The New Zealand Government is intensifying its focus on digitisation and the opportunities offered by artificial intelligence, with the Government Chief Digital Officer empowered to lead transformation across the public service. The National AI Strategy has been developed, and Cabinet is actively promoting new digital initiatives. To fully realise these ambitions and achieve maximum cost efficiencies, accelerating cloud adoption is considered critical.
Despite being an early adopter of a Cloud First policy in 2012, a recent report by Mandala Partners, commissioned by Microsoft, shows that New Zealand has fallen from ninth to sixteenth in global rankings for digital government. The report highlights that complex procurement rules, skill shortages, and cultural resistance have left more than two-thirds of government systems reliant on outdated technology, which is costly, inefficient, and vulnerable to cyberattacks.
Accelerating cloud adoption could yield substantial financial and operational benefits. Mandala Partners estimates that speeding up public cloud adoption by just five years could save the government $1.1 billion by 2030 and $3.6 billion by 2035, while unlocking an estimated $2.3 billion in AI-driven productivity gains. Cloud migration would reduce IT costs by 14%, allowing staff to focus on delivering innovative and effective public services. Modernisation through cloud also establishes the foundation necessary for scaling AI solutions, which have already demonstrated productivity improvements in trial implementations.
The report notes that 67% of government systems are still not hosted in the cloud, with on-premises infrastructure costing up to ten times more and requiring specialist maintenance. Outdated systems expose agencies to cyber risks, with public sector organizations accounting for nearly 40% of nationally significant incidents. Moving to the cloud could save $121 million in costs related to cyberattacks over the next decade, while improving service continuity and protecting citizens’ data.
Local examples demonstrate the benefits of cloud adoption. Christchurch City Council recently migrated 90% of its servers to the Azure public cloud, enabling better citizen insights and service delivery through modern tools like Microsoft Fabric and AI. Public cloud adoption also supports climate goals, reducing the public sector’s carbon footprint by 11%, equivalent to removing 14,000 cars from the road. Additionally, cloud migration stimulates demand for local data centres, edge computing, and network infrastructure while building digital skills across the workforce.
To overcome barriers to cloud adoption, the report recommends stronger partnerships between government agencies, academia, and cloud providers to address skill shortages. Modernising procurement is also essential, including aggregated purchasing and centralised frameworks, while shifting to flexible, pay-as-you-go cloud models under operational budgets rather than capital expenditure constraints. Enhanced governance, clear digital transformation targets, and strategies to overcome cultural resistance are also critical to accelerate cloud adoption. By taking these steps, New Zealand has the opportunity to unlock significant economic, social, and technological benefits for years to come.
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