Securing the Future of AI-Ready Infrastructure: Sovereign Data for Smarter Government
Across the ANZ region, state and federal agencies are racing to modernise their data systems, not just to improve efficiency, but to ensure the safe, sovereign, and ethical use of artificial intelligence.
Across the public sector, we’ve noticed that while agencies are under growing pressure to innovate and embrace technologies like AI, many remain constrained by decades of fragmented infrastructure and legacy workloads still housed in data centres. The result is a widening gap between ambition and execution, where unlocking new efficiencies or modernising processes becomes a slow and complex undertaking.
Charles Feddersen, Partner Director of Product Management – PostgreSQL, Microsoft, says: “Modernization isn’t just about boosting efficiency—it’s about safeguarding data integrity and unleashing the full potential of AI. At Microsoft, we’re driving this transformation with powerful cloud solutions and breakthrough innovations in Azure Database for PostgreSQL, offering a secure and scalable foundation for building the next generation of applications.
As a global leader in AI and a major contributor to the open-source PostgreSQL project, Microsoft is exceptionally equipped to empower customers on their modernization journey—enabling them to deliver groundbreaking, data-driven solutions across the ANZ region.”
The Challenge Facing Agencies
Departments today face a critical inflection point, with the cost of standing still rising fast. Outdated, siloed systems are slowing service delivery, exposing agencies to greater cyber risk, and making it harder to protect the data and privacy of individuals.
Unlike the private sector, agencies manage data that underpins national operations, citizen trust, and public safety. Their systems must operate transparently, comply with strict sovereignty laws, and enable collaboration across departments, all while defending against volume and sophistication.
Yet many agencies remain tied to legacy systems that limit their ability to adapt to today’s rapidly evolving threat landscape. Cybercriminals are becoming increasingly sophisticated, leveraging automation and AI to launch faster, more targeted attacks, leaving traditional defences struggling to keep pace. While migrating to a hybrid cloud is often seen as the solution, the highly sensitive nature of agency data can introduce additional complexity, cost, and security concerns. The real challenge lies in modernising infrastructure in a way that balances agility, resilience, and protection against these advanced threats.
Smarter Systems For A Hybrid Future
A growing number of public sector IT leaders are embracing open-source database technologies, such as PostgreSQL, to create flexible, hybrid data environments. These systems allow workloads to move and accelerate database performance improvements by up to 65% with PostgreSQL in Azure.
This hybrid model provides a low-risk pathway to transformation, allowing departments to modernise systems step by step, without the disruption of wholesale change. It enables departments to trial and deploy AI responsibly, integrate new tools without overhauling existing systems, and maintain compliance with sovereignty and privacy mandates.
Data Sovereignty In The ANZ Region
Government agencies across ANZ are leading the way in data privacy and protection. Unlike countries such as the US or UK, where agency data can sometimes be stored offshore, regulations in both Australia and New Zealand require sensitive information to remain within our borders. While this approach sets an early benchmark that other countries are likely to follow and strengthens public trust and transparency, it can also add complexity when modernising legacy systems.
Modern cloud platforms like Microsoft Azure are increasingly supporting this shift by providing the scalability, compliance, and resilience required for department operations, while allowing open-source technologies to run securely within sovereign environments.
Three Key Priorities For Modernisation
To fully realize these benefits, agencies should focus on three key priorities. First, how can they build a truly secure infrastructure? Whether operating in the cloud or in hybrid environments, leveraging hardware-based protections can provide a robust confidential computing foundation. These technologies offer flexibility and are easily managed through unified environments, enabling comprehensive security.
Second, how can agencies ensure cost-effectiveness during modernisation? Modern processors support more workloads with fewer virtual machines, helping reduce infrastructure costs while enabling fast, efficient AI inference to unlock new capabilities.
Third, agencies should prioritise AI readiness. By tapping into integrations and open-source deep learning toolkits, they can seamlessly connect and analyse data from diverse sources, accelerating innovation and decision-making.
Why This Approach Matters
Modern, open-source systems give agencies the flexibility to retain control over sensitive data while still taking advantage of the scalability needed for AI workloads. They offer greater cost efficiency by reducing dependence on proprietary licences and vendor lock-in, while enabling faster adoption of new technologies that improve public services.
Perhaps most importantly, they reinforce data sovereignty, keeping citizen information secure, transparent, and safely stored within the required jurisdiction.
As technology partners continue investing in infrastructure that supports open frameworks, agencies have access to world-class compute and AI capability, while keeping processing local and accountable.
The Cost Of Standing Still
Failing to invest in new, open systems carries real risk. Agencies that continue to rely on outdated databases and rigid infrastructure will struggle to adopt AI safely, leaving departments with data they can’t fully use or trust. This limits decision-making, increases operational costs, and ultimately slows the delivery of essential public services.
As AI evolves, so too must the foundations that support it. Without adaptable, secure, and sovereign data systems, agencies risk being left behind, not just technologically, but in their ability to meet expectations.
Building Trust Through Transformation
Open-source, hybrid data environments are redefining how digital agencies operate. They combine the speed and intelligence of modern cloud technology with the control and transparency that public institutions require.
By Jason Leonard, Lead AI Consultant at LAB3.
About LAB3
At LAB3, we’ve already helped bodies such as the Department of Agriculture, Fisheries and Forestry (DAFF) and the Department of Climate Change, Energy, the Environment and Water (DCCEEW) set themselves up for success. These departments have strategically embraced hybrid cloud to modernise their technology environments while also reducing energy use and environmental impact. By adopting more efficient infrastructure, including Intel-powered systems that consume less power, they’re not only building the foundations for future modernisation but also aligning with broader sustainability goals and responsible technology practices.
By Jason Leonard, Lead AI Consultant at LAB3.
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