Government CIOs prepare for big funding boosts as AI takes hold in the public sector

More than half (52%) of government CIOs outside of the United States expect budgets to surge in the year ahead, driven in part by increased AI spending.

Analysis from Gartner, which carried out the research, shows governments and public sector organizations targeting rapid modernization and cost savings through emerging technologies. This is despite long-running budgetary constraints in this area.

Arthur Mickoleit, director analyst for government at Gartner, said a combination of “geopolitical shifts and economic volatility” means many government CIOs have been forced to “rapidly adjust their priorities for next year”.

“They are being asked to demonstrate the mission impact of technology investments – including, but not limited to, cost savings and user experience,” he said.

As well as AI, the survey highlighted increased investment in cybersecurity, as another leading priority for CIOs. With government entities facing increasing threats from state-sponsored hackers, 85% of respondents said this was an area for investment.

Elsewhere, investment in cloud transformation is another key objective for CIOs as government departments contend with growing workloads and infrastructure strain as a result of AI.

The survey noted 74% of government CIOs have already deployed or plan to deploy AI tools within the next 12 months. Interest in agentic AI is also skyrocketing, with 49% planning to deploy agents in frontline operations within the next year.

CIOs view this latest iteration of the technology as a potential “enabler of government transformation”, Mickoleit noted.

“This next wave of innovation will be essential for delivering on public sector priorities, especially as expectations are high following years of investments in digital government,” he said.

Agentic AI adoption raises concerns about both cloud and cybersecurity, though, underlining the sharpened investment focus on both these domains.

Don’t fall for the hype

A key takeaway from the Gartner survey centers around rising expectations with emerging technologies, particularly with generative and agentic AI tools.

Government CIOs are hopeful these technologies will unlock marked benefits for workers, with more than half (51%) expecting employee productivity gains in 2026.

The use of AI in building new digital products and services is another area of excitement, cited by 38%, while general improvements to the “overall citizen experience” are also expected, according to 38% of respondents.

While there’s great potential here, Mickoleit warned CIOs need to avoid falling into the hype cycle witnessed in private sector domains.

“CIOs must remain mindful of the hype that can distract from more mature technologies like machine learning and business process automation,” said Mickoleit.

The hype surrounding agentic AI has reached boiling point over the last year. In June, research from Gartner noted that many “AI agent solutions” were essentially just repackaged robotic process automation (RPA) tools and chatbots.

Long-term prospects for agentic AI adoption programs were also questioned, with the consultancy revealing around 40% of all projects would be ditched within two years.

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