When Finance Minister Nicola Willis announced 8700 public sector job cuts, she pointed to AI as one way the remaining workforce would absorb the load. What she didn’t spell out was which AI tools agencies would actually be using. New reporting has filled in that gap, and the answer raises some uncomfortable questions about how the government buys technology.
Based on Official Information Act responses and the government’s own internal survey, Microsoft Copilot has emerged as the primary AI tool across public agencies. What makes that notable isn’t the choice of software so much as how it got there. Rather than going through a competitive tender process, Copilot was offered as an add-on to the Microsoft suite that agencies were already using. Because it slots into existing licensing agreements rather than requiring a new procurement, it never had to clear the bar that a standalone AI platform purchase would.
The mechanics are straightforward enough. Central government contracts already cover core Microsoft 365 tools across most agencies. Activating Copilot is a relatively small additional cost per user, cheaper and simpler on paper than running a fresh tender for a different AI provider. Multiplied across dozens of agencies making the same low-friction decision independently, it adds up to something close to a default national AI policy, set not by ministers or officials weighing options, but by procurement convenience.
Experts have flagged the obvious risk: vendor lock-in. The more deeply an agency embeds itself in one company’s ecosystem, spanning productivity software, cloud infrastructure, cybersecurity tools and now AI, the higher the switching costs become down the track, and the weaker the incentive for that vendor to keep pricing and terms competitive.
Should Kiwi businesses be worried about their own reliance on Microsoft? It’s worth separating the government’s procurement problem from the private sector’s day-to-day reality. Most small and medium businesses aren’t buying software through formal tenders in the first place, so the “no competitive process” critique doesn’t translate directly.
What does translate is the underlying lock-in risk. A business that runs its email, documents, storage and now AI assistant entirely through one vendor has less leverage if pricing changes, less flexibility if a better tool comes along, and more exposure if that vendor has an outage or security incident.
That’s not necessarily a reason to steer away from Microsoft outright, Copilot is a capable, well-supported product with strong compliance credentials. It’s more a reason to make the choice deliberately rather than by default.
Businesses weighing up AI tools should treat it the way any other major software decision deserves: compare a couple of options, understand what data each one can access, and revisit the decision periodically rather than assuming the incumbent supplier is still the best fit two or three years on.