Public sector digital transformation: Can DOGE and AI spark change?

What AI and DOGE mean for digital transformation in the public sector

Amid Elon Musk’s DOGE reforms, government shrinkage and the growing clamour for AI, can the next wave of public sector digital transformation drive much-needed efficiency?

Boardroom Bytes is the HotTopics column where our editorial team explores the news making waves at the intersection of enterprise technology, business strategy and C-suite leadership. Today, we’re diving into the next wave of public sector digital transformation, instigated by Big Tech, institutional reform and early results with artificial intelligence (AI).

Public sector digital transformation: Overview

TLDR (Too Long, Didn't Read) - The state of public sector digital transformation
Why this matters
What this means for the C-suite: The HotTopics take

TLDR: The state of public sector digital transformation

The public sector faces mounting pressure to modernise. Spiralling costs, rising citizen expectations and political instability make digital transformation a necessity rather than a choice. Despite this, while government leaders increasingly recognise technology’s potential in delivering better services for citizens, transformation initiatives are often hampered by a lack of required resources and funding.

Indeed, BCG research indicates that only 35 percent of digital transformations in government succeed within their agreed timeline and budget, 98 percent hit unforeseen implementation difficulties and programmes can go five to eight years before they begin generating financial value – a hard sell for any government official rarely looking beyond their next term in office.

But broader macroeconomic trends are now reshaping the narrative around digital transformation in the public sector. 

Global governments are shifting towards smaller states, less bureaucracy and a reduced reliance on external consultants. As a result, public institutions are looking for new levers to pull to drive change— with institutional reform and AI both coming to the fore.

Story #1: DOGE vs. the U.S. Digital Service

Take, for example, the public sector in the federal US government.

Fresh from culling 80 percent of X’s workforce, Elon Musk has applied a similar logic within his new role at the Department of Government Efficiency (DOGE), the new digital entity essentially replacing the former U.S. Digital Service.

Following an executive order at the start of President Trump’s second term, DOGE is focused  on modernising government technology to enhance productivity and efficiency, with a new software modernisation initiative looking to improve the quality of government software, network infrastructure, IT systems, system interoperability and data integrity. 

So far, so good - but not-so-disimilar from the mandate of the U.S. Digital Service, which set-out to improve and simplify digital services when introduced in 2014.

DOGE, however, has taken the search for efficiency to another level, immediately identifying spending cuts, cancelling government contracts and firing federal workers from several agencies.

Within the U.S. Digital Service, there have been mass layoffs and resignations, including senior heads of cybersecurity, data science and engineering, some of whom have publicly said they refuse to use their technical expertise to ‘dismantle critical public services’. 

Such has been the divide within the department that a ‘firewall’ has been established between the pre-existing US Digital Service and DOGE, with now-former Digital Service colleagues questioning the credibility of new staff - many of whom remain unnamed.

Others, however, have called for a degree of change in digital services, with former US Digital Service colleagues citing historical meeting fatigue, poor hiring, inter-departmental conflict, elongated processes, outdated regulation and inertia around tech modernisation.

Story #2: The Public sector and the double-edged AI sword

DOGE’s robust intervention coincides with our second macro force - the introduction of artificial intelligence in the public sector.  

While Musk and OpenAI’s Sam Altman have spoken at length of AI’s impact on manual labour and hinted at the possibility of UBI, AI has begun to drip-feed into the public sector.  

DOGE, itself, has reportedly leveraged AI to pore over government contracts and grants to look for inefficiencies, with DOGE staff allegedly telling government officials they also plan to automate a majority of jobs in the near future.

Globally, although many public sector institutions have paused recruitment and frozen projects in light of tightened budgets, AI projects have excited government officials chasing greater service efficiency and, arguably, career-defining legacy.

This is because, beyond the hype and as-yet questionable ROI, there is clear evidence of AI’s promise in the public sector; the World Economic Forum’s GovTech Network says there is a $10 trillion opportunity to streamline processes, build citizen engagement and rebuild trust.

Some countries are already seeing clear advantages of AI in the public sector. According to the AI Global Index from Oxford Insights, there is evidence of improved public service delivery, citizen inclusivity, improved data sharing and even clean energy and decarbonisation (the latter in Columbia, South America).

