Vote today for the 2025 FedScoop 50 awards.

Cast your vote!

Fed chair sees AI creating ‘significant changes’ to US workforce

The effects of artificial intelligence on the U.S. economy “are probably not great at this time,” Federal Reserve Chairman Jerome Powell told senators Wednesday, but the technology is likely to usher in “significant changes” to the labor market in the years ahead.

Appearing before the Senate Banking Committee, Powell said it’s an open question how big AI’s impact will be on the economy, and how quickly it will happen. But AI experts have told the Fed that what’s happening with the technology now is “nothing compared to what we can do in two years,” he noted.

“I think it has enormous capabilities to make really significant changes in the economy, in the labor force,” Powell said. “It can either augment people’s productivity, or it can replace people, or it can do a little bit of both. But it’s going to be something.”

Sen. Lisa Blunt Rochester, D-Del., asked Powell about a recent interview Anthropic CEO Dario Amodei gave to Axios in which he said AI could erase half of all entry-level white-collar jobs, leading to a 10-20% surge in unemployment over the next one to five years.

“Do you think this is a reasonable perspective, and how would AI-driven productivity gains or worker displacement affect how the Fed defines full employment?” she asked the Fed chair.

Powell said that typically with technology, the “last phase” of implementation tends “to take longer than people expect,” and he thinks the same will “probably” be true for AI. But the Fed “doesn’t have the tools to really address the social issues and labor market issues that will arise from this,” he added.

Internally, the Fed has embraced AI to a significant degree compared to many of its agency counterparts. The board’s 2024 AI inventory lists 50 use cases, covering everything from an economic trade modeling tool to incident reporting pattern detection technology. 

Sen. Andy Kim, D-N.J., asked Powell about the Fed’s use of AI in forecasting, pointing to modeling the Bank of England and the European Central Bank have done on the potential macroeconomic effects of AI. 

Powell said the agency has “lots of people doing work on AI,” and monitors research happening “everywhere in the world.” He also confirmed to Kim that the Fed has looked into AI credit models and how they could affect credit access and fair-lending standards. 

The Fed has “been aware” of those issues for a long time, he said, dating back to pre-generative AI technologies like machine learning and the “implicit biases that can appear.” Powell said the Fed is working with people “to make sure that that doesn’t happen.”

Though he refrained from making specific predictions about AI, Powell said it’s “very clear that it has the potential to make really dramatic changes in our economy, in our workplace, in the jobs of workers, in the way companies work, and all of those things.”

“But honestly,” he added, “there’s a tremendous uncertainty about the timing of that and what the ultimate consequences will be, and what the medium-term consequences will be.”

ValueOps for government IT modernization: Driving cost savings and mission effectiveness through Strategic Portfolio Management

Many government agencies now face a critical need to modernize aging IT systems while reducing costs and improving mission outcomes. ValueOps by Broadcom offers Strategic Portfolio Management (SPM) capabilities that provide a vital framework for achieving these objectives. This approach maximizes IT investment value through careful project selection, prioritization and management aligned with agency missions.

Jean-Louis Vignaud is head of ValueOps at Broadcom.

ValueOps combines Clarity, ConnectALL, Rally and Insights. This robust framework supports methodologies like SPM, Scaled Agile Framework, Value Stream Management and more to successfully bridge the typical gaps between the agency’s strategic planning and operational sides. 

The challenge: Modernizing legacy IT

Outdated IT systems lead to security vulnerabilities, operational inefficiencies and integration difficulties. Modernization is crucial for enhanced service delivery, stronger cybersecurity and successful mission execution, but budget constraints and unforeseen time-critical directives often complicate modernization efforts.

ValueOps and Strategic Portfolio Management

ValueOps promotes a value-driven approach to IT management, directly linking investments to agency missions. SPM is essential for organizations to ensure their resources are allocated to the most impactful initiatives.

ValueOps in action

A global aerospace leader used SPM to enhance its product development lifecycle management. As a result, the company optimized resource allocation, prioritized projects based on strategic fit, and improved on-time and within-budget delivery, leading to faster time to market and increased revenue. After two years, the aerospace company had saved hundreds of millions of dollars by eliminating overlapping work. This demonstrates the tangible benefits of ValueOps in complex organizations similar in scale to some public sector agencies.

