THERE ARE NOT many global social phenomena that can be observed during your commute to work but urbanization is one of them. Whether in Los Angeles, Lagos, Bangkok or Bogotá, stinking traffic congestion or the crush of public transport are a daily reminder of urbanization. In case the message is not clear, try finding a parking space, or exiting the subway at leisure, in a crowded peak-hour business district.
That congestion and crush will only get worse based on current trends. According to the UN, baby number 7 billion was born at the end of October this year – probably in a developing country. Before that child comes of age, a majority of her compatriots across the entire developing world, including Asia and Africa, will be living in urban rather than rural areas, according to the UN.
As a result, the nasty side effects of living in cities are fast multiplying and creating challenges for city authorities, which are strapped for cash but hemmed in by the increasing expectations of internet-savvy citizens for service provision and transparency. Meanwhile, those same city authorities are jockeying to win the attention of clever individuals and footloose firms, which they hope will boost their economies.
The race to meet the needs of these city authorities is creating a bandwagon of enormous proportions around the concept of so-called smart cities. A Google search of smart cities conferences throws up a bewildering 59.4 million results, with inspirational speakers pledging to help you "seize smart city opportunities", create "intelligent infrastructure for the information age" and "manage mega-trends for mega-cities".
Meanwhile, several companies have launched initiatives or businesses referencing urbanization. GE is committed to ‘Building smarter cities’; IBM also believes in ‘Smarter cities’; Cisco wants to create ‘Smart+connected communities’; Samsung provides Smart infrastructure engineering services; Siemens has just launched its Infrastructure & cities business unit and Citi has created the punningly titled Citi for cities.
Local and global
A change in mindset at city authorities began in the 1980s with regeneration schemes such as London’s Docklands, now home to the Canary Wharf financial district. It gathered pace dramatically in the past decade as the scale of the ambitions of cities in emerging markets – exemplified by the gaudy new towers of Shanghai, Dubai and a hundred other cities – began to be understood and emulated elsewhere.
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"Smartness defines the future in terms of technology, people, ways of managing services, sustainability and use of information"
Baldomero Falcones, FCC |
Baldomero Falcones, chairman and chief executive of FCC, a Spanish construction, infrastructure and environmental services firm that describes itself as a "global citizen services company", says that firms that provide infrastructure and technology to cities have recognized the extent of the change in mindset at city authorities – as they have come to appreciate the scale of their predicament – and changed strategies accordingly.
"Cities are competing to get the best people and companies," says Falcones. "At the same time, politicians that manage cities are responding to a clear message about what is important to citizens: 30 years ago people thought nationally; now they think locally and globally at the same time. As a result, there is this focus on quality of life and provision of higher-quality services, which cities are increasingly taking responsibility for."
A clue to how cities are responding to these challenges is provided by the ubiquity of the tag ‘smart’ used by many infrastructure and technology companies. "To adapt to this new situation there is a requirement for intelligence and smartness," says Falcones. "Smartness defines the future in terms of technology, people, ways of managing services, sustainability and use of information."
The need for smartness is one of necessity in many cases, according to Gerry Mooney, general manager at IBM Global Smarter Cities. "As cities grow they face a challenge in each of the 17 industries – from banking to government and education to transport – that we serve," he says. "In transit, for example, it is clear that in many cases it is no longer possible simply to build more infrastructure. Instead, there is a need to use existing infrastructure more effectively, by using real-time information management."
To be sure, the requirement for physical infrastructure remains paramount. A study published in September by RBS, Roots of growth – projecting EM infrastructure demand to 2030, suggests that Asia will have the highest aggregate demand for infrastructure spending of $15.8 trillion in the next 20 years. However, research by IDC Government Insights estimates the smarter cities IT market at $34 billion in 2011 and expects an 18% a year increase to $57 billion by 2014 – a figure not to be sniffed at. The financial services market related to cities, which overlaps both the technology and infrastructure sectors, is unquantifiably vast.
Do mayors dream holistic dreams?
For companies seeking opportunities in urban areas, the focus on cities – rather than individual city departments such as transport – is not just a convenient label for their marketing efforts: it reflects how cities want to address their infrastructure challenges. "Our experience is that municipalities are increasingly taking a more holistic approach to transport and social facilities, environmental services and renewable energy," says Falcones.
That holistic approach is coming about because cities are being forced to think about their infrastructure needs across all scales – from LEDs in traffic lights to big rail projects. "It makes sense to think about the technical challenges and commercial benefits in a similar way," says Johannes Schmidt, chief executive of project and structured finance, infrastructure, cities and industry at Siemens Financial Services, which supports the activities of Siemens and the infrastructure financing requirements of cities through the provision of letters of credit, risk management and financing for projects.
