NASCIO’s FY25 SLED Technology Update: Applications of AI, Digital Services, Data, and Cybersecurity

The 2024 National Association of State Chief Information Officers (NASCIO) Annual Conference took place in New Orleans, Louisiana earlier this month, where state leaders shared key insights into FY25 top technology priorities, challenges and lessons learned. Some of the key focus areas included AI, with emphasis on generative AI (Gen AI) tech, data management, governance, privacy and accessibility, cybersecurity and risk management and digital services and modern government. 

Artificial Intelligence

There is no doubt that AI is all the rage nationwide and continues to garner significant attention at the state government level. AI took the number three spot on NASCIO’s top ten technology priorities list this year, making the list for the first time in NASCIO history and highlighting the significant role that emerging technologies such as AI are playing within the SLED technology space. AI is shaping government operations across all verticals through numerous applications including task automation, natural language processing, image recognition and smarter policymaking. AI can transform how state and local governments interact with their constituencies and perform routine tasks.

States are still in the inception phase of generative AI use and implementation, with prioritization on the development of proper governance frameworks, testing capabilities through use cases, and paying close consideration to the effects on procurements and contracts, the workforce, and equity and accessibility.

However, states are beginning to apply Gen AI within state government functions and are optimistic about its potential to streamline and enhance overall operations, with emphasis on bolstering the state IT workforce. State CIOs were asked to identify the top business processes where they are using generative AI, and the top four are virtual meeting assistant transcription, cyber operations, document generation and management and software code generation.

The advancement of Gen AI also brings about some concerns for state leaders, and agencies are grappling with issues around data readiness, the lack of digital literacy, potential scalability and the impact on budgets, public records management, sustainability and maintenance challenges, transparency and emerging electricity and water resource requirements.

The state of North Carolina, for instance, said it’s aggressively trying to address its data issues with a focus on user education and digital literacy.  Approximately 75% of states currently do not have the digital literacy necessary to support Gen AI’s implementation. North Carolina’s CIO, Jim Weaver, also expressed concern around understanding generative AI total costs of ownership and asked technology companies to help state leaders understand potential cost ownership models.

The state of Missouri on the other hand, is focused on disclosure of data, i.e. understanding where the data is coming from, where it is going and whether users are aware that AI is being utilized within a system-- as there aren’t necessarily contractual requirements around vendor disclosures yet. However, the state is hopeful that Gen AI’s automation capabilities can help create efficiencies for the state’s existing call center staff and eliminate the need to hire additional FTEs.

When it comes to Gen AI and power consumption requirements, there are questions around the demands on the computing environment and data centers, power grid sustainability towards projected growth, CPU vs GPU capabilities and needs, and overall potential environmental impacts from a water pooling aspect. Technology companies should stay mindful of these challenges and assist state leaders in identifying best practices. Additionally, the emergence of generative AI will lead states to leverage capabilities from their cloud partners.

Overall, states expressed optimism toward Gen AI’s adoption and its ability to enhance government operations, while identifying potential challenges and risks. It is obvious that AI has the potential to drive innovation and progress for SLED entities and this will be reflected in future procurements and acquisitions. 

IT companies should continue to stay abreast of developing regulations and policies governing AI and its usage, with the understanding that security, privacy, equity and accessibility and data governance will be top priority. For IT companies in the security and/or privacy space, state and local government customers will be looking to bake in stringent security and privacy measures throughout all layers of AI’s execution. This “secure by design” approach will require the protection of all AI systems and critical infrastructure from cyber threats. Secure and resilient AI software development and implementation will require software vulnerabilities to be addressed, and AI manufacturers will need to prioritize security throughout the product’s entire lifecycle.

Data Management, Governance, Privacy, and Accessibility

The rapid advancement and adoption of Gen AI has presented concerns about data management and data quality, with many states expressing dismay about where they are in their data management journey as it relates to the requirements developing from the implementation of AI. In a survey from NASCIO and EY on data management, 96 percent of respondents agreed that the increased adoption of generative AI is spurring demand for better data management.

