Australian firms see AI returns but readiness lags

Kyndryl research shows Australian organisations are reporting stronger returns from artificial intelligence investments while becoming less prepared to manage the risks. The findings are based on responses from 200 senior business leaders in Australia.

The survey found 65% of Australian leaders reported positive returns on AI and machine learning investments, up eight percentage points from the previous year. At the same time, the average share who said they were completely ready to manage external risks fell 10 points to 23%.

The gap was most visible in regulation and competition. Only 18% of Australian leaders said they felt completely ready to manage regulatory change, down 18 points, while readiness for competitive disruption fell 16 points to 22%.

AI adoption in Australia is moving beyond experimentation, with 89% of organisations deploying AI in workflows beyond pilot projects. Yet the figures also point to uneven results: 28% reported a failed AI investment and 25% said they had cancelled a major AI initiative.

More than half of respondents, 56%, said they had substantially changed their AI strategies over the past year. Meanwhile, 66% said they had more AI and automation pilots than they could scale.

Martin Schroeter, Chairman and Chief Executive Officer of Kyndryl, said the figures showed a widening disconnect between ambition and preparedness. "As AI creates significant opportunity, organisations are now focusing on how to make early returns sustainable," he said. "This year's Readiness Report shows a new kind of readiness gap: AI ambitions are moving faster than the systems needed to support them, and the bar for readiness keeps moving as AI becomes more integrated in enterprises. Our data shows that focusing on people, technology and governance can help organisations win with AI and keep the ability to adapt as opportunities evolve."

Security pressure

Cybersecurity emerged as one of the clearest pressure points in the Australian data. Some 61% of leaders said cybersecurity risks were growing faster than their organisation's ability to address them, compared with a global average of 52%.

Readiness in cyber also fell sharply. The proportion of Australian leaders who said they were completely ready to manage cyber risk dropped 13 points, from 41% to 28%.

Even so, many respondents saw AI as useful in threat detection. More than four in five, or 83%, said AI helps their organisations identify threats faster, despite declining confidence in their ability to respond to cyberattacks.

Leaders also expressed concern about the technology itself. Two-thirds of Australian respondents, or 66%, said they were concerned about AI system malfunction or unintended error, yet only 20% said they were completely ready to manage that risk.

Infrastructure gap

The findings suggest many organisations do not equate a modern IT estate with one that is ready for AI at scale. While 65% of Australian leaders said their core IT estate was mostly or fully modernised, 64% said their infrastructure still required significant re-architecting before it could support AI at scale.

Technical debt remains part of that problem. In Australia, 49% of leaders said technical debt was holding them back, above the global figure of 39%.

There were, however, signs some foundational constraints may be easing. The share of Australian leaders saying innovation efforts were delayed by weaknesses in their technology stack fell 12 points from the previous year to 51%.

Workforce lag

The report also pointed to slow progress in adapting workforces to broader AI use. Only 26% of Australian respondents said their workforce was completely ready to use AI, while 29% said their organisations had formally updated roles and responsibilities around AI.

Change management appeared even less advanced. Just 22% said their organisation had fully implemented change management for AI adoption.

Graeme Beardsell, Managing Director of Kyndryl Australia and New Zealand, said the challenge would become more pressing as companies move AI projects into wider business use. "Australian organisations are seeing encouraging returns from AI in some areas, but the findings also show how much work is still required to support AI transformation at scale," he said. "As organisations consider moving more AI initiatives from pilot into production, having strong technology foundations, effective governance and a workforce equipped to adapt will become increasingly important. The potential opportunity for Australian businesses is significant, but capturing it sustainably will depend on building the resilience, readiness and security to support AI as it becomes part of everyday operations."

Sovereignty trade-off

The research also indicated that control over digital operations is becoming a bigger consideration for Australian organisations. Some 64% said they would pay a premium of 10% or more for solutions that offer full operational control if needed, while 65% said greater control was worth slower deployment and slower adoption of advanced technology.

The broader study covered 3,700 senior business leaders across 21 countries. The Australian results suggest that while many organisations are already seeing gains from AI, governance, infrastructure and workforce planning are still lagging behind adoption.