The Public Sector Can Teach Us a Lot About Digitizing Customer Service

Governments aren’t typically early adopters, but public agencies in Australia are taking the lead in using bots to improve services.

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Digital customer service agents — also known as virtual assistants, chatbots, or softbots — are poised to transform customer service over the next decade. Essentially software algorithms capable of interacting with humans, these agents use big data analytics and technologies like natural language processing and machine learning to develop accurate profiles of users and interact with them.1 According to a report by Grand View Research, about 45% of consumers worldwide, across all industries, now prefer digital agents as the primary point of communication with organizations. This translates into an estimated global market worth $1.25 billion by 2025.2

At most companies, the general strategy is to use digital agents to sift through incoming customer requests (via call centers, websites, and smartphone apps) and then process the most straightforward issues, such as requests for basic information like an account balance — the bulk of customer inquiries at many organizations. More complex issues get passed along to human agents. In that way, digital agents reduce the humans’ workload and associated costs (despite implementation costs, which can be high).3

There is a perception at many companies that these tools can handle only basic inquiries, and that anything else must be handled by human reps. But that is not true. We have studied both public and private sector applications of digital agents in our home market, Australia, over the past four years.4 Through that research, we have found that public sector agencies are already using these technologies to handle complex inquiries from citizens regarding services.

The public sector implementation itself runs counter to the conventional wisdom. In most countries, government entities are slower than businesses to adopt new technologies. They don’t have the budget to make such investments, they struggle with institutional inertia, and they tend to be risk averse, in part due to reputational risk if they get something wrong. Yet since 2015, some public service organizations in Australia, particularly providers of public welfare services, have invested heavily in digital agents. These entities deal with extremely high volumes of interactions and need to increase productivity by facilitating self-service among citizens.



1. K. Kirkpatrick, “AI in Contact Centers,” Communications of the ACM 60, no. 8 (August 2017); and H. Demirkan, C. Bess, J. Spohrer, A. Rayes, D. Allen, and Y. Moghaddam, “Innovations With Smart Service Systems: Analytics, Big Data, Cognitive Assistance, and the Internet of Everything,” Communications of the Association for Information Systems 37, article 35 (October 2015).

2. Grand View Research, “Chatbot Market Size to Reach $1.25 Billion by 2025,” August 2017.

3. Demirkan et al., “Innovations With Smart Service Systems.”

4. The study that is most relevant to this article has not been published yet, but we have published several studies that examine customer adoption of new technologies in both public and private sector service delivery. See, for instance: M. Leyer, M. Tate, F. Bär, M. Kowalkiewicz, and M. Rosemann, “Customer Acceptance of Pro-Active Services: A Scenario-Based Empirical Study,” Proceedings of the 25th European Conference on Information Systems, June 5-10, 2017: 1,837-1,852; and D. Oberle, A. Barros, U. Kylau, and S. Heinzl, “A Unified Description Language for Human to Automated Services,” Information Systems 38, no. 1 (March 2013): 155-181.

5. Australian Government Department of Human Services, “Annual Report 2016-2017,” October 2017.

6. Salsa Digital, “Digital Transformation in Government Insight #51: Chatbots and the Public Sector,” Feb. 19, 2018.

7. D. Rosenberg, “How Marketers Can Start Integrating AI in Their Work,” Harvard Business Review, May 29, 2018.

8. Microsoft, “Artificial Intelligence Transforms Even the Most Human Services.”

9. G. Nott, “Cognitive Virtual Agent Amelia Debuts on NSW GovDC,” Computerworld, Nov. 10, 2017.

10. Microsoft, “Artificial Intelligence Transforms Even the Most Human Services.”

11. T.H. Davenport and V. Mahidhar, “What’s Your Cognitive Strategy?” MIT Sloan Management Review 59, no. 4 (summer 2018).

12. Rosenberg, “How Marketers Can Start Integrating AI.”

13. Demirkan et al., “Innovations with Smart Service Systems.”

14. J. van Doorn, M. Mende, S.M. Noble, J. Hulland, A.L. Ostrom, D. Grewal, and J.A Petersen, “Domo Arigato Mr. Roboto: Emergence of Automated Social Presence in Organizational Front Lines and Customers’ Service Experiences,” Journal of Service Research 20, no. 1 (February 2017): 43-58.

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