Next decade to bring fourfold increase in number of smart cities

Wed, 2014-08-06 06:00 -- Doug Cooley

Dozens of cities around the globe will join the ranks of “smart cities” in the decade ahead, according to a recently released report from global information company IHS Technology.

Applying its own definition of a “smart city,” IHS forecasts that the number of smart cities worldwide will climb to 88 by the year 2025. That’s four times the 21 cities that fit its definition in 2013. These 88 cities are expected to arise fairly equally across the Asia-Pacific, Europe-Middle East-Africa (EMEA) and Americas regions, with Asia-Pacific claiming slightly more cities than the rest.

So what does IHS really mean when it says smart city?

“Smart cities encompass a broad range of different aspects, but IHS has narrowed the definition of the term to describe cities that have deployed -- or are currently piloting -- the integration of information, communications and technology (ICT) solutions across three or more different functional areas of a city,” said IHS’s Lisa Arrowsmith in a press release announcing the report.  “These functional areas include mobile and transport, energy and sustainability, physical infrastructure, governance, and safety and security.”

IHS also finds that smart city annual investment will grow along with the proliferation of smart cities. Spending is expected to soar from about $1 billion in 2013 to more than $12 billion in 2025.

In announcing its report, IHS calls out the driving forces behind the smart cities movement.  It points to the rapidly increasing populations in urban centers and the stress that places on resources such as energy and water, and on the overall quality of living.  By implementing smart technology solutions, cities can meet energy-efficient targets, track and use water resources more efficiently, and add employment opportunities.

Project strategies for smart cities

The IHS report -- titled “Smart Cities: Business Models, Technologies and Existing Projects” -- takes a look at trends and strategies at work in the smart city movement. For example:

  • European cities tend to initiate more expansive projects than those in the Americas. U.S. projects, for instance, will often focus on a single functional area, such as mobility and transport.
  • Budget issues facing European city economies are not as prevalent in the Asia-Pacific region. This has the potential to create a greater scope for investment in smart city projects in Asia-Pacific, where projects are sometimes based around creating new infrastructure, rather than replacing legacy systems.
  • For cities battling budget limitations, a key element of smart city development is the return on investment of projects. Projects must show measurable cost savings. However, other benefits are often taken into account, too. For example if smart technology projects improve the quality of life in a city, more residents will want to stay and, in turn, contribute to a city’s tax base.

The IHS report also describes several public-private business models for launching and operating smart city projects.

For more information around financing and smart city projects, check out our Smart Cities Financing Guide, a free download when you register to become a member of the Smart Cities Council.