Cities around the world will invest a total of about $41 trillion over the next 20 years to upgrade their infrastructure and benefit from the network of connected devices known as the Internet of Things, experts at the Smart America Challenge forecast.
“This is really a new way of thinking about how we better utilize technology to support the quality-of-life issues that citizens both want and need,” said Alan Shark, executive director of the Public Technology Institute.
As cities invest in air-quality sensors, solar-powered trash compactors, self-healing power grids and more, the opportunities for private industry are huge. Experts say there is just one problem: It’s virtually impossible to measure the return on investment for many leading-edge technologies first being put to use by the public sector.
Many cities are hoping their investments pay off in other ways, especially as they focus on smart technology, which aims to provide environmental and social benefits as well as cost efficiency.
“Sometimes the efficiencies that are realized are not always in dollars and cents,” Shark said. “Success is measured by how many citizens are proud of their city.”
Smart technology uses the Internet of Things to gather data, connect components across the city and impact multiple departments or services in order to improve people’s quality of life. Spending on smart technology has grown from 0.7 percent of city IT budgets in 2005 to 4.1 percent in 2015. That percentage is expected to grow to 7.5 by 2025, according to Deltek, a global provider of enterprise software and information solutions for government contractors and professional services firms.
Estimates of the size of the municipal technology market vary greatly because terms like “smart cities” and “innovative technology” have no universally accepted definitions. They can cover everything from bike-sharing programs to electric buses, from a city councilor’s tweet to an app that lets citizens search through public records. But experts seem to agree on one point: The market will continue to expand for years.
Analysts estimates on the urban innovation trend are eye-popping — but right now it’s as much for how greatly they vary as for how big the market may ultimately grow to be. Some analysts peg the smart-cities market to be worth about $27.5 billion annually by 2023, while others say the market could reach as much as $757 billion by 2020.
Population dynamics should support the continued adoption of technology by cities. In urban centers around the world, population numbers are skyrocketing and putting an unprecedented demand on city infrastructure and resources. Fifty-four percent of the world’s population lives in urban areas, a proportion that is expected to increase to 66 percent by 2050, when another 2.5 billion people could be living in cities.
The test lab mentality
Cities are microcosms of the world, with every type of market available and all of the world’s challenges at play, making them the perfecting testing ground for technological innovation. And it is not just a handful of America’s biggest cities leading the tech-spending charge.
“We’ve opened up our city as a test lab,” said Joseph Curtatone, mayor of Somerville, Massachusetts, home to about 80,000 residents. “We’re always asking how can private-sector innovation help us take on some of the legacy issues facing cities and towns around the world.”
The city has partnered with Audi to develop self-driving and self-parking cars, as well as a network of traffic lights that will reduce congestion. It is also partnering with start-ups to bring free solar mobile device charging stations into the city. With the help of a $1 million innovation fund, Curtatone hopes to entice new technology companies to try out their ideas in Somerville.