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Powerful forces are converging to make smart cities a growing trend all around the world. It is valuable for city leaders to understand what’s behind this momentum and how it will play out in their region. Chances are some of the pain points described below will hit close to home.

Growing urbanization. Cities deliver many benefits – greater employment opportunities, greater access to healthcare and education, and greater access to entertainment, culture and the arts. As a result, people are moving to cities at an unprecedented rate. Over 700 million people will be added to urban populations over the next 10 years. The United Nations projects that the world’s cities will need to accommodate an additional 3 billion residents by the middle of the century. A recent UN report suggests that 40,000 new cities will be needed worldwide.

Growing stress. Today’s cities face significant challenges – increasing populations, environmental and regulatory requirements, declining tax bases and budgets and increased costs – at the same time many are experiencing difficult growing pains ranging from pollution, crowding and sprawl to inadequate housing, high unemployment and rising crime rates.

Inadequate infrastructure. Urbanization is putting significant strain on city infrastructures that were, in most cases, built for populations a fraction of their current size. Much of the developed world has infrastructure that is near or past its design life, requiring massive upgrades. For instance, in 2013 the American Society of Civil Engineers gave the United States an overall grade of D+ for its infrastructure. Meanwhile, much of the developing world has missing or inadequate infrastructure, requiring massive build-outs. The 2012 blackout in India that left more than 600 million people without electricity is a prime example; the country has inadequate power generation to meet ever-increasing demand. The bottom line? McKinsey & Company estimates that cities will need to double their capital investment by 2025, to $20 trillion from today’s $10 trillion per year.

Growing economic competition. The world has seen a rapid rise in competition between cities to secure the investments, jobs, businesses and talent for economic success. Increasingly, both businesses and individuals evaluate a city’s “technology quotient” in deciding where to locate. A real challenge for cities with economies based on heavy industry is creating job opportunities that appeal to recent university graduates so they will stay and help build the kind of high-quality workforce that new industries, for instance those in technology, demand.

Growing expectations. Citizens are increasingly getting instant, anywhere, anytime, personalized access to information and services via mobile devices and computers. And they increasingly expect that same kind of access to city services. In fact, a May 2013 United Nations survey of over 560,000 citizens from 194 countries revealed their top priorities are a good education, better healthcare and an honest and responsive government. We also know that people want to live in cities that can provide efficient transportation, high-bandwidth communications and healthy job markets.

Growing environmental challenges. Cities house half of the world’s population but use two-thirds of the world’s energy and generate three-fourths of the world’s CO2 emissions. If we are going to mitigate climate change, it will have to happen in cities. Many regions and cities have aggressive climate and environmental goals – goals that cannot be reached without the help of smart technologies. Smart cities are better able to address resiliency and adaptation to climate change.

Rapidly improving technology capabilities. Many of the smart city drivers listed above are negatives – problems that demand solutions. There are positive drivers as well, especially the rapid progress in technology. The costs of collecting, communicating and crunching data have plunged. What’s more, much of the needed technology is already in place:

  • Over the last decade, many regions have begun to modernize their electric power grids and, to a lesser extent, their water and gas networks. Hundreds of millions of smart meters and smart sensors are now in place, producing data of value to a smart city.
  • With the arrival of smart thermostats and building management systems, there are now millions of buildings with some of the pieces needed to be smart, on the cusp of being able to ‘talk’ and ‘listen.’
  • The reduced costs of solar energy and renewables systems (distributed generation) is increasing adoption rapidly in homes and businesses. By balancing these new resources with the grid, cities can increase their energy sustainability.
  • On the health and human services front, we’re seeing better access to healthcare with in-home consultations via computer. Meanwhile most agencies are switching to electronic records and many are using analytics to improve results.
  • Our highways and byways are becoming smarter thanks to intelligent transportation management software, roadway sensors and smart parking apps. Navigation apps and equipment display real-time traffic so users can find – and even be automatically pointed to – less congested alternatives. And we are seeing more electric vehicles on our roads which help reduce pollution and our dependence on oil.
  • Over the last two decades, we have deployed high-bandwidth networks worldwide that connect one billion computers and four billion cell phones. These networks are already in place in almost all major cities and can be leveraged for smart city applications.
  • An increasing number of cities are starting to benefit from a large network of Near-field Communication (NFC) equipped point of sales with the roll-out of contactless cards. technology. It means hundreds of merchants are already capable of accepting mobile payments and wallets for seamless consumer experience and value added services, but also cashless cities are able to reduce frauds and benefiting from better insights on their citizen purchasing journeys.