Implementing ValueOps in government agencies

Broadcom’s experienced implementation partners recommend a structured approach to deploy ValueOps in government agencies successfully:

ValueOps, with its focus on SPM for the public sector, is a potent framework for cost-effective and mission-focused government IT modernization. By aligning technology investments with agency missions, optimizing resource allocation and promoting transparency and collaboration, ValueOps empowers agencies to modernize effectively, maximizing taxpayer dollars and enhancing mission outcomes.

Learn more about how the strategic implementation of ValueOps principles can drive significant cost savings, improved efficiency and streamlined operations.

Bipartisan bill to modernize federal tech procurement gets another shot in House

A bill to modernize the federal procurement system is back on the table after stalling out in Congress late last year.

Reps. Eric Burlison, R-Mo., and Suhas Subramanyam, D-Va., on Wednesday reintroduced the Federal Improvement in Technology (FIT) Procurement Act, legislation that would alter how the federal government purchases technology. 

The FIT Procurement Act passed the House last December, but a companion bill from Sens. Ted Cruz, R-Texas, and Gary Peters, D-Mich., didn’t advance out of the chamber.

A press release announcing the bill’s reintroduction touted projections that it would save taxpayers millions of dollars annually and boost government efficiency.

“The government’s procurement system is slow, outdated, and frustrating,” Burlison said in the release. “The FIT Procurement Act cuts through the red tape, saves taxpayers money, and finally brings procurement practices up to the standards of any efficient business.” 

The legislation would raise the micro-purchase threshold from $10,000 to $25,000, a change the lawmakers said would cut down on buying bureaucracies and allow agencies to more quickly make purchases.

The bill calls for the simplified acquisition threshold to be raised from $250,000 to $500,000, a provision that the press release said will enable “faster, more flexible contracting that also opens doors for small businesses.” The legislation also seeks advanced training for procurement staff to foster more informed purchasing practices.

“The FIT Procurement Act is designed to help federal agencies more easily access new technologies while cutting costs and minimizing waste,” Subramanyam said in the press release. “This bipartisan bill will give small businesses more opportunities to compete for government contracts, while also saving tens of millions of dollars annually.” 

The bill is backed by a host of tech and business groups, including the Software & Information Industry Association, the American Consumer Institute, the Small Business Roundtable, the Taxpayers Protection Alliance, the Professional Services Council and the Alliance for Digital Innovation.

Measures in the bill “directly align with PSC’s mission to advocate for a modern, efficient, and competitive federal marketplace,” Professional Services Council CEO James Carroll wrote in a letter to Burlison. “By enabling agencies to acquire and deploy advanced capabilities more quickly and responsibly, the FIT Procurement Act supports better mission outcomes, stronger national security, and a more robust economy.”

The Alliance for Digital Innovation — which counts Amazon Web Services, Crowdstrike, Google Cloud, Palantir, Salesforce, Workday and many others among its members — said in a letter to the top lawmakers on the House Oversight Committee that it strongly endorses the bill’s provisions to increase the micro-purchase and simplified acquisition thresholds, as well as the enablement of subscription-based pricing.

“As federal agencies strive to meet the increasing demands of a digital-first world, the FIT Act, if passed, will facilitate a competitive, flexible procurement environment that encourages innovation, reduces acquisition delays, and creates new opportunities for businesses to enter the federal contracting space,” the letter said.

With FedRAMP High accreditation, Salesforce brings agentic AI to tackle government efficiency goals

As the Trump administration continues its pursuit of efficiency as a top priority, Salesforce believes agentic AI can help drive toward that goal and offset agency resource constraints.

The customer relationship management cloud giant recently received a FedRAMP High accreditation for its Agentforce platform, which will allow civilian agencies handling some of the government’s most sensitive data to introduce AI agents for their workflows managed by Salesforce.

Particularly, as the Department of Government Efficiency looks to cut back on federal spending and dramatically reduce agency employee counts, it couldn’t come at a better time, according to Paul Tatum, who leads Salesforce’s Global Public Sector Solutions Engineering team.

Amid DOGE’s reshaping of federal operations, “what we’re being asked by agencies … is: ‘Can you start building a digital agent? Here’s my problem,’” Tatum explained. Employees at those agencies, he said, “are doing great work, but frankly, are underresourced against the workload that they’ve been given.”

With a huge footprint as one of the federal government’s most-licensed software platforms, Salesforce is integrating the agents as part of its existing platform for federal customers, Tatum said, adding that the company is currently doing demos and proofs of concept for those agencies.

