Analysis: Gov. agencies must accelerate innovation amid economic crisis, AI “gold rush”

Federal agencies face unprecedented challenges navigating budget cuts and workforce reductions while still needing to deliver on their mission-critical objectives. Forrester Research’s 2025 analysis argues that strategic AI adoption offers federal leaders a path to maintain essential operations with fewer resources. Rather than abandoning innovation during crisis, the research suggests AI can be a tactical tool to accelerate decision-making, enhance transparency, and automate complex tasks that would otherwise languish amid staffing shortages.

The big picture: Despite economic volatility continuing into 2025, the AI gold rush remains strong, with intelligent automation emerging as a critical strategy for resource-constrained federal agencies to maintain operational effectiveness.

• Federal agencies experiencing massive changes must narrow their focus to critical capabilities without completely shutting down innovation.
• The psychological safety challenges of innovating during organizational upheaval are substantial, as many federal workers face daily uncertainty about their employment status.

Why this matters: Automation and intelligence technologies represent essential innovation levers that will allow remaining federal workers to fulfill their mission despite significant resource constraints.

• Federal agencies that fail to embrace these technologies risk falling further behind in their ability to deliver services effectively.

Key AI benefits: Generative AI offers federal agencies significant advantages beyond the predictive AI applications that have dominated government use cases to date.

• Generative AI prepares decisions at unprecedented speed, allowing agencies to maintain operational tempo despite reduced staffing.
• AI enhances transparency and accountability across government operations, a crucial benefit during times of increased scrutiny.
• AI can automate complex tasks that other technologies cannot address, creating efficiency gains when manual resources are scarce.

Strategic approach: During times of uncertainty, federal agencies should prioritize tactical AI innovations that deliver rapid value rather than pursuing long-term disruptive initiatives.

• Employee productivity improvements, process automation, and real-time analytics across agency ecosystems represent high-value application areas for generative AI.

Practical recommendations: Forrester advises federal agencies to adopt four specific approaches when innovating with AI during resource constraints.

• Treat AI agents like human new hires that require proper onboarding and integration rather than viewing them as instant solutions.
• Recognize AI is not universally applicable—certain tasks and decisions will continue to require human judgment and expertise.
• Carefully evaluate which AI systems and vendors earn your trust, especially in sensitive government contexts.
• Thoroughly understand your existing processes before applying AI, as automation of poorly designed workflows simply creates faster problems.