Governments Eye AI at Scale but Face Major Execution Barriers: KPMG

The report titled "KPMG Global Tech Report 2026: Government and Public Sector" said that 48 per cent of government organisations plan to deploy AI use cases into production at scale within the next 12 months, even as 43 per cent admitted they are facing roadblocks in scaling their initiatives.

"Governments report being in the early stages of AI adoption... however, challenges scaling are increasingly evident in the data," the report noted.

The findings are based on responses from 115 government leaders and technology decision-makers globally and highlight a widening gap between ambition and execution in public sector digital transformation.

The report pointed out that one of the biggest hurdles is the lack of coordination across departments, with governments "struggling to integrate their data across functions, departments and ecosystems" and being "limited by siloed thinking."

It added that while governments are keen to adopt advanced technologies, much of their spending continues to go towards maintaining existing systems. Around 40 per cent of technology budgets are being spent on maintenance, indicating a slower shift towards transformation.

On cybersecurity, the report flagged a significant gap between awareness and preparedness.

While data security remains a top priority, only 38 per cent of respondents said their cybersecurity capabilities are mature, even as 64 per cent plan to increase investment in this area over the next year.

"Data protection and security concerns are the top factor slowing collaboration," the report said, adding that these concerns are also affecting partnerships on emerging technologies.

The report also highlighted issues around data management, noting that just 37 per cent of organisations have achieved high maturity in enterprise data systems, despite recognising that strong data foundations are critical for digital transformation.

"Clean, reliable, integrated and accessible data is the key to delivering service transformation from technology investments," the report said.

Another major challenge identified is the lack of skilled talent. Governments are finding it difficult to build the capabilities needed to support new technologies, especially AI. The report said 86 per cent of respondents believe managing AI agents will become an important skill within the next five years.

At the same time, governments are increasingly looking to collaborate with external partners to accelerate transformation. About 75 per cent of respondents said they plan to expand their technology ecosystem and partnerships, although concerns around security, costs and alignment remain.

The report emphasised that leading governments are shifting their approach by focusing on citizens and outcomes rather than just processes.

It noted that the most successful organisations are "moving past siloed processes... to instead focus on outcomes, experiences and experimentation."

Overall, the report suggests that while governments are committed to digital transformation, significant gaps in data integration, skills, cybersecurity and execution continue to slow progress.

- ANI