Many states, such as Hawaii, Massachusetts and Georgia, have included data governance, management and analytics as a top three priority for this fiscal year, with heavy investments in data-driven initiatives statewide. 

The state of Oregon, for example, has a robust framework for the state’s data strategy and is working on creating a data literacy one to match. The state’s data strategy prioritizes the use of data as a driver for digital government services and helps support and create a foundation for AI adoption and integration.

There is consensus among state leaders around the importance of robust data quality, management and accessibility within government operations. Show your customer how easy it is to integrate your solution within their existing data infrastructure; and how compatible it is. To offset challenges around data management and data quality, take this opportunity in the near-term to partner with state and local agencies to ease some of their concerns, affording them the opportunity to be more innovative in future adoption of emerging technologies.

Cybersecurity and Risk Management

Expectedly, cybersecurity is still top of mind for state CIOs and will continue to drive purchasing decisions for SLED end users. Cybersecurity threats continue to pose risk to our nation’s infrastructure and maleficent actors are only becoming more sophisticated as they gain access to new technologies like Artificial Intelligence amid a widening attack surface. 

In FY25, cybersecurity is still requiring an all-hands-on-deck, whole-of-state approach involving interagency collaboration and governed under a secure framework such as Zero Trust. Local government agencies and education institutions typically have fewer resources than their counterparts at the state level, so having a whole-of-state approach in which states can provide security services to these agencies is key.

The introduction of Gen AI within state and local government presents poses additional risk to information security and data privacy. Additionally, there are still staffing issues and talent gap shortages within the cybersecurity workforce, along with inadequate cybersecurity funding levels. There is also greater emphasis on bolstering data privacy in critical infrastructure and better incident response planning.

New Hampshire, for example, highlighted the progress it has made with its whole-of-state cybersecurity program created under IIJA’s state and local cybersecurity grant program. The state of Rhode Island has implemented zero trust architecture for its agencies, in efforts to shore up statewide cybersecurity posture, after previously having made investments in tools that support data loss prevention, identity and access management (IAM) solutions and extended detection and response (XDR) for monitoring remote assets.

As we continue into FY25, technology companies will continue to see demand for tools and solutions that can help shore up their cybersecurity posture such as software and firewall protections, securing a reliable backup system, cyber training for staff and testing for vulnerabilities, systemwide multi-factor authentication, continuous security monitoring, encryption and cloud backup processes. State leaders also cautioned against pitching tools or solutions without disclosing information about the origin of their data.

Digital Services and Modern Government

Augmenting the citizen experience is a continued focal point for state leaders, as today’s modern world necessitates individualized services that afford agility, accountability, transparency, equity, efficiency and adaptability. The foundation of a community is built on the public’s trust in administrative decision making and corresponding transparency and accountability. Digital services bolster transparency and spur citizen-to-government engagement, providing better interactions for all those involved.

Utah, for example, is prioritizing the establishment of a new design system, enhancing the customer experience, and implementing a new identity and access management platform and a new citizen services portal.

The state of Connecticut has been making significant progress on its digital government journey. This past year the state launched a modern health-related portal called health.ct.gov and another portal for employment, jobs.ct.gov. The state has highlighted its continued progress on breaking down walls between agencies and ensuring people get the services they need across agencies.

States are becoming increasingly more innovative in their approach to technology adoption, and there is no doubt that modernization and digitization efforts centered around the citizen experience are influencing acquisitions across all SLED entities. You will want to tailor messaging around how your solution can complement these efforts and consider each state’s unique pain points and challenges. Be ready to discuss how your solution can streamline service delivery, provide real-time insights, bolster security and privacy, bridge gaps in equity and accessibility and help each state advance their mission of becoming a leader in the citizen experience.

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About the Author: Yvonne Maffia is the senior analyst covering state, local and education markets. She applies insights and analysis to purchasing trends to help vendors and partners shorten their sales cycles. Prior to joining TD SYNNEX Public Sector, Yvonne spent 8 years working in state and local government, where she oversaw advisory boards across the State of Florida and served as an analyst to a local politician. Yvonne currently lives in Washington, DC.