Telecom Italia has served up troubling news for its customer services staff by announcing details of an artificial intelligence (AI) partnership with US software giant Microsoft.

The Italian phone incumbent today said it would use Microsoft's AI technology to develop chatbots and make other improvements to customer care and technical assistance.

A chatbot is a voice- or text-activated digital assistant that can be used instead of an employee to provide support to an organization's customers. According to Norwegian telecom incumbent Telenor, evidence suggests many customers would prefer to use a chatbot than speak to a customer services assistant. (See Downsizing Telenor Pins Margin Hopes on Automation.)

While operators like Vodafone Group plc (NYSE: VOD) have played down the jobs threat from chatbots, others have acknowledged the use of automation and digital tools will lead to headcount reductions. Telenor Group (Nasdaq: TELN) expects to cut one in five jobs in the next three years as it automates operations, while Russia's MTS, which has been piloting two chatbots, plans to cut 1,000 of 11,000 customer services jobs this year. (See Russia's MTS to Cut 1,000 Jobs as AI, Chatbots Arrive.)

Telecom Italia (TIM) representatives did not respond to queries about the likely impact of the Microsoft Corp. (Nasdaq: MSFT) partnership on staff numbers. But the operator is one of a number in Europe and North America that have already realized efficiency improvements through headcount reductions. (See Efficiency Drive by Major Telcos Has Claimed 74K Jobs Since 2015.)

The operator cut 1,800 jobs across its Italian and Brazilian units last year, or about 3% of the company total. Per-employee revenues rose 7.5% in 2017, to around $333,000.

Reporting its recent financial performance earlier this month, Telecom Italia said its digitization targets under a new "DigiTIM" plan are to get 85% of customers using self-care apps and reduce "human-operated interactions" by 30%. (See Telecom Italia Molders as Shareholders Feud.)

Should that ultimately translate to the disappearance of three in ten jobs at the customer services department, the impact will be heavy. While Telecom Italia does not break out details of staff numbers across different departments, about 15% of Mobile TeleSystems OJSC (MTS) (NYSE: MBT) employees were involved in customer services at the end of 2017. If the proportion were similar at Telecom Italia, around 2,670 jobs could be at risk, or about 4.5% of the company total.

The operator has indicated that its tie-up with Microsoft forms an important component of its DigiTIM plan.

The introduction of apps and "interactive voice response" technology would help to simplify its relationship with customers, said Telecom Italia.

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While a number of US tech companies have been investing in AI-based digital assistants and chatbot technology, Microsoft and IBM Corp. (NYSE: IBM) appear to be in a two-horse race in the European telecom market.

Last year, Spain's Telefónica revealed it was using Microsoft technology to build its Aura digital assistant, which can answer customer queries about usage and even activate smart home services in the Spanish market.

IBM, meanwhile, has landed chatbot and digital assistant deals with UK-based Vodafone and France's Orange. While Vodafone is using IBM's Watson technology for a customer services chatbot, Orange's recently launched banking operation has developed a digital assistant based on Watson technology. IBM has also been working with France's Bouygues in the customer services area, said Philippe Desbiolles, the vice president of IBM's global services business unit in France, during a previous conversation with Light Reading. (See Robot Wars: Telecom's Looming AI Tussle, Chatbot Takes Charge: Vodafone's Customer Services Overhaul and Orange Plans Bank Raid With AI, Digital Weapons.)

While the US tech giants have stormed into the market for chatbots and digital assistants, they have not had the same impact on the network operations side of the telco business.

IBM, however, says Watson can also be used for network management and operations. The company has also been involved in a European Commission project known as CogNet, which has looked at using AI to predict traffic demand patterns in future 5G networks. (See Orange Hails AI Progress in 5G With IBM, Nokia.)

Interest in this area could potentially put IBM in competition with traditional network vendors like Huawei Technologies Co. Ltd. and Ericsson AB (Nasdaq: ERIC), both of which are developing AI tools for use in network operations. (See Humans Beware: Ericsson Readies Machines to Run the Network and Huawei Set for 'Intensive' AI Investment.)

— Iain Morris, News Editor, Light Reading