In the federal context, Salesforce sees AI agents serving a need in “adjudication” contexts, such as when an agency issues a benefit, makes a payment, or takes other similar actions on some service delivery, Tatum told FedScoop.

“There’s an application, there’s a case, there’s a request for services, and government ultimately has to decide yes or no,” he said. “When they’re deciding that, they’re comparing it against some kind of policy, and that can be pretty hard. The policies are long, they’re complicated, they’re updated frequently. And so what we’re finding is these AI agents are extremely good at helping provide recommendations on that adjudication.”

Working with federal personnel, these digital assistants would then serve as “copilots” to issue recommended actions for a human’s final review.  

Federal agencies are abuzz with excitement about the possibilities of agentic AI, seen as a progression from generative AI in which the technology goes a step further to take or direct an action. The CIA’s chief AI officer recently said the emerging field is the most exciting recent development in AI and that the agency will look to AI agents to support business-oriented use cases. 

On the government’s fitness for agentic AI adoption, Tatum said it is “just primed for it” and an ideal candidate. 

“All of the documentation policies are very well structured. The data is super clean. It’s very clear, the use cases of this adjudication,” he said. “I think it’s going to help government be more efficient and more responsive.”
Salesforce isn’t the first or only technology company to lean into agentic AI for federal use cases. Amazon, Google and ServiceNow in recent months have also announced FedRAMP authorizations for agencies to use their AI agents.

Federal workers rarely seek DeepSeek, but it’s happened

By and large, people don’t seem to be trying to access technology created by DeepSeek — the Chinese AI firm that’s rattled leading U.S. AI companies and lawmakers — on government systems. But it has happened at least once at a federal civilian agency. 

Since January, there’s been one attempt to access DeepSeek at the U.S. Department of Agriculture, a spokesperson for the agency confirmed to FedScoop. The USDA successfully prevented access to the technology and has blocked DeepSeek through Microsoft’s Defender for Cloud Application service since Jan. 28, the spokesperson added. DeepSeek is banned along with other public AI sites “based on risk levels that Microsoft provides in their Defender applications,” the person said. 

The agency did not say whether there were attempts to access the technology before the block was implemented. 

Lawmakers are increasingly concerned about DeepSeek, a China-based large language model developer that threatens the dominance of American AI companies like OpenAI and Anthropic. In the view of many federal officials, the company’s technology raises serious security concerns. 

On Wednesday, lawmakers proposed the No Adversarial Al Act, which would ban the use of DeepSeek on government devices, create a registry of foreign adversary AI systems and establish a method for these technologies to be delisted.

There have been other proposals to both ban DeepSeek on government devices and bar its use by federal contractors. A U.S. official recently told Reuters that the AI firm is assisting Chinese military and intelligence operations, including by helping the government skirt export controls on chips. 

Press representatives for the House Select Committee on China, the panel in which the bill was introduced, did not immediately respond to FedScoop’s question as to whether they were aware of any attempts to use the technology on government services. 

When DeepSeek first came out, the Office of the Federal Chief Information Officer conducted a very informal review that involved some White House staff reaching out to a number of federal agencies to determine if the technology was being used. However, nothing significant came of that process, a former White House AI official told FedScoop. 

One source said they hadn’t received anything from the Federal CIO’s office on DeepSeek. A request for comment from the Office of Management and Budget, the White House agency that houses the Office of the Federal CIO, did not receive a response by publication time. 

Agencies take proactive approach to DeepSeek bans

The movement to pass a law officially banning DeepSeek on U.S. government systems is growing, but many federal agencies have already taken action to limit the service on their devices and networks. In January, NASA banned access to DeepSeek, CNBC reported. The Pentagon also blocked access to the tool that month after some employees were found to have used the service, Bloomberg reported. 

The Department of Commerce banned DeepSeek on government devices, according to a Reuters story published in March. The U.S. Navy and the House have also taken action to prevent the use of the technology.

The Transportation Department formally blocked DeepSeek on Jan. 30, though there were some initial challenges blocking all the URLs for the application, an official at the agency told FedScoop. 

At the Treasury Department, there was no need to explicitly call out DeepSeek because the agency’s existing IT supply chain would have already prevented its use, a former agency official told FedScoop. 

The Department of Energy, meanwhile, immediately blocked DeepSeek when the technology was released in January, a former agency official said. 