However, as with enterprises plotting their own experimental AI journeys, now is not the time to throw caution to the wind. Experts from Oxford Insights call for the need for the appropriate foundations, responsible innovation and sustainable adoption– a rallying cry for a sector which has historically struggled with many of AI’s key tenets; data sharing, interoperable systems and adapting to new ways of working.

Why this matters

Digital transformation in the public sector presents an opportunity to build more effective and resilient services which deliver for citizens — but only if empowered and accountable digital leaders can navigate the risks of over-ambitious strategies, fragmented delivery – and the creeping divide between new and legacy systems .

This is not to say that public sector digital transformation hasn’t happened in pockets around the globe; Take, for example, the digitisation of global governments through the pandemic, the advent of remote voting or the centralisation of services through UK’s Gov.UK (or locally, through LOTI).

Look east, and you’ll see examples of the ‘start-up’ mentality in Estonia, ‘the Nordic Silicon Valley’, with its e-Residency and Digital ID programmes, or a successful digital welfare system at play in Denmark. In APAC, you’ll find Singapore’s Smart Nation initiative, in India the largest biometric ID system in the world. 

Advocates will argue that DOGE-like start-up cultures, supported by AI in driving efficiencies, can help build faster, leaner and more effective public services.  Critics, however, point to the nuances of system-wide public sector IT and the possibility these forces add greater system complexity, fall down on the required governance, safety and skills and result in more risk and less value for government and taxpayer.

What this means for the C-Suite: The HotTopics take

HotTopics members say that this latest chase for efficiency in the public sector requires new ways of thinking, braver leadership and greater collaboration. Technology leaders must be able to drive innovation and stability in equal measure. Government officials, however, must recognise that change is not as riskily enacted as it is in the private sector.

A former government official, who wished to remain anonymous, believes that DOGE is an opportunity to ‘refactor or reshape’ public sector digital transformation, but the rudimentary approach to resourcing could do more harm than good in the absence of strategic leadership and aligning team capabilities against desired outcomes.

Talent, said this executive, becomes a particular challenge, especially given the public sector’s long-publicised struggles with maintaining legacy technologies. This was emphasised by another executive who added that it was ‘all fine being lean…but if you don’t have the institutional knowledge to hand before making those cuts you're going to be playing catch-up’.

Stephen Espy, the Chief Data Officer at the Tennessee Department of Health, believes that DOGE’s news and notoriety will appeal to other public sector organisations looking for ‘radical change, fast’ - but warns that ‘stability’ should be prioritised over chasing start-up speed.

“In a political climate, there is this DOGE mentality where the mentality is that the problem is the government. That creates some difficulties in using that strategy to improve the government,” he said.

“Strong technology governance is amplified in government. So it becomes very rigid. It becomes difficult to be agile and make decisions. Everything has to move at the speed of technology governance ....Radical change fast is the opposite of technology governance.”

Another senior executive cautioned against chasing start-up speed. “...[Public sector] employees won’t get stock, they’re spending public money, they’re operating under broader constraints (regulation, investment cases). Would the same people also be happy with a 90 percent failure rate - which is roughly how many startups fail?”

Despite this, other leaders believe that DOGE’s incision and the introduction of AI present an opportunity to drive lasting change - so long as the political aspiration is more than just words.

“The change being asked for requires funding, resourcing, engagement and leadership (including political leadership),” said another former tech leader in the public sector. “If that is not available, then the public sector does not have a plan for change, it has an aspiration and some directional thinking.”

For Alan Hill, the director of strategic solutions at Splunk, DOGE represents the latest way of implementing a centralised ‘command and control’ approach to digital transformation, which has seen mixed success in the past. He believes stripping back teams could be a ‘fundamental disaster’ putting digital resilience under threat at a time where talent is critical to not only maintaining legacy technologies - but also AI tools which require a ‘human in the loop’. 

“It'll be an absolute fundamental disaster, unless you deal with the source problem – which is legacy. Unless you fix that, you'll never have enough money to fix the skills problem….and your consultancy bill will be phenomenal. 

Will DOGE and AI see public sector leaders rewrite the playbook on digital transformation, or will reform keep collapsing under its own complexity? Let us know what you think in the comments or on LinkedIn.