Smart Cities Are a $7.5 Billion Annual Opportunity for Technology Providers
Cities around the globe are beginning to build out new digital services such as smart lighting, traffic, waste management and data analytics to reduce costs, tap new sources of revenue, create new innovation business districts and improve the overall quality of urban life. The previous blog (“How to Make Money from Smart Cities”) identified the great opportunities for the technology vendors and partners to help to create and operate these digitally smart cities of the future.
The Cisco Smart City Business Architecture identifies a set of essential requirements in a number of different business layers essential for delivering and operating a successful smart city initiative. In order to measure this opportunity, we developed a detailed economic model based on the business architecture. We chose Seattle in the USA as a representative city, with roughly 3 million people in the greater metropolitan area, to quantify the potential opportunity available to technology providers. Our model smart city initiative included covering 30 per cent of the city area with a Wi-Fi network and four key smart city solutions – traffic incident management, smart lighting, smart parking, safety & security. In addition, we included the technology platforms, operational capabilities, and services in the Smart City Business Architecture. All of the services and solutions were modeled as managed services, generating an annual revenue stream to the provider.
Creating such a smart city solution for a city like Seattle could generate approximately $32 million in new technology and services revenues for technology vendors and partners. This revenue is distributed across the architecture categories as follows:
Network connection and access comprise over one-third of the potential revenue opportunity. The smart city solutions equal one-quarter of the total smart city opportunity and operations and leadership a further 19 percent of the potential revenue.
There are roughly 1,900 cities throughout the world with populations of 250,000 or more. Twenty-six of these cities have in excess of 10 million inhabitants. Making some very conservative assumptions on potential smart city deployments based on city size, we estimate that just over one-quarter (or 27%) of the world’s cities are viable candidates for smart city solutions over the next 3 to 5 years. That equates to a global market opportunity of $7.5 billion of new annual revenues for technology vendors to help cities to deploy smart city initiatives to create significant new value for their cities and citizens.
Cities will need vendors and partners to provide solutions and services to make their smart city initiatives a success. There are significant sources of new revenue available to providers who can deliver compelling solutions and value in each of the layers of the smart cities business architecture.
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