In March, Energy’s chief information officer signed a memorandum to the other CIOs within the department, “indicating that DeepSeek and its products are not authorized to be accessed or used on DOE assets or personal devices used to access any DOE network,” a spokesperson for the agency added. 

“Any violation of this must be reported to the local Chief Information Security Officer. The memo allowed exceptions, with conditions, for AI research and development at national labs,” the spokesperson said. They also noted that the department is aware of DeepSeek and all AI applications because the agency deploys a supply chain risk assessment program that reviews all the applications used on its networks. 

Complete bans on the technology are complicated by the fact that government workers may try to access the technology for research and other purposes. The No Adversarial AI Act, for example, includes exceptions for certain applications, including research, counter-terrorism efforts, and “mission-critical needs,” a press release said.

But while there might be some benefit to formally banning DeepSeek, the reality is that the technology was already restricted, and where it was used, there may have been good justifications, a former government official with knowledge of the issue told FedScoop. It would be more important, the person said, for Congress to help federal staff have access to technology that is better than DeepSeek so that they can enjoy the efficiency of using generative AI without having to turn to “worse Chinese models in the first place.” 

The Department of Justice declined to comment and several other CFO Act agencies didn’t respond to a request for comment.

Lack of IRS transparency on AI jeopardizes public trust, advisory panel says

A little more than a year ago, the IRS had listed 68 artificial intelligence use cases in its public inventory, providing details on tools aimed at everything from improving customer service interactions to flagging potentially audit-worthy returns.

Today, that use case inventory is nowhere to be found on the Treasury Department’s website, a fact that an advisory panel to the tax agency said Wednesday could undercut IRS efforts to build public trust in how it uses new technologies.

The IRS’s Electronic Tax Administration Advisory Committee (ETAAC) said in its annual report that the agency’s decision to pull down its inventory — which it said was done to “ensure IRS alignment with executive orders that remain in effect regarding AI governance” — means the public no longer has access to information about how AI is deployed in tax operations.

“Given that mistrust generally stems from the lack of understanding of a particular topic and the ease of spreading sensationalized misinformation — the latter of which tends to capitalize on the former — the government must ensure the public can quickly obtain a complete and accurate understanding of a topic, especially one as important and nascent as AI, while seldom leaving any possibility of misinterpretation that may harm public trust in the IRS,” the report stated. 

ETAAC members “strongly” recommended that the IRS republish its AI use case inventory and a “frequently updated dashboard/web page” containing a description of IRS policy positions on AI, current use cases, details on third-party data sharing and data security measures, related FAQs and more. The inventory should describe use cases “in plain language and terms easily understandable by everyday Americans, in addition to other actions that [the IRS] may take as a result of” the January AI executive order from President Donald Trump.

The advisers also pushed the IRS to conduct town hall-style meetings on AI use at the agency, ideally helmed by executives or business unit leaders who can answer questions and source ideas from the public.  

ETAAC envisions a modified approval process for AI projects led by the agency’s chief data and analytics officer that would “better guarantee a project’s success” and ease reporting mechanisms for technical issues or inaccuracies. The panel also suggests more engagement with IRS employees, seeking feedback on how they use AI in their professional and personal lives and conducting internal surveys on in-house tools.

Trump officials have said the IRS has big plans for AI at a time when the agency has undergone massive downsizing. Treasury Secretary Scott Bessent told House lawmakers last month that “smarter IT, through this AI boom” will enhance collections. New IRS Commissioner Billy Long, meanwhile, has said he wants the agency to take “clues from the private sector,” comments that one former IRS IT executive told FedScoop most likely means a greater embrace of AI and automation, specifically to “accomplish many tasks that deal with collection and refunds.”

The Taxpayer Advocate Service, which also released its annual report to Congress on Wednesday, sees a greater — and more public-facing — role for AI going forward. The independent IRS body said if the agency “can use artificial intelligence to effectively authenticate the caller and address a broader range of taxpayer issues, it can assist more taxpayers quickly and accurately, allowing employees to help taxpayers who require personal assistance.”

Other recommendations

The recommendations from both organizations come in the wake of substantial reductions to the IRS workforce. According to the TAS, the agency has lost more than 25% of its workforce since the beginning of the Trump administration.

Erin M. Collins, the National Taxpayer Advocate, wrote in her letter to Congress that reductions of that kind will likely have a major impact on the next filing season — a prediction former IRS executives have shared with FedScoop. “Looking forward, taxpayers may face more challenges,” she said, attributing such issues in part to staffing cuts.

