Public sector organisations are taking a harder look at what their technology investments actually deliver, as constrained budgets and growing demand for services increase pressure on IT teams to demonstrate value.
According to Clare Metcalfe, managing director of Phoenix Software (pictured), the shift is changing how public bodies evaluate everything from AI and cloud to cybersecurity and managed services.
Rather than focusing primarily on technical capabilities, organisations are increasingly concerned with efficiency, productivity and return on investment. They are also examining how to get more from technology they already own before committing to further spending.
“We also see organisations placing greater emphasis on getting maximum value from existing technology investments,” Metcalfe told Think Digital Partners.
But while technology offers opportunities to reduce costs and improve services, finding the resources to implement change remains a significant obstacle.
“In many cases, the challenge is not identifying technology that could deliver benefits, but in creating the capacity, governance and organisational readiness required to implement the change successfully,” she said.
AI faces the test of delivering value
The change is particularly apparent in AI, where public sector organisations are moving beyond experimentation towards practical deployment.
Metcalfe said AI has seen the biggest shift in customer behaviour over the past 12 to 18 months, with organisations increasingly looking at how it can reduce administrative workloads, improve access to information and support service delivery.
However, adoption remains uneven across the 11 public sector markets Phoenix serves, and organisations are becoming more demanding about the outcomes they expect. Rather than committing to widespread deployment, public bodies want to understand how AI will improve productivity, reduce costs or deliver better services, and how they can adopt it safely.
That means addressing the less visible requirements of implementation, including data readiness, governance, security controls and workforce skills.
“Organisations need appropriate governance, security controls, data readiness and workforce enablement before they can scale AI effectively,” said Metcalfe.
The challenge extends beyond AI. Public sector organisations must balance investment in new capabilities with the demands of maintaining ageing technology estates, addressing skills shortages and keeping essential services running.
Finding the money for modernisation
With limited scope for additional spending, public sector organisations are increasingly looking for savings within their existing technology environments.
Metcalfe said software asset management, FinOps and IT asset management can help organisations optimise spending and free up funding for further modernisation.
“The biggest opportunities are those that improve productivity and allow public sector teams to focus more of their time on delivering services,” she said.
Cloud technologies and managed services can also improve flexibility and efficiency without increasing internal headcount, although the pressures and priorities differ considerably across the public sector.
“Treating public sector as a single market risks oversimplifying those differences,” said Metcalfe.
In central government, modernisation programmes, legacy remediation and AI adoption remain priorities, alongside compliance with digital and cybersecurity standards.
Local authorities face different challenges, including the technology implications of local government reorganisation.
Metcalfe pointed to the work undertaken by councils preparing for potential structural changes, including auditing applications, reviewing cloud and identity management arrangements, and mapping where data is held.
Phoenix was previously involved in delivering digital infrastructure for Cumberland Council and Westmorland and Furness Council, the two unitary authorities created in Cumbria in 2023.
Metcalfe argued that the preparatory work could have lasting benefits by giving authorities a clearer understanding of their technology estates.
“Ultimately, the common challenge across all sectors is delivering more with less, but the operational context, procurement landscape and risk profile differ significantly from one sector to another,” said Metcalfe.
Security and sovereignty influence buying decisions
Alongside the focus on financial returns, cybersecurity and data sovereignty are playing a greater role in public sector procurement.
Metcalfe said cyber resilience has become a fundamental consideration in technology decision-making, reflecting the potential impact of attacks on public services and organisational trust.
“It is no longer viewed as a technology issue, or even simply a business continuity issue. It is fundamental to organisational trust, operational effectiveness and the delivery of public services,” she said.
For many public sector organisations, maintaining an in-house security operations centre is beyond their resources, creating demand for external monitoring and response services.
Cloud procurement is also becoming more complex as organisations scrutinise where their data is stored, who can access it and how it is protected.
Metcalfe said these considerations can now carry as much weight as functionality and cost when organisations select technology partners.
A different approach to public sector technology
Phoenix became an exclusively public sector-focused IT provider in July.
Having worked with public bodies for more than 35 years, the company has moved away from serving commercial customers to concentrate its business on the different requirements of government, healthcare, education, policing and other public services.
Metcalfe argued that traditional suppliers serving both public and private sector markets can struggle to give sufficient attention to the public sector’s particular procurement, governance and funding requirements.
“We recognised that the public sector operates within unique procurement frameworks, governance requirements, funding pressures and operational environments that distinguish it from the private sector,” she said.
