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November 17, 2017

Technology companies are going have to pay for smart cities

By GlobalData Technology

We have been beyond the hype for smart cities for many years. But technology companies often fail to address the biggest barrier for these intelligent future cities — the cost.

Technology isn’t a differentiator in the smart city market and tech companies have to do more to address what really stymies projects.

Cisco might now be able to smash one of the biggest barriers for truly smart cities with $1bn of financing for urban planners.

While it’s a financing arrangement rather than a donation, the funding allows a city to access funds for projects offset by revenue from new services.

The company’s city infrastructure financing acceleration program also echoes public-private partnerships used for infrastructure investments, an arrangement to which many city managers are accustomed.

Most smart city projects are hamstrung by a lack of strong municipal leadership and investment funds to extend projects beyond a pilot phase.

Such arrangements are essential for most cities wanting to digitise services. Few city managers have access to the $500bn of Saudi oil money which will build the digital oasis of Neom.

Without investment a budget, the alternative is that city managers find a proverbial sugar daddy to build intelligent municipal services for free.

This also comes with benefits for technology companies themselves.

The future Denver smart city of Peña Station will be both a technological testing ground and showcase for Panasonic own products and services.

But this isn’t enough for some companies wanting to accelerate digital urban civic services.

Microsoft found and sometimes world’s richest man Bill Gates has purchased 24,800 acres of land in Arizona to build his own smart city.

Free from the constraints of legacy infrastructure and civic regulation, this will provide a blank canvas to build a digital utopia.

The question becomes: what will it be like to actually live in city of a technologist’s dreams?

Charter cities are not a new concept nor constrained to the last century — the private sector ruling and running a city is the libertarian dream.

But while municipal government can be ponderous, residents of Gurgaon in India can attest that private technology companies don’t always have the practical experience or civil responsibility to succeed.

The success of Cisco’s fund will be dependent on how it interfaces and integrates the knowledge of technology companies, civil leaders, and financiers.

It may sound cliché but the smart city concept only works if all city stakeholders pull together.

And the same is true with how these projects are financed. It is the technology companies which can provide both leadership and humility when dealing with urban government which will ultimately succeed.

Citizens may feel that city built by Google would be the best place to live but such a model is unlikely to be sustainable and as archaic as it is, the experience and practicality of city governance is just as crucial to build smart cities

Technology companies need to address smart cities’ biggest barriers — which aren’t technological at all.

Verdict deals analysis methodology

This analysis considers only announced and completed artificial intelligence deals from the GlobalData financial deals database and excludes all terminated and rumoured deals. Country and industry are defined according to the headquarters and dominant industry of the target firm. The term ‘acquisition’ refers to both completed deals and those in the bidding stage.

GlobalData tracks real-time data concerning all merger and acquisition, private equity/venture capital and asset transaction activity around the world from thousands of company websites and other reliable sources.

More in-depth reports and analysis on all reported deals are available for subscribers to GlobalData’s deals database.

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