With those reductions in mind, TAS spells out ways the IRS can use modern technology to improve services, including AI in phone calls and the exploration of other opportunities for the agency to “implement similar automation technology strategies.”

The report also pushes for increased transparency on IT modernization efforts, expanded online account capabilities, improved identity verification processes, bolstered digital service offerings and more.

“Modernizing and expanding IRS online account functionality is critical to enhancing taxpayer service, eliminating paper, and reducing burdens on traditional support channels,” TAS said. “By prioritizing taxpayer needs and ensuring inclusive, accessible design, the IRS can empower users with tools that improve compliance, reduce frustration, and build trust in the tax system.”

ETAAC’s report contains several other recommendations that touch on tech, including continued modernization enhancements, better coordination on real-time data-sharing from free filing options, an acceleration of human-centered design principles that were a hallmark of Direct File, and additional tools to combat scams and schemes promoted on social media and other platforms. 

“Currently, the IRS lacks a streamlined and comprehensive tool for taxpayers and tax professionals to provide information about identity theft, data breaches, and other scams and schemes,” the report said. “ETAAC encourages the IRS to evaluate whether the current approach supports consistent service across channels. While offering multiple tools gives the public some flexibility, there is potential for inconsistent experiences.”

This story was updated June 25, 2025, with additional material from the Taxpayer Advocate Service report.

Congress seeks ban on government use of foreign adversary AI 

Federal agencies would be barred from using artificial intelligence linked to the Chinese government under legislation introduced Wednesday by a bipartisan group of House and Senate lawmakers.

The No Adversarial Al Act proposal from Reps. John Moolenaar, R-Mich., and Raja Krishnamoorthi, D-Ill., the chair and ranking member of the House Select Committee on China, respectively, is a companion to legislation from Sens. Rick Scott, R-Fla., and Gary Peters, D-Mich. 

The bill is the latest in a series of other congressional proposals focused on DeepSeek, a Chinese startup whose low-cost AI model has stirred panic in U.S. tech and AI companies. A bipartisan pair of senators introduced a proposal last month to formally ban its use by federal contractors. Notably, a U.S. official recently told Reuters that DeepSeek was assisting Chinese military and intelligence work. 

Some agencies, like NASA, have issued specific memoranda focused on barring the technology’s use in the federal government. 

The House bill was announced in conjunction with a hearing Wednesday focused on American AI leadership and a committee campaign on raising concerns about protecting American technology and innovation from foreign adversaries. 

This bill, according to a press release, calls for the creation of a list of foreign adversary AI systems managed by the Federal Acquisition Security Council, establish a “delisting” process for companies to show they aren’t working with adversary tech, and formally ban federal agencies from working with the technology in most circumstances.

“With clear evidence that China can have access to U.S. user data on AI systems, it’s absolutely insane for our own federal agencies to be using these dangerous platforms and subject our government to Beijing’s control,” Scott said in a statement. 

Related legislation introduced this year includes a bipartisan Senate bill that would ban DeepSeek from all federal government devices and networks and a bipartisan House bill that would prohibit federal employees from using DeepSeek on their government-issued devices.

“Chinese, Russian, and other adversary AI systems simply do not belong on government devices, and certainly shouldn’t be entrusted with government data,” Krishnamoorthi added.

VA secretary pledges progress on EHR rollout amid major workforce cuts

Veterans Affairs Secretary Doug Collins attempted to assuage lawmakers’ concerns Tuesday over how the agency plans to deliver critical health tech services amid drastic cuts to its workforce.

Appearing before the Senate Appropriations Military Construction, Veterans Affairs, and Related Agencies Subcommittee, Collins said the VA is full steam ahead on planned deployments of its oft-troubled electronic health record at additional facilities, and is also pushing forward on the rollout of its External Provider Scheduling tool.

The VA said in February that it had dismissed 1,000 employees, while the Associated Press reported in March that it planned to cut 80,000 staffers. The Oracle EHR system, meanwhile — plagued by technical problems since its launch during the first Trump administration — is scheduled to be deployed at 13 medical facilities by 2026. 

Sen. Gary Peters, D-Mich., whose state is waiting on full deployment of the EHR at VA facilities in Ann Arbor, Battle Creek, Detroit and Saginaw, asked Collins how he would “ensure that outages, slowdowns and disruptions to veterans care will not occur once again under this new EHR deployment plan.”

