Why developers are licking their chops at the prospect of smart cities

The smart city market is at a tipping point. Having been led by IT industry stalwarts such as IBM and Cisco for the last five years, it needs a fresh injection of ideas to take it to the next level. Ovum believes that the developer community will add the required impetus. One of the key discussion points at Ovum’s recent Smart Cities in Europe 2012 event, which was held in conjunction with Imperial College London, was the impact that developers are having on the smart city market. On the developer panel were representatives from the Urban Land Institute, Quintain, Balfour Beatty, and Buro Happold, while other global players, such as engineering consultancy Arup, were present in the audience.

There are three main reasons why developers are so important to the smart city debate.

• The IT industry cannot live with the 5–10 year ROI models inherent in smart cities, but the developer community can.
• The possession of physical infrastructure means that developers work at the junction between the key smart city metrics of sustainability, quality of life, and competitiveness. In comparison, IT is the connective network that sits on top of this framework.
• There is precious little capex currently available to governments. However, developers have years of project financing experience, and a comprehensive understanding of the financial instruments required. All of the top international development companies are scoping their value propositions, which has resulted in the emergence of some interesting consortia.

Although developers and the IT industry have always had common interests, the “smart” part of smart cities assumes a level of IT technology that has not been seen before. Cisco and international developer Gale have been leading the development of the South Korean smart city Songdo for the last five years. Arup and Accenture have collaborated on a number of publications on smart cities alongside the Climate Group, while Quintain has been engaged with Living-PlanIT.

Buro Happold, Atkins, and a number of other players worked on the London Olympic village, and are poised to take their experience from this project to develop a smart city offering for the marketplace. Another key skill of developers is their ability to bring order to chaos. However, while developers embrace complexity through their master planning skills, they need to understand the new IT paradigms of cloud, Internet of Things, Big Data, and “bring your own device”.

Proving the case

Developers are particularly keen on opportunities where they can control the full master plan. However, these types of opportunities will be few and far between in Western Europe. The fact that there are so few examples of where the ROI of smart cities can be proven at scale has led to two interesting developments.

Firstly, the UK smart cities market recently received a significant boost with the announcement of the 30 winners of the UK Technology Strategy Board’s (TSB) demonstrator feasibility project funding. This is the first stage of an initiative that has the potential to have a considerable impact on the smart cities market. Following the TSB’s recognition that the major obstacle to the development of smart cities was that there is little quantifiable data on their ROI, they organized a competition for a large-scale demonstration of a smart city in action that was open to any community of over 125 000 people in the UK.

Originally, the competition called for applications for 20 tranches of £50,000 in feasibility funds. The demonstration must be led by a public-sector authority, and the information gathered from the contest will be disseminated through the TSB’s Future Cities Catapult Project. The eventual winner will be awarded £24m in January 2013 for a large-scale demonstration project that can quantifiably show how integrating city systems can improve competiveness and quality of life.

The first stage of the competition has meant that at least 50 UK communities have audited their current situation and thought about how greater connectivity could improve their competitiveness. These communities now have a framework to discuss their smart city plans, and the 30 winners of the feasibility stage have a strategy on how to improve their cities, and a starting point for their discussions with vendors. The TSB has not taken the easy option of awarding multiple but meaningless awards. By opting for one winner that gets the full £24m prize, the demonstrators are more likely to create meaningful data to inform the ROI for a smart city.

The second notable development is Pegasus Global Holdings and SAIC’s recently announced partnership to establish a Center for Innovation, Testing, and Evaluation. Under the initiative, the developers will build a 20-square mile uninhabited test city in New Mexico by 2014. The facility will allow vendors and government agencies to test smart city solutions at scale and in laboratory conditions. Although the original concept was to recreate a midsized US town, the partners are now considering creating four urban scenarios to replicate US, European, Asian, and African cities. This project is important to the development of smart cities because:

• It is being built with private money
• It will speed up city solutions as they can be tested at scale and without the health and safety issues of having people around
• It leads to the possibility of creating certified solutions that could work as a type of ISO standard for cities.