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Jul 21 2026
Artificial Intelligence

Why the Right Infrastructure for Government AI Workloads Might Be Hybrid

IT leaders are turning to hybrid environments to meet the demands of a growing variety of artificial intelligence use cases.

As state and local governments become more experienced with using artificial intelligence to improve constituent services and agency operations, they are looking to optimize those initiatives with the technology infrastructure that best meets their needs. For a growing number of agencies, this means running AI workloads in hybrid environments.

In fact, IDC predicts that by 2028, 75% of enterprise AI workloads will be deployed on hybrid infrastructure.

“The future of the data center is hybrid,” says Sana Gutierrez, senior manager of the data and artificial intelligence practice at CDW. “There are organizations that are going to decide to begin within a cloud environment, and that posture can completely change. They need to understand how they want to take workloads, whether they’re in the cloud, on-premises or in a neocloud — and put them in the right place to gain maximum benefit.”

As government IT leaders build infrastructure that can support AI over the long term, they are balancing modernization goals with security, compliance and budget realities. That means making strategic decisions about workload placement while ensuring AI investments support agency missions and constituent outcomes.

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Matching Infrastructure to Agency Needs

One of the key benefits of hybrid infrastructure is that it allows IT teams to place workloads where they best meet agency requirements. Public cloud environments are often well suited for AI experimentation or workloads requiring burst capacity, while on-premises infrastructure may be preferable for applications involving sensitive citizen or public safety data. Likewise, on-premises GPU clusters can support predictable, large-scale inferencing workloads.

READ MORE: Here is a guide to AI governance for state and local agencies.

“Whether an AI workload is running in the cloud or on-premises is going to depend on the organization’s specific needs for artificial intelligence,” says Mariano Carro, principal field solution architect for Microsoft hybrid infrastructure at CDW. “Most of the time, we are going to need some resources in the cloud to do the training and for the high level of compute that we need. But once we get that training complete, we may move a workload on-premises to improve performance or protect data privacy.”

Hybrid infrastructure helps agencies control costs and address GPU scarcity while maintaining data sovereignty and supporting compliance with regulations governing sensitive public-sector information. Keeping data close to processing resources can also reduce latency for AI applications.

Workload Placement: Putting AI Close to Government Data

Workload placement decisions are rarely static. As agencies mature in their use of AI, they often revisit where applications run based on changing cost structures, performance requirements and governance policies.

“Workload placement is going to take into consideration things like latency as well as accessibility,” says Eryn Brodsky, server and storage practice lead at CDW. “Businesses need to think about what AI outcomes they want to leverage the data. You need to have quick access to it, but you also have to ensure that you have proper access to it.”

That balancing act frequently leads to movement between environments over time. Many organizations begin AI initiatives in the cloud because of its flexibility and access to large-scale compute resources. As workloads mature and costs become more predictable, some choose to move those workloads back on-premises.

“It’s not uncommon for us to see customers starting in the cloud, as the majority of our customers are, then bringing those applications back on-premises. We call it repatriation,” Brodsky says. “They repatriate those workloads on-prem because they have to consider the cost of maintaining those applications and those workloads in the cloud versus the cost of being able to invest in the architecture to support them.”

LEARN MORE: IT infrastructure supports AI use cases.

Cost optimization is only one piece of the equation. Performance and efficiency become increasingly important as AI initiatives expand.

“What we’re looking for is lowest cost per function or lowest cost per token,” Gutierrez says. “Leveraging all of the available optimizations — whether it’s through power and cooling, accelerated infrastructure, better data pipelines, better data posture — is really important to achieving the desired outcomes, reducing latency and getting users the information that they need when they need it.”

Those optimizations increasingly depend on matching compute resources to AI workloads. The relationship between CPUs and GPUs has become a critical consideration for agencies modernizing their data centers.

“Advancements in accelerated compute are really important when thinking about the data center of the future,” Gutierrez says. “There are certain applications and certain data center processes that simply work better on a GPU. So, understanding the GPU-CPU relationship in your data center and what workloads or what jobs you can assign to each of those is really important in optimizing your infrastructure.”

Sana Gutierrez
When organizations get AI and accelerated compute right, there is a material benefit to the bottom line of any organization.”

Sana Gutierrez Senior Manager of the Data and Artificial Intelligence Practice, CDW

How Microsoft Azure Local Helps Government AI

As agencies navigate these decisions, platforms that unify management across environments are becoming increasingly valuable. Microsoft’s Azure Local enables organizations to build and scale AI infrastructure while maintaining flexibility in where workloads run.

“Businesses need an infrastructure that can grow with their needs, and with Azure Local, you can do that,” Carro says. “You can begin small, and then you can add modularly to satisfy the needs of your artificial intelligence.”

A key advantage of Azure Local is its ability to provide consistent management across hybrid environments. Centralized oversight enables IT teams to manage resources, enforce policies and ensure workloads are running where they deliver the greatest value.

“Centralized control through Azure Arc is going to give us the way to manage our GPUs, our policies and our workloads across on-premises and the cloud,” Carro says. “This makes it easier for IT teams to scale artificial intelligence consistently without having operational problems, because we are watching everything on the same control panel.”

The platform also addresses one of the core challenges of AI performance: proximity to data. By enabling GPU-accelerated infrastructure on-premises while maintaining cloud connectivity, Azure Local supports both performance and scalability.

“Because AI performance depends on proximity to the data and access to acceleration, we need to have GPU-enabled platforms like Azure Local,” Carro says. “This allows you to have all of your information on-premises for AI, but you could also get resources from the cloud in a hybrid environment to be able to run faster and have better results.”

DIVE DEEPER: Cloud accelerates time-to-value for citizen services.

Aligning Infrastructure With Mission Outcomes

Ultimately, the value of hybrid infrastructure comes down to how well it supports agency priorities. State and local governments that take a thoughtful approach to workload placement, cost management and performance optimization are better positioned to scale AI responsibly while delivering measurable value to employees and constituents.

Organizations may derive numerous benefits by aligning their IT infrastructure with their AI strategy, but the financial outcomes are perhaps the most significant.

“When organizations get AI and accelerated compute right, there is a material benefit to the bottom line of any organization,” Gutierrez says.

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