Three-quarters of state and local government decision-makers expect their agencies’ reliance on legacy technology to eventually cause a significant operational failure, according to an EY survey of 200 leaders released Oct. 29.
Meanwhile, 68% reported positive returns on modernization initiatives over the past two years, EY said in a press release. Although 96% reported documented modernization roadmaps, only 57% said implementation extended agencywide.
Agencies face replacement challenges
Replacing outdated systems remains daunting: 74% felt overwhelmed by the scale of replacement, and 70% by its complexity. Nevertheless, 74% expressed confidence in phasing out their most outdated systems within two years.
Still, cost concerns loom large. Eighty-eight percent said they are concerned about securing dedicated funding for modernization projects, and 91% said they are concerned about unforeseen challenges, including budget cuts, that could significantly derail modernization progress.
“Modernization requires agencies to plan beyond individual technology investments and consider the capabilities needed to execute and sustain those efforts,” said Justin Fishman, who leads the EY Americas Government & Public Sector State, Local and Education practice. “That includes understanding how funding, talent, legacy environments and organizational changes can affect the ability to move from individual initiatives to broader modernization efforts.”
AI adoption brings oversight challenges
Nearly all survey respondents reported found benefits from artificial intelligence (AI) adoption, which the report calls super intelligence. Those benefits include greater efficiencies (59%), improved cybersecurity and threat detection (56%), and reduced administrative burden (47%). Nearly 70% reported fully integrating or currently implementing generative AI.
Oversight of AI use is a significant concern. While 94% reported AI governance policies or strategies, only 51% described a comprehensive, unified approach. Eighty-four percent expressed concern about unauthorized employee AI use.
“As agencies move toward generative and agentic SI systems that can perform increasingly consequential work, they need governance that defines accountability, establishes appropriate boundaries, and produces evidence that the technology is operating as intended. SI governance must become a core pillar of government modernization,” said Steve Harvey, an EY principal.
M Booth Research & Insights conducted the survey July 23-Aug. 4 among 100 state and 100 local decision-makers who were responsible for technology, workforce, finance, efficiency, and strategy. Local respondents represented jurisdictions serving at least 100,000 constituents.
