FEATURE silos. Disparate systems and isolated repositories make it difficult to gain a holistic view of operations or share information efficiently across departments. Overcoming these silos requires both technical integration and political will. Improved interoperability can significantly enhance efficiency, reduce duplication and enable better citizen services. However, such projects often require extensive inter-agency co-operation and careful resource allocation.
For example, when state health departments integrate with education systems, agencies can respond more effectively to public health crises by understanding their impact on school attendance and community wellbeing. This type of cross-sector data sharing is made possible by modernised IT environments.
Shifting procurement and service models
The competitive landscape among service providers is evolving, the report says. Many now offer modular pricing, outcome-based contracts and on-demand engineering services. This shift away from onesize-fits-all models toward agile, tailored solutions reflects the public sector’ s need for flexibility and rapid transformation.
Providers are investing selectively in capabilities that support hybrid operations, regulatory compliance and vertical-specific modernisation. As large vendors consolidate or form global alliances, some public sector clients are seeking assurances on service continuity and long-term support.
Procurement models are also under review. Agencies increasingly prefer shorter contracts with built-in flexibility, reducing the risk of vendor lock-in and ensuring that services evolve alongside emerging technologies.
Key modernisation trends
The report identifies several trends as shaping how the US public sector approaches IT transformation: early and enhance decision-making through advanced analytics.
• Cost optimisation: Agencies are embracing FinOps practices, automation and consumptionbased pricing to ensure sustainable IT spending.
• Data-driven operations: Comprehensive analytics tools enable agencies to derive insights, improve services and guide policy.
• Citizen-centric services: Investments aim to make interactions with government more intuitive, responsive and accessible.
Industry leaders and recognition
The report names Rackspace Technology as a leader across all three evaluated quadrants: Managed Services, Managed Hosting and Colocation Services. Ensono, Kyndryl, NTT DATA and Unisys earned leader status in two quadrants each, while Accenture, CGI, Equinix, HPE, IBM, Infosys, Iron Mountain and TierPoint were recognised in one quadrant.
Persistent Systems was named the global ISG CX Star Performer for 2025, achieving the highest customer satisfaction ratings in ISG’ s Voice of the Customer survey. This recognition reflects growing demand for high-quality, user-focused cloud services.
Looking ahead
The report finds that while challenges such as budget limits, talent shortages and regulatory complexity persist, the momentum toward hybrid cloud adoption in the US public sector is undeniable. By leveraging managed services, AI, automation and data analytics, agencies are not only modernising their IT infrastructures but also reshaping how they deliver services to citizens.
This transformation, the report says, is not only technological but cultural with the shift toward flexible, secure and data-driven systems marking a turning point in public sector operations, promising more transparent, efficient and citizen-focused governance for years to come.
• Legacy replacement: Outdated systems are being replaced with cloud-based solutions designed for scalability, security and integration.
• Automation and AIOps: These technologies reduce manual workloads, detect issues
As citizen expectations continue to rise, hybrid cloud models will become a linchpin of public trust and service innovation. The agencies that act decisively today stand to redefine how government works tomorrow, the report says. �
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