Smart Cities – $20 Billion in Annual Market



GLOBE-Net, February 7, 2013 Across the globe, the number of people living in cities will increase to 6.3 billion by 2050, up from 3.6 billion in 2010.  It is projected that by 2025 there will be 37 megacities with populations of more than 10 million; 22 of those cities will be in Asia.

According to a new report from  Pike Research, one consequence of this explosive urbanization will be a corresponding growth in smart city initiatives – characterized by the integration of technology into a strategic approach to sustainability, citizen well-being, and economic development.

[stextbox id=”custom” float=”true” width=”200″ bcolor=”add3d5″ bgcolor=”add3d5″ image=”null”]The smart city technology market will surpass $20 billion in annual value by 2020, the study concludes. This represents a compound annual growth rate (CAGR) of 16.2%[/stextbox]

“Over the last twelve months, the market has shifted away from being shaped largely by technology suppliers and city developers,” says research director Eric Woods.

“Today, the market is being driven by the enthusiasm of city leaders.  Mayors and other city executives have seized on the smart city concept as a rallying point for the technological, commercial, and social innovation needed to meet the challenges and opportunities facing their communities.”

Rather than a traditional technology market, the smart city should be seen as a complex confluence of several existing markets, as well as a driver for new, emergent solutions that span several traditional domains, according to the report.

The biggest test for the smart city now is to show that innovative pilot projects can be deployed at a citywide scale and replicated across cities.

This will be vital to ensuring momentum in pathfinder cities and building confidence for other cities to embark on the same journey.  It will also be necessary to convince commercial partners and other stakeholders that these are economically viable models that will provide long-term returns for citizens and investors.

According to the report, many of the market drivers, technology innovations, and decision-making processes associated with smart cities continue to be focused on existing industry and operational siloes: energy, water, transportation, buildings management, and/or government services.

Now, though, the smart city is also becoming a space for the testing and implementation of cross-functional technologies and solutions.

Key Challenges

The key challenges facing smart city leaders and suppliers include:

Developing effective financial models: Funding remains the critical issue for large-scale deployment of smart city solutions. The development of a range of financial models that allow cities to invest in innovation will be crucial to the next phase of this market.

Moving from pilots to large-scale deployments: There are a vast number of initiatives in cities around the world using a wide variety of technologies and focused on every aspect of city operations.

Developing a holistic view of the city: A broad perspective on the operations of a smart city is vital not only to ensure that environmental targets are met, but also to get maximum benefit from investments.

Improving governance and citizen engagement: Many current smart city pilots are characterized by limited engagement with the wider public..

Identifying the customer: Cities are not companies with clear leadership and well-defined decision-making processes.

Smart Cities

Market Drivers

The large-scale infrastructure and urban development projects in China and India make them the most dynamic markets for large-scale city innovations. Brazil is also beginning to address many years of underfunding in its urban infrastructure.

In the United States, stimulus funding  has helped kick-start of a number of smart city projects, but few cities have developed a strategic view on integration across city operations.

Europe, in contrast, has a well-defined vision for the role of smart cities within an overarching policy that covers environmental,  economic, and social development. Yet, European cities face challenges in finding the funding to drive beyond the pilot stage.

Globally, though, the smart city concept is creating a vibrant market for a wide range of innovative technologies and services, leading to a cumulative investment of over $117 billion in smart city technologies between 2012 and 2020.

The Pike Research Smart City Report is available for purchase here

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