Reflections on 2024 and Predictions for Government IT in 2025

In 2024, I traveled a lot. I spent over 100 days meeting with federal and state leaders to talk about how technology could help them solve their business problems and reach their goals.

While industry buzzwords and trends, such as AI, application modernization, identity and access management and cloud, dominate surveys, including the recently published 2025 State CIO TOP 10 Priorities by NASCIO, my conversations with executives lead me to predict that 2025 will prioritize those areas while adding a significant focus on controlling costs and improving efficiency in core business operations.

Federal leaders preparing for policy change

While federal and state leaders frequently talk about making operations more efficient, federal leaders are preparing for big policy changes with the new administration, including the Department of Government Efficiency (DOGE). Similarly, state leaders are facing the new reality of lower funding from Washington as various stimulus programs end. While the actual impact of the DOGE is yet to be seen, many IT leaders are preparing for impacts that include:

• Reduced funding for new IT projects: Agencies may face tighter budgets, leading to fewer resources for new technology investments.
• Increased scrutiny of existing IT expenditures: There could be more rigorous evaluations of current IT spending to identify and eliminate inefficiencies.
• Potential delays in IT modernization efforts: With reduced budgets, some modernization projects might be postponed or scaled back.

Sources of efficiency in 2025

According to my conversations with leaders, 2025 will likely bring a mix of programs that focus on increased efficiency and lower costs. These programs target expenses in the core parts of IT operations and seek to make those operations more efficient. I expect the focus will include FinOps, data center operations (including cloud migration), modern workplace services, GenAI and what I call procurement optimization. Regarding GenAI, I expect the goal will be to make government employees more efficient while simultaneously improving the citizen experience.

A focus on FinOps

In my talks, both state and federal IT leaders expressed concern regarding the migration of their applications to the cloud is the failure to achieve the expected cost savings from these initiatives. IT leaders are interested in this topic, and they were at the FinOps Foundation during the December AWS re:Invent conference in Las Vegas. The event featured numerous sessions on FinOps, along with multiple vendors showcasing FinOps solutions. Similarly, Apptio, an IBM company which is a leader in the Gartner® Magic Quadrant™ for Cloud Financial Management Tools, hosted an event in Washington, DC. That sold-out event attracted senior government IT leaders who were eager to learn about optimizing cloud costs, as it is widely recognized by industry analysts that effective cost control presents one of the best opportunities to modernize IT operations and is an essential tool for enabling and adopting new GenAI technologies.

In my October blog post, Optimizing Hybrid Cloud Expenditure and Efficiency, I addressed this challenge and provided strategies for mitigating it. The blog looks at the main challenges government organizations have when buying and managing cloud services and how those challenges drive up costs. It also discusses how FinOps serves as a critical tool in managing expenses to improve operations.

Efficiency in the data center

Another area my conversations over the past year have highlighted for cost savings is optimizing and outsourcing data center operations. Many clients have raised this issue, including states, local governments, federal agencies, tier-one research universities and academic medical centers. Many are looking to free up valuable real estate on campus as they transition to state-of-the-art colocation facilities.

Many IT leaders want to use public/government clouds from global leaders like AWS, Azure and Google in the future. However, experienced IT executives know that many older applications may function better in their own data center infrastructure. According to a report by Forrester, many organizations are adopting a hybrid cloud approach to leverage the benefits of both on-premises and cloud environments (See Forrester, “Predictions 2023: Cloud Computing,”). However, a combination of new requirements for sustainability and cybersecurity from the GSA, unexpected cost increases from VMware licensing and increased demands for computer processing and power consumption driven by modern AI technology have many executives looking at contractor-owned facilities vs their government-owned data centers as a go-forward strategy.

This is possible because of new technology like edge computing capabilities for ultra-low latency use cases that need to remain on campus, combined with low latency enabled by modern network technology, which allows agencies to efficiently run operations from contractor-owned and operated facilities. A recent report by TechTarget, What Is Edge Computing? Everything You Need to Know, defines how edge computing reduces latency and bandwidth use, improves response times and saves bandwidth costs. It is particularly beneficial for applications requiring real-time processing and low latency.

Partnering for modern workplace services

Partnering for modern workplace services, including Device as a Service (DaaS), presents numerous advantages for organizations seeking to improve efficiency and reduce costs. According to a white paper by IDC, The Benefits of Integrating Managed Device Services: How These Solutions Improve Resiliency, Reduce Costs and Create Better Experiences, 42% of respondents reported improving employee productivity by an average of 24%. By leveraging DaaS, organizations can streamline their IT operations by partnering with specialized service providers to procure, manage and maintain employee devices. This model not only alleviates the burden on internal IT departments but also ensures that employees have access to the latest technology and support services, thereby enhancing productivity and user satisfaction.

Furthermore, DaaS offers predictable and scalable costs, as it typically operates on a subscription basis, which helps organizations manage their budgets more effectively. The ability to quickly scale up or down based on workforce needs also provides flexibility, making it easier to adapt to changing business environments. Service providers often include robust security measures and compliance protocols, ensuring that all devices are safe and up to date with the latest software and patches. This comprehensive approach to device management allows agency IT leaders to focus on their core business functions while enjoying the benefits of enhanced operational efficiency and reduced overhead costs.

How GenAI will provide to be a game changer in employee productivity

GenAI can change the public sector by making employees more efficient and improving how residents engage with and use government services. A study by MIT Sloan found that when GenAI is used within its capabilities, it can improve a worker’s performance by nearly 40% compared to those who do not use it. Additionally, Gartner analysts suggest that using productivity zones can help identify areas where GenAI can enhance information-centric work. GenAI automates routine tasks like entering data and processing documents. This frees up time for employees to do more important work, which leads to better operation efficiency and job satisfaction. A World Economic Forum article titled "AI at work: A Practical Guide to Implementing and Scaling New Tools" discusses how embedding GenAI tools into existing processes can improve employee efficiency by streamlining workflows, allowing employees more time to focus on strategic tasks.

For example, when you review and approve a request for services, you usually must check the application's content against eligibility rules. Modern generative AI tools can be programmed with these prescriptive rules to compare them to the responses, conducting an initial review.

Procurement optimization

While not as cutting-edge as AI or Cloud Modernization, there are likely ongoing opportunities to drive down costs by improving how agencies buy technology. While strategies will vary by agency and level of government, opportunities likely include rationalizing hardware requirements, further consolidating and centralizing technology purchases, transitioning to lower cost but substantially similar options, and moving to enterprise agreements as contrasted with distributed procurement models.

Embracing the future with confidence and purpose

In 2025, government operations will focus on being even more efficient, controlling costs and using generative AI (GenAI). By adopting FinOps practices, optimizing cloud expenditures and using GenAI, government agencies can not only meet their financial goals but also enhance service delivery and operational excellence. This year is a great opportunity to improve how IT works. It is imperative that both federal and state agencies carefully manage resources and provide citizens with improved and innovative services.

Discuss cost control with Noel.