Worldwide spending on the technologies that enable Smart Cities is forecast to reach $80 billion in 2018, according to the International Data Corporation’s (IDC) latest study. In the first release of its Worldwide Semiannual Smart Cities Spending Guide, over five years that total will reach $135 billion by 2021.
“Part of what is driving the growth is the expansion of our perception of what Smart Cities are,” said Bob Mazer, co-founder of Smart City Works, a non-profit organization based in the Washington, DC area, which focused on sustainability and enhanced living in rapidly growing urban areas. “There are new innovations, new categories surfacing every day, which we are seeing coming from the companies we’ve been supporting and promoting.”
This includes three companies who struck up development relationships at the Smart City Works Spring Demo Day earlier this year. Matrix Materials, Accure Analytics, and Infrashares are bringing together new roads made of recycled, highly conductive materials which provide information on traffic volume, weight of vehicles, and more with an AI firm which can generate actionable recommendations in real time based on the data coming from those “sensitive” roads, and an equity crowdfunding company disrupting how public/private infrastructure projects are backed.
“Smart Cities have been so successful where they’ve been implemented, and have demonstrated such significant environmental improvements, like carbon reduction economic benefits, and public safety enhancements that we’re now seeing not just a gold rush, but a platinum rush,” Mazer said. “It’s no surprise IDC has come out with such strong forecasts, and no surprise that their report also highlights regional differences given where certain cities, countries and regions are. Smart Cities need bandwidth, security, innovation, systems integration and primarily support from governments and citizens to realize the full potential of connected life and governance.”
According to IDC, successful digital transformation of Smart Cities are blending together environmental, financial, and social outcomes. In IDC's view, a Smart City begins to be developed when multiple smart initiatives are coordinated to leverage technology investments across an entire city, use common platforms to decrease service time/maintenance costs, share data across systems, and tie IT investments clearly to smart missions.
"Smart Cities have recently evolved from a collection of discrete flagship projects to a sizeable market opportunity that will drive significant technology investments in 2018 and beyond," said Serena Da Rold, program manager in IDC's Customer Insights & Analysis Group. "IDC believes that the strategic priorities we identified will drive digital transformation across cities of all sizes, but our research demonstrates that there can be significant differences in the focus of investments across regions.”
The strategic priorities that IDC believes will see the most spending in 2018 and throughout the forecast are intelligent transportation, data-driven public safety, and resilient energy and infrastructure. Intelligent traffic and transit and fixed visual surveillance are the two largest use cases in terms of worldwide spending, followed by smart outdoor lighting and environmental monitoring. While these use cases attract considerable investments in most geographies, the focus shifts across different regions. Intelligent traffic and transit will be the top priority in investment terms in the United States, Japan, and Western Europe. Fixed visual surveillance will be the leading use case in China and the second largest in the United States, while environmental monitoring will be relatively more important in Japan.
"IDC has a truly innovative approach to size the global Smart City market by identifying 41 key use cases that will have the most impact on local government over the next three years, and sizing and forecasting their growth," said Ruthbea Yesner, vice president of IDC Government Insights and Smart Cities programs. "This approach provides technology suppliers with a detailed look at the opportunity in cities and offers a view into niche areas as well as broad market solutions."
On a geographic basis, the United States will be the largest market for Smart City technologies with spending forecast to reach $22 billion in 2018. China will be a close second with 2018 spending expected to be nearly $21 billion. The two countries will share a similar growth trajectory with five-year compound annual growth rates (CAGRs) of 19.0% and 19.3%, respectively. The regions that will see the fastest spending growth are Latin America (28.7% CAGR) and Canada (22.5% CAGR).
More information is available on IDC’s website.
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