Digital government productivity: cloud and AI to boost services

Mandala’s analysis shows accelerating cloud and AI could save billions in government management, cut downtime and reduce emissions while freeing staff for higher‑value work.

How do government cloud adoption benefits translate into tangible savings?

Why does cloud matter for governments? Because it reduces waste and centralises capacity, yielding direct financial benefits. Mandala’s report finds that retiring legacy IT and accelerating cloud adoption by five years could yield an annual saving of $1.4 billion, equivalent to a 13% reduction in total IT costs. In fact, the study projects cumulative savings of $3.4 billion by 2030 and $13.5 billion over the next decade.

• $10 billion from infrastructure and software consolidation
• $2.1 billion from lower external IT labour costs
• $1.3 billion from increased productivity of internal IT staff
• Today, roughly 10% of government IT spending is on public cloud — indicating major headroom

Therefore, even moderate acceleration unlocks large fiscal returns. Moreover, agencies could reduce IT budgets by up to 28% over the decade depending on size and function. In short, cloud is both a cost and capability lever.

Which public sector IT modernization steps deliver the biggest returns?

Modernisation is not only lift‑and‑shift. It includes refactoring legacy systems, redesigning processes and updating governance. Mandala shows that infrastructure and software consolidation deliver the largest share of savings. For example, avoiding 2.9 million hours of IT downtime is estimated to save about $82 million in lost productivity over the next decade.

Consequently, agencies that pair migration with process change capture more value. In practice, this means combining technical migration, change management and measurable KPIs.

Which procurement for cloud migration reforms remove the biggest barriers?

Procurement often stalls projects. Traditional capital‑style contracts and rigid specifications disincentivise subscription models. Therefore, reforming procurement toward multi‑year operational budgets and outcome‑based contracts is essential.

Moreover, a practical example comes from a state program that migrated about 25% of its IT services over five years after adapting procurement and training approaches. This shows that procurement reform, paired with co‑investment, accelerates scale while retaining accountability.

What ai government productivity gains were identified and how should governments treat them?

Cloud is the platform for AI at scale. Mandala estimates that accelerated cloud adoption could unlock an additional $5 billion in productivity gains from AI tools by 2035 — a 63% increase compared to the status quo. However, these gains depend on governance and workforce readiness.

Importantly, empirical trials support the modelling. A 2024 Microsoft 365 Copilot pilot reported participants saved about one hour per day. Participants also reported improved speed (around 70%), improved quality (about 61%) and that roughly 40% of time saved was reallocated to higher‑value tasks.

What are the risks and how do cloud cybersecurity best practices mitigate them?

Security and resilience are central. The sector recorded 163 data breaches in 2024, highlighting exposure. Yet, moving to modern cloud platforms combined with strong cloud cybersecurity best practices — such as continuous monitoring, automated threat detection and zero‑trust architectures — can reduce breach impact and speed response.

Indeed, the analysis estimates that improved security via cloud migration could save about $178 million in breach‑related costs over the next decade. Thus, security is a productivity enabler rather than only an expense.

How should governments invest in digital skills public sector to sustain gains?

Technology alone will not deliver outcomes. Mandala notes that only about a quarter of agencies currently offer transformational digital training. Therefore, targeted upskilling programmes are essential.

Specifically, agencies should invest in reskilling, create new role taxonomies and define career pathways. When paired with pilots, training ensures staff reallocate time to complex work and that automation raises overall service quality.

What workforce outcomes should officials target?

Priorities include reducing routine task time, increasing case resolution rates and building cross‑functional teams. Measured pilots with clear KPIs — time saved, quality gains and redeployment rates — provide the best evidence for scaling.

Are there environmental and resilience co‑benefits from public sector it modernisation?

Yes. The report estimates that cloud migration could reduce the government’s IT carbon footprint by around 14%, avoiding approximately 480 million kg of CO2 emissions over the decade. Consequently, modernisation contributes to climate goals while improving system resilience.

What should investors, builders and institutions watch next?

Stakeholders should track governance reforms, procurement changes and pilot outcomes. Investors will look for clear ROI metrics; builders need standard APIs and security baselines; institutions must ensure budgets and workforce plans align with digital strategies.

In addition, accelerating cloud adoption can prevent outages and free staff for higher‑value tasks — making the opportunity both fiscal and operational.

Final considerations: community input, warnings and a soft next step

Community engagement matters. Consider running a poll to decide whether to prioritise cloud migration, AI pilots or digital skills this fiscal year. However, a clear warning: rushing adoption without training or security controls will increase risk.

In our work delivering digital transformation for municipal and national agencies, we prioritise short, measurable pilots (6–12 months), clear KPIs (time saved and case resolution), and cross‑agency training cohorts to embed change. We also pair procurement reform with 3–6 month training sprints and continuous user research to reduce rollout time and lift adoption.

For government guidance on digital transformation and standards, see the Australian Government Digital Transformation Agency. Readers are encouraged to follow Mandala’s report and emerging pilots to move from potential to measurable public value.