Technology Planning and Analysis

Smart Cities: What Will People Pay For?

“A casual visitor might see the small sign along the highway pointing in the direction of Dholera,” wrote the Guardian in April about India’s much touted smart city project. “But they might also, if they take the turn-off, be disappointed: for several months of the year, they will find a vast, low-lying area, mostly submerged under seawater”.

Smart cities are an extremely divided topic. On the one hand they represent enormous dreams for future efficiency. In this guise they are widely brandished as publicity statements by emerging countries that hope to implement tech solutions for their vast young populations and glaring infrastructure issues. On the other hand, these dream often belie reality: the ideas are too ambitious and impractical. And they mostly work where there is plenty of cash already. In fact, by 2025 it is expected that half of all smart cities will be located in developed countries across Europe or North America.

However, whilst it’s unlikely these cities will offer any real quick fix for underlying social problems there is certainly big money to be made from these initiatives. Frost & Sullivan research estimates a global market potential of $1.5 trillion for smart cities across energy, transportation, healthcare, building, infrastructure, and governance. And as Forbes points out, this is it above the GDP of Spain and would make them the “12th largest GDP in the world”.

HP feels there is more than $500 million available in networking alone. Whilst all the other cloud-based technology necessary has seen the biggest tech giants like Cisco and IBM circling anxiously for a slice of the action. Yet beyond the hype, the big figures, and massive social possibilities, how will all this work in practice? Beyond the fluff and guff what are the ‘must-have’ features that cities will actually pay for?

This topic has proved incredibly popular on the “Smart Cities and City 2.0” group on LinkedIn over the last year. As one chief operations and finance manager suggested to a cacophony of likes: “Cities won't pay for anything that doesn't offer a return [and often a significant return] in financial as well as liveability terms”.

“I think we need to start with what cities are today and how to make them better,” he went on to add. “Building on existing technologies and addressing existing issues: not peddling idealised visions of future cities”.

“The key to a smart city would be a methodology designed to create enough awareness about the present conditions in tandem with the future demands to the present and future generations,” said an urban designer.

One academic suggested: “Most areas of a smart city cloud are largely cost centres (transport, health, energy management). The part that generates income is the business activity. Supporting and enabling this in a smart city is key”.

“A smart city needs systems to identify and display the capability of businesses,” he continued. “It then needs systems to help combine capabilities to address local and distant business opportunities and smart systems to manage these projects. Included in this Smart City Economic Cloud would be systems to encourage and support entrepreneurship. We have been testing such systems”.

The subject of ROI keeps returning. One advisor to entrepreneurs, who started the debate said: “In the limited conversations I've had with small town officials, they have not indicated an ‘on fire’ interest in renovating their [existing] infrastructures”.

“They have restricted budgets and are under numerous pressures,” he continued. “They are willing to accommodate smart grids and have environmental and water management concerns, but they are definitely pragmatists and not dreamers. I wonder whether the people envisioning the smart cities of the future are first and foremost the vendors themselves?”

Nobody responded to this question but there was some talk about regional differences. One director said: “For UK local governments there will only be 'must haves' when there are clear business cases. Some master planning RFQs [request of quotations] I have seen recently give reference to 'innovative approaches' but in the context of new ways of bringing developments to market – [these tend to reflect] the current property market rather than visions of the future”.

A senior systems architect added that whilst he didn’t know much about local authorities in other countries, in Italy: “More people have to be involved in the process to have any hopes of really changing things”.

He added: “One of the more interesting results of [a] recent survey here has been that the critical issues are not so much technological as training and advising. All too often excellent technologically-oriented projects failed in the long run (basically after funding ended nothing happened). While it can happen for reasons beyond the control of local authorities, all too often they didn't have help to organise communities and professional groups”.

The human element is seconded by others through the debate. “I believe that customer (citizen)-driven requirements are still the priority - there is no smart city without smart citizens inhabiting it,” said one proprietor.

She continued: “Just as no two cities are alike, there probably is a short-list of ‘must-haves’, informed by the nature of the city and its citizens. What works for Amsterdam is probably not so good for Lagos. Where the city includes disenfranchised citizens living in slums and precarious settlements, solutions that will ameliorate their conditions will have a high priority. Old-world cities focus on solutions for their built environment, such as heat emissions from buildings (and how to harness such energy) and various IOT options”.

There was some talk around the need for smart grids. “Please explain why smart grids are so important to smart cities - I can see why they are important for a wide range of grid-related and efficiency reasons but am not sure why they might be central to smart cities,” requested the chief operations and finance manager.

“From an economic standpoint, smart grids begin to produce a return on investment rapidly. Smart meters immediately provide labour savings by eliminating physical meter reading,” responded the advisor to entrepreneurs.

“If you look to the near future and see the smart city as being capable of producing its own energy (think solar, wind, biofuel plants, power derived from future innovation such as the Yildiz Motor),” added a strategic consultant.  “[There is a] need to manage the flows of all of this energy, such as shutting down parts of the city when not in use (think office lighting, PC systems, white goods) then smart grids come into their own, and need to go beyond just predicting supply and demand, working interactively with the cities’ infrastructure”.

“There is an interesting video that highlights the importance of the smart grid in future city developments,” he concluded.

Beyond these bigger questions there was a lot of discussion about the specifics in smart cities. The most talked about topics were energy saving and traffic management. Transport especially came up a lot. “Not just on smarter vehicles, but also on different ways that movement of people can be limited to certain areas,” stressed one strategic consultant. On top of this, healthcare and education were all duly raised.

“I think that toilets that use little or no water would probably be a winner for all those who do not have water security,” added the proprietor. “In Johannesburg, we pride ourselves on our portable water that comes out of our taps, but use that same water to flush our toilets”.

As with any debate around smart cities. The real divide arose between practical solutions and pie in the sky thinking. “Smart Cities need to be further categorised into say City 2.0, City 3.0, with each level covering some degree of development into next generation of working and living,” suggested an independent consultant and trainer.

The trouble with this, said the chief operations and finance manage, is: “Given that many cities are struggling to be Smart 1.0, I'm not sure how practical visions of 2.0 and 3.0 are. I'm also very unconvinced that new cities would be smart: many will be smartER, but we are a very, very long way away from seeing truly smart cities”.

The argument has been running for 11 months on this LinkedIn group alone and doesn’t look to end any time soon. This is no surprise: all over the world people are flooding from under-populated rural areas into densely packed urban areas. This is causing huge issues which technology can help. The trouble is there are a lot of conflicting priorities.

One thing is certain though: big vendors like IBM, HP and Cisco could make a lot of money out of all this… so it is unlikely they will stop banging the drum any time soon.


Kathryn Cave is Editor at IDG Connect


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