Smart Cities and the Internet of Things: Follow the Money and the Data

smart-cities-1As we introduced here on the blog earlier, our next (and last) installment of our four reports on the internet of things will be all about the concept of smart cities. After our initial exploration of the internet of things in the first report, the personal (and wearable) internet of things in the second report, and the third report on the industrial side of IoT and the integration of Information Technology and Operational Technology, cities are a logical next step in which all these concepts are converging. And cities are a huge piece of the Internet of Things-pie.

All big themes associated with the internet of things, like efficiency gains, predictive maintenance and ubiquitous connectivity, have a enormous relevancy towards cities. More than half of the world lives in cities, and by 2050, it will be two-thirds. This rapid increase in population coupled with financial constraints, the convergence of technologies and a desire to reduce environmental impact is creating new challenges and opportunities for cities in areas such as energy use, mobility, security, infrastructure, healthcare and governance.

That’s where the IoT comes in.

We all know the staggering predictions about what economical impact the IoT will have on the world. In terms of numbers, the loudest drumroll is currently being produced by Cisco that, in June 2013, estimated the present potential of things at 613 billion dollars, and presumes that the market will amount to no less than 14,400 billion dollars in 2023. In this context, Cisco is talking about savings — the reduction of waste — plus the direct sale of products. McKinsey assesses the economic impact of the Internet of Things at somewhere between 2700 and 6200 billion dollars in 2025, with the healthcare sector, infrastructure and public sector services as the most promising domains. 

If we zoom in on these numbers we end up at cities (or urban environments) pretty fast. A more recent research by Bosch titled  “Capitalizing on the internet of things” talks about 5 key markets as where the estimated 596 billion in IoT-revenue will come from.

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For one Smart Cities is one of he key markets. However, 3 out of 4 other markets (automotive, utilities and intelligent buildings) have a direct connection with living in (future) cities as well. Research from IDC shows the same picture: they predict that  “IoT technology and services spending to generate global revenues of $4.8 trillion in 2012 and $8.9 trillion by 2020”. As the most dominant forces driving this big pile of revenue they explicitly name ‘Ongoing development of smart cities, cars, and houses’.

Money is one side of the story when it comes to the IoT, data is the other side. In the same Bosch research they also predict where all the data that will be generated by the IoT is coming from.

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This graph also shows that when we talk about the IoT-pie smart cities aren’t just a slice, they take up pretty much most of the pie.

The next question is if these predictions will become  reality. We will post more stuff out of our research on this blog in the next couple of weeks. Our report on the Internet of Things and Smart cities will be available in September. Stay tuned.

3 comments on “Smart Cities and the Internet of Things: Follow the Money and the Data

  1. hello Thomas,

    Interesting, but I am a bit confused regarding Smart cities scope. I do not understand from where will come the money. if we are talking about public organization or local government, I think that (maybe only in France) there is a real challenge to fund all infrastructure needed for a real operational Smart City. if we are talking about private companies offering digital services, the economic model will have to be explained and who will pay for all these services maybe reduction of wastes will be an answer but….

    I hope to find out some answers in the next and last report, I will stay tuned… 🙂

  2. Hi Jacques,

    Thanks for your comment. My goal for this blogpost was to show that in all the discourse on the internet of things, there’s a constant mention of huge amounts of money to be made based on sales (of course), but also on efficiency gains. I wanted to show that a lot of companies (Cisco, McKinsey to name a few) are throwing around numbers and to understand them we need to think about the potential for ioT in urban environments. Because a lot of these numbers are based on applications in urban environments. So this is part of the reason VINT is dedicating it’s final research paper on IoT to smart cities.

    So I/we do not claim that there’s a lot of money to be made :), but if this is part of the discourse we set out to find if this is actually the case and if yes, how will this scenario enfold.

  3. Hello Thomas,

    Thanks for this answer, I do agree and it will be great to see which scenario and context that would be occur.

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