Let’s consider that final example in more detail. It’s important to realize that today’s ubiquitous smartphones are becoming both a “delivery platform” and a “sensor network” for smart city applications. The delivery platform is obvious – a smartphone is a great place for a resident to receive alerts and access city services. But today’s smartphones can also be leveraged to collect information when the user agrees to share data. For instance, one smartphone launched in 2013 has the following sensors: a GPS locator, a microphone, a gyroscope, a light sensor, a camera, an accelerometer, a barometer, a thermometer, a magnetometer and a hygrometer.

“By the end of the decade, many infrastructure technologies – smart meters, intelligent traffic systems, building energy management – will be deployed across North America and Europe and, increasingly, in the rest of the world,” says Navigant Research analyst Eric Woods. Once in place, that technology provides the basis for a wide range of innovative smart city applications and services.

Rapidly declining technology costs. Even as capabilities are climbing, technology costs are plummeting. Hardware costs are declining at a steady pace. But it is software costs that have plunged the most, thanks to four trends.

The first trend is the advent of inexpensive mobile apps and information services viewable by mobile phones. Those phones are so popular that millions of developers have turned their attention to building applications, many of which cost only a few dollars. Mobile technology has allowed citizens of developing countries to essentially leapfrog into 21st century expectations – and cities have to find ways to address them.

The second trend is the arrival of social media. Applications such as Facebook and Twitter act as free “platforms” to deliver alerts, updates or even small-scale apps. They also act as “listening posts” that help cities monitor citizen needs and preferences. In fact, companies such as IBM and Microsoft now have the capability to use machine intelligence to monitor social media and derive trends.

The third trend is the maturation of cloud computing. Cloud computing delivers powerful solutions via the Internet. Suppliers save money because they can build one solution and sell it to many different users, gaining tremendous economies of scale. Users save money because they don’t have to buy and maintain giant data centers or hire and train large IT staffs. Only a few years ago, advanced applications were available only to the very biggest agencies and corporations. Today – thanks to cloud computing – they are not out of reach for even the smallest township. And they are available without a giant upfront investment, simply by paying a monthly fee.

The fourth trend is about the data. From an analytics perspective, we can now cost effectively handle the high volume, velocity and variety of data – e.g. Big Data.

And there’s much more to come. The smart city is part of an even larger trend – the “Internet of Things” or “Internet of Everything.” Technology provider Cisco estimates there were 200 million devices connected to the Internet in the year 2000. By 2012, that number had increased to 10 billion. A 2015 report from Cisco and DHL predicts there will be 50 billion devices connected to the Internet by 2020.

Clearly we are entering a remarkable new phase. Research firm IDC predicted in 2012 that the smart city market would grow by 27% year over year. Meanwhile, Navigant Research said it would hit $20 billion in worldwide sales by 2020. And a 2014 Cisco study predicted the Internet of Everything will be a $19 trillion global opportunity over the next decade: Private-sector firms can create as much as $14.4 trillion of value while cities, governments and other public-sector organizations can create $4.6 trillion.

No surprise the world’s biggest corporations and brightest entrepreneurs are racing to bring their best ideas to this market. And the fierce competition is raising capabilities, increasing choice and lowering costs at a rapid pace, making smart cities more viable every day.



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