The secretary acknowledged the Biden administration’s decision to pause the EHR rollout in the wake of several issues, and said his first move to get the modernization effort back on track was to bring together Dr. Neil Evans, other VA leaders and top Oracle brass. 

“There was differences of opinion,” Collins said, but the VA ultimately landed on taking “the Oracle standardization for coding” paired with “about a 10% gap to where VA would have our uniqueness.” 

The White House’s fiscal year 2026 budget calls for a $2.17 billion increase to the VA’s EHR initiative, a funding jump that Collins called “vitally important” to ensure doctors and veterans can communicate effectively. 

“You’re using a system that’s costing us literally hundreds of millions of dollars, that’s used nowhere else in the world except the VA,” he said. “So we need to move forward on this. I do believe we have a path that is safe, that is effective and will be cost-effective, because Oracle understands that they’ve got to provide this.”

While it doesn’t get nearly the amount of attention — or funding — as the EHR, the VA’s External Provider Scheduling (EPS) tool has also experienced some implementation speedbumps, with House lawmakers pushing for a quicker rollout of the technology that links agency scheduling teams to community providers.

Sen. Deb Fischer, R-Neb., asked Collins for “reassurance that the EPS rollout will continue without disruption under the current administration.”

Collins said the VA is “going to continue with EPS” and has generated positive data thus far, including a reduction in the number of days it takes to make an initial contact in the system and then get a scheduled appointment. 

“So we’re doing everything we possibly can,” the secretary said. Those data points “will be definitely used as we go forward for the scheduling on what we can get.”

GSA inks deal with Elastic on discounted product offerings for agencies

A suite of Elastic products will be discounted for agencies by up to 60% under a new deal announced Tuesday by the General Services Administration.

The agreement, part of the GSA’s OneGov strategy to modernize how the government purchases goods and services, will give agencies access to discounts of Elastic’s self-managed solution starting at 27.5%, climbing to higher savings based on governmentwide annual spending. 

Stephen Ehikian, GSA’s acting administrator, said in a press release that the pact “represents a significant step in our efforts to drive cost efficiencies and modernize IT infrastructure across the federal government.” 

“Elastic’s capabilities in unifying data for search, security and observability directly support the GSA’s effort to help federal agencies make sense of vast amounts of information, proactively identify security threats, and ensure their critical systems are running optimally for the American people,” he added.

Additionally, discounts start at 15% for FedRAMP Moderate cloud deployments via GovCloud, jumping to 32% at the top volume tier. The pricing options are locked in for orders made prior to Sept. 30, 2027.

Josh Gruenbaum, commissioner of GSA’s Federal Acquisition Service, said in a press release that the agency appreciates Elastic’s “cooperative approach in establishing pricing structures that are not only cost-effective in the present but also guarantee sustained financial benefits for taxpayers in the long run. Through the OneGov initiative, we are actively converting these beneficial collaborative relationships into formalized, enduring agreements with our industry partners, with the goal of systematically reducing procurement expenses for the foreseeable future.”

Products offered by Elastic through GSA Advantage include a host of Search AI solutions, including tools to monitor security incident events, a vector database for building generative AI applications, and zero trust architecture. The company’s Search AI platform “accelerates operational resilience, powers complex cyber threat detection, and delivers instantly searchable results, AI-driven relevance, and real‑time analysis,” per the press release.

“Elastic is committed to ensuring taxpayer dollars are used more efficiently by empowering the federal government to modernize and advance its IT capabilities through Search AI,” Elastic CEO Ash Kulkarni said in the release. “We are proud to partner with GSA to bring greater capabilities to federal agencies at unprecedented savings, potentially reaching hundreds of millions of dollars in cost reductions over time.”

GSA has previously announced OneGov deals with Google, Adobe, Microsoft and Salesforce, in addition to unveiling plans to disrupt the tech reseller market in favor of forming more direct relationships with IT manufacturers.

Q&A: Workday CEO sees $1B opportunity in governmentwide HR modernization

The federal government could save $1 billion in productivity simply by modernizing outdated legacy HR systems across agencies, according to research that Workday put out last month.

But that’s just the tip of the iceberg, if you ask the company’s CEO Carl Eschenbach, who told FedScoop in an exclusive interview that there’s an appetite among some agencies in the Trump administration to move to a common, cloud-based HR system. Beyond making federal human capital workers more productive, such a platform that spans across the federal government could completely transform the way it manages, moves, optimizes and upskills personnel, Eschenbach said, emphasizing how different that conversation is from those Workday has had with federal agencies in the past.

