Public sector transformation constrained by execution pressure: report

Australian government and critical infrastructure organisations are under growing pressure to modernise technology ecosystems while maintaining operational control, accountability and resilience, but new research is suggesting the gap between ambition and execution is widening.

The ‘Sovereign Technology Report: From Complexity to Confidence’, released by Kinetic IT in partnership with research firm ADAPT, draws on surveys and executive interviews with leaders across the public sector and regulated industries. Its central finding is that sovereignty is no longer a policy or procurement question. It is an operational one: defined by whether organisations can maintain visibility, accountability and control across critical systems when it matters most, particularly during disruption or periods of heightened risk.

The research confirms what many technology leaders privately acknowledge: that they are expected to simultaneously deliver transformative programs — including embedding automation and artificial intelligence — while running day-to-day operations and delivering essential services for Australians, without an increase in budget or resources.

As a result, questions that were once considered operational — such as who responds during an incident, where accountability sits across complex delivery environments, and how quickly organisations can recover — have become central to transformation itself, the report has found. How leaders answer these questions is increasingly what separates organisations that modernise with confidence from those that modernise and lose control in the process.

The report identified five key shifts shaping Australia’s current operating environment, adding greater complexity into the roles CIOs, CTOs, CDOs and technology leaders play in delivering trusted citizen services for Australians.

1. AI adoption is amplifying foundational weaknesses

The report identified a major shift in how leaders view transformation. While digital modernisation remains a strategic priority, the research found the biggest challenge is execution under pressure, not ambition.

The research also found that while 60% of agencies identified agentic AI as an investment priority, only 2% believed they currently had the governance, data maturity and assurance mechanisms required to support safe AI deployment.

In addition, 74% of leaders reported a severe or significant capability gap in data, analytics and AI, making it the single largest capability gap identified in the research.

“The report highlights an opportunity to close the gap between ambition and readiness. Digital capabilities have the potential to enhance productivity, strengthen decision-making, and improve the way citizens and business engage with government,” said Jacqui Adams, Head of Digital Transformation at Kinetic IT. “Leaders are focused on identifying and addressing the barriers to adopt and scale these technologies. For example, the need to co-design and deliver a cohesive AI strategy and operating model that is aligned to and enables enterprise priorities.

“The research shows that digital technologies amplify the underlying characteristics of a system. Therefore, if an organisation’s strategy, services, customer journeys or practices are opaque, fragmented, poorly governed, badly designed or vulnerable, digital transformation will accelerate these challenges whilst making them harder to detect and more consequential.”

2. Execution risk is increasingly limiting transformation scale

One of the report’s most significant findings was that many agencies operate without a formal reinvestment model for maintaining technology assets, despite technology now underpinning essential public services and critical infrastructure operations.

According to the findings, 73% of Australian public sector leaders identified funding and resourcing constraints as the primary barrier to transformation. The report argues that organisations are now being asked to modernise faster, strengthen cyber resilience, adopt AI and maintain uninterrupted services, often without additional resources or tolerance for operational disruption.

“The report introduces the concept of ‘sovereign execution’, which is the operational discipline of maintaining control, accountability, resilience and evidence across modern technology environments, regardless of which vendors, platforms or delivery partners are involved,” said Murray Thompson, Chief Strategy Officer at Kinetic IT. “Rather than being a question of ownership, vendor origin or compliance, ‘sovereignty’ in this context is better understood as the ability to retain meaningful control over systems, data and capabilities where it matters most.

“This requires leaders to make deliberate choices early in the design of their strategy and operating model to ensure they can balance speed with trust, resilience, accountability and long-term flexibility.”

3. Delivery confidence is becoming more important than delivery speed

The research reflects a growing operational reality across government and critical infrastructure sectors.

“Modernisation is no longer a future-state conversation. It’s happening now, with agencies also managing legacy platforms, workforce pressures, regulatory obligations and increasingly complex delivery environments,” Adams said. “As platforms, data and AI move closer to the core of how government and critical services are designed, managed and delivered, public trust is increasingly a key success measure of transformation. Success isn’t just ‘does the technology work?’ It is ‘do citizens trust the outcome, and can we maintain operational control, flexibility, and accountability?’”

4. Hybrid operating models are likely to persist for years

The report found that hybrid operating environments are now the norm across government; however, many agencies report that cloud migration programs are only partially complete. Larger and more complex organisations were often significantly further behind, creating extended periods where legacy systems, cloud environments, operational technologies and multiple service providers must operate together.

“Hybrid environments are no longer a temporary transition state for government agencies. For many organisations, they are becoming the long-term operating reality,” Thompson said. “Agencies are modernising while simultaneously maintaining legacy platforms, managing complex cloud set-ups, supporting operational technologies and coordinating multiple delivery partners.”

5. Partner expectations are shifting towards accountability and operational continuity

The research also highlighted growing concerns around fragmented accountability in multi-vendor environments, particularly during incidents or periods of disruption.

Organisations are increasingly shifting their focus from innovation speed towards operational assurance and accountability. Public sector and critical infrastructure leaders are operating in environments where service disruption carries economic, societal and sometimes national security consequences.

“This changes how technology decisions are made. Leaders want confidence that systems can be governed, secured and operated under pressure, not just modernised quickly,” Thompson said.

The report’s findings reinforce the need for stronger operational governance models as organisations continue to modernise.

“Sovereignty is now about who holds privileged access, who can respond in the first hour of an incident, how accountability is maintained across multiple providers, and whether organisations can evidence control under pressure,” Thompson added.

Sovereign execution becomes a defining operational requirement

The report argues that sovereign execution is becoming a key requirement for organisations operating in high-consequence environments, particularly under increasing obligations associated with the Security of Critical Infrastructure Act, Australian Government AI guardrails and broader cyber resilience frameworks.

“The research is intended to help organisations navigate the operational realities shaping transformation efforts, and offer practical insights for modernising sustainably, ethically and safely in today’s environment,” Adams said. “Public sector organisations are required to concurrently balance technology transformation, operational continuity, cyber resilience, and staff and citizen experience.

“The leaders making progress are transforming with intent to build trust, resilience and accountability.”

The full report is available here.

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