How to pay for a Smarter City
February 2, 2012 3 Comments
There are many definitions of what a Smarter City is; but a lot of them boil down to something that seems like common sense: spend some money doing things that have positive outcomes, rather than spending (much) more money trying (and often failing) to fix things that have gone wrong.
One reason that’s hard to do is that providing the accurate and holistic information needed to identify which preventative measures need to be taken where and when requires an investment in improving the systems that provide information to decision makers. That information might come from sensors on physical infrastructure; from people; from information systems; or from all of those sources.
Advances in technology are lowering the cost of collecting, integrating and exploiting that information; but the more fundamental problem is how to justify any investment at all in preventative action by one organisation when the benefits are realised by other organisations, some time later.
For example, (as is very well known) it has proven persistently uneconomic for network providers to deploy broadband coverage in areas with low economic activity. Despite the potential benefits to business and residents that technologies such as telecare and remote working could provide, there are simply not enough potential subscribers from whom network providers could collect revenues to recover the deployment cost. In most cases where this issue has been addressed, it is through Government or European grants – and those sources won’t provide a generally scalable financial model for Smarter Cities.
I haven’t figured out how to fix this; but I think I’ve realised what a couple of pieces of the puzzle are.
The global financial situation is forcing public sector organisations everywhere to make significant savings – around 10%-20% of their budgets. They can only do that by sharing capabilities such as IT services and back office processes. Of course, this results in job losses that cause real hardship, and I count friends, neighbours and colleagues among those who have lost their employment in this way.
But the resulting shared IT platforms do enable an opportunity to simplify the business case for investing in Smarter Cities. Those platforms can deliver IT capabilities to organisations in City regions at incremental cost. These days we call that Cloud Computing.
The multi-tenancy, automation of provisioning, and virtualisation of Cloud Computing enables capabilities paid for by a business case in one domain – such as predictive analytics and information portals – to be subsequently exploited at incremental cost in other domains. This way, business cases that to date have not been economically viable may now become so.
The majority of cities around the world need such capabilities to be available to Smarter City initiatives at incremental cost because they are not in the same financial positions as some of the most commonly referenced Smarter Cities. They do not have forthcoming global sporting events driving inward investment such as the Olympic Games or football World Cup, as London and Rio do. And they are not new-build cities in emerging economies such as China, paid for by strong growth in working populations and the economy.
For these cities, a Cloud platform can help them achieve Smarter City transformations through a carefully sequenced and co-ordinated series of investments, each of which is individually justified in one domain, but which adds capabilities that can then be cost effectively exploited elsewhere.
For example, case studies have shown how investments in information integration and analytic technologies can save money in delivering social care and reducing benefits fraud (see the examples from the London Borough of Brent in the UK and from Alameda County in the US (see this case study and this video). In other cities where similar business cases are viable, information integration and analytics technologies could be deployed. If those technologies are made available to other City stakeholders through a regional Cloud platform on a commercial basis that reflects the ongoing operational cost of providing capacity, rather than the deployment cost of the platform, then the investment required to enable Smarter City solutions in other domains will be lower. It might make traffic prediction solutions for commuters a viable investment to make, for example, in order to reduce the congestion that lowers economic productivity and job creation in cities.
This is likely to happen on regional city clouds rather than on nationally or internationally distributed public cloud infrastructures. The volume and velocity of the data required to generate timely insights based on holistic information means that the co-location of data and analytics on a regional Cloud will be a vital for achieving the required performance and scalability.
I don’t claim that this approach will be straightforward or simple. The nature of Smarter City solutions in spreading across organisations, industry sectors and budgets will make the financial models and technology infrastructures – particularly in the areas of security, service management and resilience – a huge challenge.
But for the vast majority of cities, this approach is – in my opinion – the only way to make the investments that are required. I think 2012 will be a very significant year in the development of Smarter Cities. By the end of it, at the very least I’ll know whether I’m right or wrong.