“That didn’t happen in the past. You go to one agency, they were siloed,” he said. “Now we’re talking about things like a governmentwide platform to be able to manage your entire 2 million-plus workforce and do it on the same platform. We start to learn about the skills of our employees. We start to think about how we can move people from one organization to the other to meet the needs of a project, right?”

Before a day on the Hill meeting with lawmakers to educate them on the role his company could play in modernizing the federal government’s workforce and financial portfolios, Eschenbach also shared how Workday’s success with Fortune 500 companies has it ready to move quickly to modernize federal agencies, the “unfair advantage” it has with AI technology, and much more.

This transcript has been edited for clarity and length. 

FedScoop: Let’s start with the $1 billion question: Workday recently produced research that makes the case that outdated legacy HR systems cost the federal government $1 billion every year, thus justifying an imperative to transform federal human capital management. That’s a massive number. How are you working to solve that?

Carl Eschenbach: There’s a billion dollars of productivity and efficiencies lost on an annual basis based on our research, because of antiquated systems that are on-premise supporting our employees today. That’s massive, right? So when people talk about government efficiencies, there’s a perfect example where I think the government will lean into someone like Workday, leverage our platform to drive efficiencies, but also drive massive productivity changes, right? And I think we often say that AI will drive a step function change in human productivity, and the way you’re going to do that is with a modernized platform like Workday. And that’s research we did and we got back. This is what we’re hearing from the government itself. A billion dollars of government efficiency across your people is pretty impressive.   

FS: When you put it like that, it sounds like a fairly simple move for this administration, which is prioritizing efficiency and savings, to cut $1 billion. Is it that simple? 

CE: It is a transformation, though. You do have to go through a transformation to move from on-premise into the cloud environment for HR and finance. But this is what we do. We do this for a living. We do massive transformations. And we’re ready to step up and help the government do it as well. We’re already in the process of doing this, as you know, across a number of different agencies. We have the Department of Energy, which was a huge success. And then we’re working in the DOD area with DISA and on the intel side with DIA.

So, yeah, we’re ready to step up and help the government achieve their goals and deliver an employee experience that just hasn’t existed probably in decades across the federal or public sector. That’s our opportunity. And I don’t think it’s ‘if.’ It’s ‘when and how fast?’ And it’s about moving through all of the policies and the changes that the administration is making, right? I think the opportunity is there. It’s really about: How do we accelerate actually getting done and people making decisions to move forward?

FS: You mentioned some contracts you have with federal agencies. Those are large agencies. How does that work and transformation journey compare to the work Workday is most known for on the commercial side?

CE: It’s different, but again, there are a lot of similarities. The biggest difference is the platform itself, and some of the requirements the government has around security and compliance and controls of the system itself. So we can’t just take our commercial platform, roll it into the federal government and support DIA or DISA with the existing platform. But we leverage the majority of the platform, and then we put the enhancements on top of it, especially around the security requirements. That’s the biggest difference. But there’s a lot of commonality across our commercially available platform today. And in fact, as we go into other agencies outside of DOD and the intel agencies, one of the things the government has been telling us is they want to drive efficiencies through standardization. Not everything is a snowflake, and not every agency needs their own thing. And when you do these modernizations or transformational exercises, one of the things you get on the other side of it, if you do it right, is you standardize your process and controls and your workflows, and that’s what drives the efficiencies and productivity gains for the employees, right? There’s a lot of commonality in what we do with the major enterprises that we work with as well. But, to your point, I think there’s a belief that everything is radically different [in the public sector] when, in fact, there are differences, but it’s not a radical differentiation from what we see in a Fortune 500 company deploying or re-platforming to Workday. Which gives us the confidence that we can do it, and we can do it at a very rapid pace as well. So that’s why we’re so confident. And this is one of the reasons, quite honestly, the last two years, we’ve gone all in on the U.S. federal government, because we see the opportunity. We’ve had enough experience now to say that it’s not that different than what we’re doing in the commercial world, and we get to leverage all of that 20 years of experience and bring it to the federal government to modernize their systems.

FS: There’s a very transformative moment going on in Washington and the federal government right now. And whether it’s through executive mandate or other changing power dynamics, as you mentioned, there is a push to drive more commercial, innovative technologies into agencies. How has that impacted the way you’re approaching business with the federal government?

