1. Cloud Centers of Excellence Are Rising— And the Back Office Must Evolve to Keep Pace
Nearly every conversation touched on Cloud Centers of Excellence (CCoEs).
States are evolving from infrastructure providers into internal service brokers—managing cloud, platforms, and shared services on behalf of agencies.
That’s the future.
But the “messy middle” is where things are breaking down.
Right now, we’re seeing:
- Homegrown processes pulling usage data out of Azure or AWS
- Manual spreadsheets passed between IT and finance
- Static allocation models trying to keep up with dynamic consumption
- Increasing pressure for billing transparency as cloud spend grows
In some states, 80%+ of chargeback is already cloud-driven.
And yet the systems supporting it are still manual.
This is the gap.
States want to operate like cloud brokers—but they’re missing the financial infrastructure layer to support that model.
What’s needed isn’t another dashboard.
It’s a sub-ledger for consumption-based services that can:
- Normalize usage data
- Apply pricing and allocation logic
- Generate defensible billing outputs
- Reconcile to vendor invoices
- Feed directly into finance systems
In other words: FinOps + Billing + Governance—working as one system.
2. The “Unfunded AI” Problem Is Already Here
Everyone is talking about AI.
Almost no one has figured out how to pay for it.
In more advanced states, central IT is currently absorbing the cost of AI platforms—particularly token-based usage tied to copilots, LLMs, and automation tools. That works… for now.
But the clock is ticking.
Eventually, those costs will need to be allocated back to agencies. And when that happens, there’s a real risk:
If agencies see a bill they don’t understand, adoption will stall—or worse, they’ll go around central IT entirely.
We’re already hearing early signs of this:
- States unsure how AI consumption will be funded long-term
- No consistent way to track token usage at the agency level
- Concerns about “shadow AI” emerging if governance gets too heavy-handed
This is where consumption showback becomes critical.
Before you ever send a bill, you need to show usage:
What was consumed
- By whom
- When
- And why it costs what it costs
If states don’t establish this visibility now, they risk either:
- Draining central IT budgets, or
- Losing control of AI adoption altogether
3. In State IT, Trust Is the Real Currency
This was the most important—and most overlooked—theme.
In commercial markets, everything is about growth.
In state government, everything is about trust.
CIOs aren’t just managing systems.
They’re managing relationships—with agencies, budget owners, legislators, and the public.
And nothing erodes trust faster than a bill that can’t be explained.
We heard this repeatedly:
- Agencies pushing back on allocations they don’t understand
- Finance teams questioning how costs are calculated
- Leaders concerned about audit exposure—or worse, public scrutiny
The risk isn’t just operational.
It’s reputational.
When IT billing becomes a “black box,” it creates friction, slows adoption, and undermines the very shared services model states are trying to build.
This is why transparency isn’t a feature.
It’s a requirement.
Self-service visibility into:
- Usage
- Rates
- Allocations
- Historical trends
…is what allows CIOs to move from “defending bills” to building alignment across agencies.
What We’re Seeing Across States Right Now
Across conversations at NASTD, a few consistent themes emerged in how states are approaching modernization, funding, and financial operations.
Where Momentum Is Building
- AI Consumption Visibility
States that are further along in AI adoption are already thinking ahead to cost allocation. Even when central IT is covering AI costs today, there is growing recognition that usage transparency needs to be in place now to avoid disruption when those costs are eventually distributed to agencies.
- Cloud Centers of Excellence & FinOps
Many states are actively building or expanding Cloud Centers of Excellence (CCoEs), with a focus on operating as internal service providers. As cloud usage grows, so does the need for structured financial operations (FinOps) to track, manage, and allocate consumption in a scalable way.
- Starting with Billing Transparency
For many organizations, the immediate priority is not full chargeback—it’s creating clear, understandable billing. Establishing visibility into usage, rates, and allocations is becoming a foundational step before introducing more formal cost recovery models.
