Key Takeaways:

State and local agencies are under pressure to reduce costs while modernizing at the same time. Louisville Water Companyʼs decision to move its entire mission-critical stack to the cloud shows how those goals can align rather than conflict. Facing a mandate to slash IT expenses in half, the utility used Oracle Cloud Infrastructure (OCI) to exit the data center business and is now on track to save nearly $7 million over five years, largely through reduced hardware, software, energy, and operations costs.

The shift is also changing what IT work looks like. Instead of racking servers and managing patches, Louisvilleʼs team is leaning into cloud architecture and application development, using the migration as a chance to upskill staff and make them more agile and responsive to internal customers like finance and customer service. That reorientation turns IT from a cost center into a partner on new digital services and revenue opportunities, including non-water-related streams.

Cloud infrastructure is giving the utility a faster innovation clock. With OCI, they can scale compute and memory almost in real time, spin up new environments without waiting for procurement, and start experimenting with data analytics and AI to automate repetitive tasks and support better decision-making. Leaders are already exploring how cloud tools and automation can improve customer experience and unlock new insights from operational data.

This also lays out a playbook that other agencies can borrow. It stresses forming a multidisciplinary team across IT, vendors, finance, and customer operations; modeling both upfront and long-term costs as you move from CapEx to OpEx; and carefully assessing which applications can move quickly versus those that need deeper work on processing and security. It underscores the need for strict controls around data used for AI for logging, privacy, and regulatory compliance, along with testing, validation, and continuous monitoring to manage risk. In that framing, cloud migration isnʼt just an IT upgrade; itʼs the new operating system for how utilities and governments plan, fund, and deliver services in the next decade.

Rethinking how to optimize AI strategies, budgets, or workflows in 2026? Fractional Source can help. Just reply to this email to get the conversation started.

In this episode, Tony Scott, the former U.S. Federal CIO from the Obama administration joins the host to unpack why government technology reform so often stalls and what actually works when it succeeds. The conversation spans modernizing legacy systems, fixing procurement incentives, building internal digital talent, and leading large-scale change across agencies, with reflections on lessons learned inside the White House and how those lessons apply to todayʼs AI- and cloud-driven transformation push.

This free, in-person summit (hosted by ARMA International) brings federal, state, and local leaders together to get practical about information governance. Itʼs a strong fit if you want an AI-ready government angle thatʼs grounded in the unsexy-but-critical stuff like data stewardship, policy, and risk controls that make automation and AI deployments durable.

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