CE: Because the government is looking to drive efficiencies across all the agencies, across all different sectors, we absolutely see them leaning in more aggressively to folks like us than we’ve historically seen in the past. We also see a bit more of a sense of urgency, right? There’s a whole speed component to this and how rapidly they want to make changes to drive transformation. So we do see a pretty big change with the new administration, both from policy as well as interest in modernizing, as well as doing it faster than they’ve done in the past. But we see the absolute change in the administration and their desire to run the federal government as much as a business as we see in the commercial world today, and it comes back to efficiencies. It comes back to speed and agility.

There’s also this notion of starting to move your federal workforce across agencies, and you can’t do that with a siloed approach like we see today with all the different systems. Every agency has their own system in place. It’s on-premise. Some might be a little bit in the cloud. But if you have a common platform, you now give talent mobility and talent optimization opportunities to the federal government to move your workforce around. That’s a really big part of the discussions we’re having across the different agencies. That didn’t happen in the past. You go to one agency, they were siloed. Now we’re talking about things like a governmentwide platform to be able to manage your entire 2 million-plus workforce and do it on the same platform. We start to learn about the skills of our employees. We start to think about how we can move people from one organization to the other to meet the needs of a project, right? So that’s a different conversation than we’ve seen in the past. 

FS: You’re here in D.C. because you have several meetings with lawmakers on the Hill. Obviously they have a role in how federal workforce modernization could play out. What is the strategy in working with Congress?

CE: We have four or five different meetings on the Hill just in the next 24 hours. A lot of it is education — educating them on the power of the Workday platform and the potential impact it can have on the federal government, for all of us to achieve our mission as a country. I want to make sure that the federal government understands that an investment in the new architecture is required to actually drive change in how we’re supporting our employees. A lot of times in the past, if you talk to people here, my opinion is they wouldn’t want to spend money. But to modernize, you have to spend money, and through that modernization, you actually save money. The inefficiencies we see on-premise are just bonkers what you see today, and we’re helping to modernize that. We see an almost $3 billion [savings] opportunity just for us to help modernize these infrastructures going forward. So we’re meeting with different people on the Hill who are responsible for different areas across the federal government, and as much as anything else, it’s us educating them on Workday and the impact we can have on the government.

FS: We haven’t touched much on AI. But recently, there’s been more of a fever pitch in the federal space around agentic AI. How are you looking to cater to the federal government’s adoption of that, particularly as a driver of efficiency? 

CE: I think the first thing is we need to continue to educate — not just the federal government and all the agencies, but I’d say everybody in general — that AI is not going to displace all the human workers in the world. We are going to learn to peacefully coexist and leverage this technology to drive efficiencies and drive productivity gains. When you talk about productivity gains, you’re talking about humans being more productive. So I think one of the narratives that we’re spending time educating the government on is the fact that AI will help drive your efficiencies and drive productivity gains. Will some jobs be eliminated? Yeah, potentially. So we’re not naive, but at the same time, we also know there’s so much work to be done out there. What we need to do is leverage this technology so we create a new opportunity for existing employees to have new skills to go and work on more productive stuff, [and] let the mundane tasks be taken care of by AI.

We think we actually have an unfair advantage around technology when it comes to AI because of our data. We have 70 million users on our platform, a billion transactions a year. Today we’re processing, I think it’s up to 25% of the job applications in the United States. This all gives us an incredible data set to build domain-specific agents that will support our customers, both in the public sector and the private sector. So we’re huge fans of AI. We know the power of it. We do believe in regulation, but not overregulating, right? Because we want to drive innovation. I think the administration has shown a willingness to be a little bit more, if you will, less aggressive on regulation to allow AI. 

But, yes, the government is actually very interested in it. It comes back to efficiencies. Efficiencies and productivity gains are two big factors that you get when you implement AI, and it’s something I think we’re doing as well as anyone in the market today. We’re bringing to market our own agents. We believe in the quality of agents, not quantity. There are people talking about bringing thousands of agents to the market. But if you can’t show true business value and business outcomes with your agents, these agents actually can pose a threat, because they’re just running around wild right in your infrastructure, getting access to data that maybe they shouldn’t. So you have to have security, policy and control around those agents as they enter into the enterprise to actually provide the right level of value, or there’s a risk that you can pose with what we call ‘agents for all.’