By Dante Ricci, Global Marketing Team Lead for Services, Financial Services and Public Services Industries at SAP
Government efficiency is an eternal topic, but rarely has it gotten such attention. That’s what happens when tech entrepreneur Elon Musk, co-lead of a prospective Department of Government Efficiency, suggests eliminating close to one-third of U.S. federal spending.
The cuts could well commence in 2025. That has serious implications for IT contractors who work with governments. How should they proceed in an environment of such budget uncertainty?
The answers share a common theme. Now more than ever, efficiently maintaining the government services constituents want and the nation needs—much less enhancing them to keep up with rising expectations based on elegant private-sector offerings and geopolitical uncertainty—will require ongoing government investment in IT and related services.
Below are five areas of opportunity for government IT-related contractors in 2025.
1. Continue to integrate systems and migrate data
Speaking of the mainframe era, not a few government systems remain mired in it. These and other legacy systems need to be replaced because they both underperform, are expensive to upgrade and maintain, and often present excessive cybersecurity risk. Near-term budget considerations and risk aversion will in many cases lead to stepwise upgrading rather than wholesale replacement. This brings integration efforts and data migration to the fore to keep historical information accessible and ensure continuity with surviving legacy applications while maximizing the investment in new systems.
2. If it works, repurpose it.
Tighter budgets will likely impact government IT spending on new initiatives. If you’ve run a successful cybersecurity or generative artificial intelligence pilot for agency A, agency B may be amenable to adapting something that already exists to meet most of its needs to avoid paying full freight to build a bespoke system from scratch. Take advantage of that, and you have two reference customers instead of one.
3. There will probably be personnel gaps. Fill them.
IDC predicts that, by 2026, more than 90 percent of organizations worldwide will be dealing with an IT skills crisis, and the government is no exception. The research firm pegged AI skills as the top need, closely followed by IT operations, and with cloud skills such as architecture, data management and storage, and software development skills also in arrears. That tracks with a recent Gartner survey that found that, among 478 government CIOs and tech executives, more than 80 percent said they were increasing investments in cybersecurity, GenAI and AI.
Governments will feel the talent pinch, and IT contractors who can deliver those skills, or can help governments strengthen them from within through training and talent-management systems, will find opportunities. They should be recruiting their own talent and getting security clearances rolling now so they’re ready to step in with consulting, implementation, managed services and other offerings as those opportunities arise.
4. Help them understand the unintended consequences.
Cutting back can bring collateral damage. Let’s say a U.S. Department of Energy group is eliminated, but one of its programs with potential implications is saved by moving it to another agency. That changes how grants are accounted for, how compliance unfolds, how reporting happens, how employees and contractors are managed and how funds are delivered. All of that impacts systems.
More broadly, organizational downsizing without instituting process changes, automation and, ideally, digital transformation risks inviting inefficiencies, hampering capabilities and security, and degrading performance levels that could quickly become politically unsavory or geopolitically risky. Expect consulting services related to organizational and digital transformation to be in demand.
5. Tee up GenAI to enable smaller, less-seasoned government workforces
Experienced workers are generally more expensive resources, and they’re more vulnerable in reductions in force. Not long ago, when they departed, the institutional knowledge and subject-area expertise they had amassed over years went with them. GenAI can help soften the blow for the more routine tasks.
Also, with GenAI, citizens will be able to engage with government anywhere, anytime using natural language as they would with a human agent. A higher percentage of low-risk, simple inquiries will be resolved at the point of initial contact, no agent interaction required. At the same time, high-risk, complex inquiries will be segmented and prioritized for agent assistance with accompanying AI-generated case summaries. Agents will then be supported with GenAI communication proposals and best-action recommendations. Taken together, that lets governments focus on what truly matters — providing fast, effective, personalized and accessible services — efficiently and cost-effectively.
Further, policies do change, and programs left for dead can get resurrected. If program knowledge and process descriptions are saved in a structured, deliberate way, GenAI algorithms will have much of the input needed to help those tasked with rebuilding the program and relaunch it quickly and efficiently despite the departure of those who once built and maintained it.
In either case, agencies will need help in understanding what data to prioritize and how to bring it together from what are today probably siloed data sources.
Improving government efficiency is a laudable goal. Done wisely, it will involve cutbacks as well as strategic investments in areas such as cybersecurity, GenAI, AI and the cloud. IT contractors should be ready to step up to help on all those fronts in 2025. Those who do can thrive as they help agencies through a challenging but, ideally, transformational era.
