Organisations across Australia and New Zealand are increasingly shifting toward hybrid cloud arrangements as they try to balance AI-driven innovation against cost pressures and data sovereignty requirements, according to a new Forrester report on the state of cloud in the region for 2026. Companies are moving a larger share of workloads and data into managed private cloud environments while still using public cloud, driven by rising hardware costs and heightened focus on where data ultimately resides. Dan Wright, GM cloud and connect at Atturra, told CRN Australia that geopolitical events over the past 12 months have forced organisations to examine data sovereignty much more closely.
The Forrester report recommends that cloud strategies should now treat AI as the default workload rather than a future add-on. AI workloads demand significantly greater compute, memory, and storage capacity, which forces organisations to rethink capacity planning and decide whether it makes economic sense to purchase and continually refresh infrastructure themselves, consume it through public cloud, or adopt managed private cloud as part of a hybrid model. The massive demand for AI infrastructure is also pushing up prices for memory, storage, and other components used in traditional servers, contributing to higher hardware costs across the board, Wright noted.
The report finds that sovereignty, governance, and resilience considerations are compelling organisations to be more deliberate in their cloud decisions. Wright explained that geopolitical developments have prompted many organisations to scrutinise where their data sits, who can access it, and which jurisdictions their technology providers operate under. Organisations now treat data sovereignty as a strategic risk issue rather than simply a compliance exercise, particularly in government, critical infrastructure, and regulated industries. This shift is driving greater demand for Australian-hosted private and sovereign cloud environments as part of broader hybrid strategies, Wright said.
Success in hybrid cloud depends on building what the report calls operational muscle—adopting FinOps for cost control, applying standardisation and automation, and improving data governance and resiliency. Wright said the technology itself is rarely the biggest challenge; instead, organisations need common approaches to governance, security, monitoring, service management, automation, and cost management, or each platform risks becoming another operational silo. The report notes that achieving cloud success requires aligning cloud, AI, and governance to long-term business outcomes, and cloud strategy must account for data gravity, model lifecycle management, and scalable AI infrastructure across public, private, and sovereign environments. When done well, hybrid cloud gives organisations the flexibility to optimise workload placement based on cost, performance, risk, and control rather than being locked into a single infrastructure model, Wright added. For local cloud providers, the confluence of sovereignty concerns and AI infrastructure demands may represent a structural advantage, particularly as organisations seek in-country options that can deliver both compliance and performance without the economic penalty of owning and refreshing hardware at the pace AI workloads now require.