complex platforms to be relevant; very often, EDF projects do not even require that. It is enough to develop key software modules, algorithms, integration components, or security solutions that are embedded into larger systems or form part of a larger project. That is why EDF projects are divided into calls for research, known as Research Actions, which aim to support innovation at a lower level of practical applicability, and calls for development, known as Development Actions, which are then expected to bring that applicability to the level of a rough prototype. Based on our own experience, as well as the experience of our market and the partners we speak with, Croatian companies can certainly contribute in both cases.

Participation in European consortia, cooperation with major defence companies and alignment with high security, technical and regulatory requirements create experience and references for companies that are difficult to compare with conventional commercial projects. This is precisely why participation in EDF projects changes the way domestic companies build credibility.

Your experience through the HYBRID and LODESTAR II projects shows that Croatian companies can participate in technologically very demanding European consortia. But what is the most valuable expertise that domestic industry can offer in such projects today? Is the key advantage in the development of specialised software, system integration, data processing, artificial intelligence, or the ability to adapt quickly to operational requirements?

Our experience through the HYBRID and LODESTAR II projects shows that Croatian companies can offer very concrete expertise in specialised software development, artificial intelligence, data processing, video analytics and system integration. What has particularly stood out is our ability to adapt quickly to operational requirements, because defence projects very rarely function as pure laboratory development. It is often the case that technology for the defence industry must first and foremost be applicable, then extremely robust and compatible with existing military systems.

What we see from our own experience is that, in the defence sector today, it is extremely important to connect the traditional military industry with the ICT sector. Sensors, autonomous platforms, AR interfaces, secure communication systems and command-and-control systems increasingly depend on software, data and algorithms. This is precisely where Croatian ICT companies can make a strong contribution.

HYBRID and LODESTAR II show that Croatia should not be viewed only as a source of subcontracting capacity. Domestic companies can and must be a source of technology, knowledge and specialised solutions with high added value, especially in niches where flexibility, rapid development and integration expertise are more important than company size itself.

Both projects show a strong role for artificial intelligence, analytics and data processing. But where should the line be drawn today between technological ambition and real operational value in a security and defence environment? How much does AI in defence systems truly help accelerate decision-making today, and how much does it still depend on the quality of sensors, data and human judgment? Is the ability to process and interpret data in real time becoming more important than the hardware deployed in the field?

We are aware that artificial intelligence has become part of a broader trend and is sometimes misused, but that is certainly not the case in the defence and security environment, where it is essential to remain pragmatic. As in any industry, artificial intelligence must not be an end in itself. Artificial intelligence delivers great value by helping users understand a situation more quickly and thereby directly reducing the burden on the operator, for example of an unmanned system, so that they can interpret large volumes of data from the field more effectively.

Artificial intelligence is regulated and restricted in the EU through legislation that necessarily keeps the human factor present in decision-making, with particular emphasis, of course, on the defence sector. This naturally limits technological ambitions, but in a positive sense.

In the defence sector, real operational value is essential for end users, especially because innovations are most often implemented into already existing military systems. For a successful military project, the support of national defence structures is also necessary, and in this respect the Republic of Croatia and its institutions provide a good example for other EU member states.

When we speak about artificial intelligence in this field, it can significantly support object detection, video analytics, pattern recognition, sensor-data processing and assistance in making critical and rapid decisions. However, caution is necessary. The effectiveness of artificial intelligence also depends heavily on sensor quality, data quality, operating conditions, and human judgment. In a defence context, the human must remain at the centre of decision-making, especially when decisions have operational, security or legal consequences.

That is why reliability, interpretability, system resilience, and cybersecurity are crucial. It is not enough for an artificial intelligence model to perform well in controlled conditions. It must be tested, understandable, protected against manipulation, and capable of operating in conditions that are far from ideal. Operational value emerges only when technological ambition is transformed into a stable, secure, and useful capability in the field.

Your message suggests that Croatian companies should no longer be only partners, but also consortium leaders. What is realistically missing today for more domestic technology and security companies to take leading roles in EDF projects? Is the biggest problem a lack of capital, a lack of international connections, insufficient experience in managing large consortia, or weak national support? How important is it for such a step forward to have not only good technology, but also the ability to manage complex development, regulatory and security requirements?

Based on our experience, we have recognised that good technology alone is not enough. This is crucial if we are talking about Croatian companies taking on increasingly significant leadership roles in EDF projects. Capital, international relationships, experience in leading such complex consortia and, ultimately, a deep understanding of defence procedures, together with stronger institutional support, are also necessary.

Leading an EDF consortium means being able to manage highly complex development, financial, regulatory, security and administrative requirements extremely well. This requires serious project capacities, a stable organisation, experience with international partners, institutional support and the ability to align different industrial and national interests.

In our view, Croatia should therefore connect the IT sector, the defence industry, academia and the state more systematically. If we want more projects in which domestic companies do not participate only as partners but lead development, we must build a national ecosystem capable of identifying priority technologies, bringing together relevant partners and supporting them through the preparation and implementation of international projects.

Looking at the next several years, where do you see the greatest opportunity for the Croatian IT and security industry within the European defense ecosystem, and how can we avoid missing this moment again? Will the greatest opportunity lie in developing specific niche technologies, such as video analytics, autonomous platforms, cyber defense, data fusion, and AI-supported decision-making? How important is it for Croatian companies to build references now, particularly in the field of dual-use technologies with both civilian and security applications?

In the next several years, we see the greatest opportunity for the Croatian IT and security industry in niche technologies with high added value: video analytics, AI-based decision support, cyber defence, autonomous systems, secure communications, and integration platforms.

Dual-use technologies are a particularly important area, meaning solutions that have both civilian and security applications. Such technologies enable companies to develop commercially sustainable solutions while simultaneously building references relevant to the defence sector. In this segment as well, there are several financial support instruments available to Croatian companies that can serve as a driver for the development of Croatia’s IT and security industry.

We are at a key moment in which the Croatian technology scene should no longer be viewed merely as a local market. It must become part of the European security and defence value chain. To ensure that this opportunity is not missed, companies must build international references, invest in their own development capacities and actively enter European consortia, while the state must recognise that software, data, AI and cyber security are now just as important elements of defence capability as traditional industrial production.