A recent study from the Information Services Group (ISG) reveals that public sector entities in the United States are modernizing critical infrastructure through phased hybrid cloud strategies. This approach enhances operational resilience while laying the groundwork for the secure adoption of artificial intelligence.

The report indicates that state, local, and educational institutions are adopting new cloud infrastructure in stages to mitigate risk. These organizations are updating legacy platforms for functions like payroll, healthcare management, and public safety, all while ensuring the uninterrupted delivery of essential services. This allows for the introduction of new technologies without disrupting daily operations.

Nathan Frey, a partner at ISG for the public sector, stated, "Large-scale cloud migration is no longer the standard playbook for IT modernization. There is a growing focus on ensuring continuity, accountability, and long-term operational value. A hybrid operating model allows agencies to maintain the stability required for public-critical services while refreshing key systems."

The study shows the public sector is expanding AI applications through private and hybrid environments specifically designed for sensitive workloads. Agencies are introducing AI in education, citizen services, and public safety. Concurrently, they are establishing mechanisms for data sovereignty, auditability, and controlled operations, adopting infrastructure that supports secure AI implementation without compromising oversight or operational integrity.

Constrained by budget limitations and finite IT resources, agencies are boosting operational efficiency through automated managed services and improved financial visibility. These efforts aim to reduce manual tasks, enhance system reliability, and accelerate incident resolution. Furthermore, there is a growing preference for procurement models that simplify technology adoption and clarify accountability for project outcomes.

ISG Principal Analyst Shashank Rajmane noted, "Successful modernization requires balancing new infrastructure capabilities with the strict governance and operational discipline of the public sector. Service providers that can combine hybrid cloud expertise with security assurance and measurable outcomes are better positioned to meet these needs." The report also evaluated 37 service providers across three key capability areas, with NTT DATA being rated as a leader in all three categories.