Whatever happened to the “smart city?” It’s alive and well but morphing into the “hyperconnected city,” powered by data analytics, artificial intelligence, Internet of Things (IoT), and other advanced technologies.
Among the goals: Create new business opportunities, increase the efficiency of government processes, and improve public safety and health, according to a new study by research firm ESI ThoughtLab and sponsored by Oracle. Those benefits will come with a discernible return on investment that increases as connectivity expands, the report maintains.
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One surprising finding is the extent to which hyperconnected cities—even some with huge technology investments—admit to being largely unprepared for cyberattacks.
Breadth and Rigor
The new report builds on one released last year titled “Smarter Cities 2025: Building a Sustainable Business and Financing Plan,” in which ESI ThoughtLab researched the smart city initiatives or plans of 136 municipalities in 55 countries. That report surveyed city leaders, businesses and citizens, incorporated data from secondary sources, and tapped third-party experts for analysis.
The new report, “Building a Hyperconnected City,” narrows the focus to 100 cities—from Athens to Warsaw, Bratislava to Washington, DC—that are spending a total of $141 billion on connectivity projects in 2019, representing an average investment of $1,220 per citizen. Those cities, a third of them in developing countries, range in population from fewer than 200,000 to more than 24 million.
The study groups the 100 cities into three categories: “implementers” (25 cities), “advancers” (50), and “leaders” (25).
Technology Stakes
The first report established the technology table stakes: cloud computing, mobile applications, and IoT sensors and networks. Especially important is the ability to acquire, aggregate, integrate, and analyze data—as much data as possible—from a variety of sources, using a sophisticated data management platform.
The new study reinforces the criticality of data. A majority (57%) of the 100 cities say they tap non-government sources for that data, including businesses, academia, and social media. That rises to 80% for “leader” cities. About three-quarters (76%) of leaders describe their cities as “advanced” in gathering and extracting value from data, while 68% say they use a data management system to integrate data.
Data analysis is growing in importance. A significant percentage of connected cities analyze data for insights into their IT infrastructure (64%), payment and financial systems (56%), mobility and transportations systems (49%), and physical and digital security (46%).
Among the 100 cities studied, 90% use cloud, Wi-Fi, and mobile technologies, while 82% report widespread (and growing) use of AI tools, especially in connection with public safety and governance initiatives. Some 91% of the cities in the report use IoT today, a percentage projected to increase to 97% in three years.
Parsing ROI
The cities in the new ESI ThoughtLab study say their connectivity investments generate an average return of between 3% and 4%. For “leaders,” though, the average ROI is 5%. The same disparity exists with specific municipal efforts. Leaders report a 7.1% ROI from digital tax filing systems, for example, while the average return overall is 5.2%.
Digital public transit applications are often the first and most popular connectivity projects. Among cities that deploy them, more than a third (38%) report increased passenger satisfaction. Among cities that have deployed water-related systems—for example, to monitor quality and use in real time—40% cite improvements in public health and citizen wellbeing.
The ability to generate ROI estimates helps cities get approvals for their smart connectivity projects. More than two thirds (68%) of cities in the leader category create a detailed business case for all of their smart projects, and 64% expect to demonstrate a positive ROI before investing in such projects. That finding points, once again, to the critical role data and analytics play in smart city efforts.
Cautionary Notes
The new study strikes cautionary notes concerning security preparedness, talent acquisition, and privacy and regulatory issues.
Fewer than half of the cities surveyed consider themselves “well prepared” for cyberattacks. That finding suggests that as cities invest in connectivity projects and processes, they realize their expanding vulnerabilities
Municipal losses related to cybersecurity events averaged an estimated $3.4 million over the last year, with 11% of cities losing more than $10 million, the new study finds. Leader cities reported an average loss of $6.2 million.
More than three-quarters (82%) of connected cities say they plan to increase their cybersecurity budgets next year—more than a third by more than 10%.
Finding the necessary technology talent is as challenging for connected cities as it is for modern businesses. Fewer than half (46%) of the 100 cities say their staffs have the requisite skills in data analytics, strategic thinking, and problem-solving to advance their connectivity projects.
Use of biometrics technology is widespread (83%) and increasing, according to the study. At the same time, the public is starting to balk at the use of facial recognition systems, citing privacy concerns.
Similarly, workers are wary of the increasing use of AI, out of concerns that their jobs could be automated. So it’s not surprising that almost half (45%) of the smart city advocates surveyed say regulatory efforts could impact their ability to gather and analyze data.
Investment Will Increase
Overall spending on municipal hyperconnectivity initiatives will increase by 14% during the next year, according to the cities that participated in the new study. Implementers say they will increase their investments the most, by an average of 21%. Transit and traffic projects are getting the most attention, followed by public safety and health initiatives.
Among other emerging technologies, two-thirds of connected cities say they’re already investing in blockchain distributed ledger networks, and those investments are expected to increase during the next three years, especially in the areas of governance, funding, construction, and maintenance. The cities surveyed also expressed interest in using 5G mobile networks, robots, drones, and augmented reality.
Last year’s ESI ThoughtLab study disclosed a considerable disconnect between the challenges cities sought to address with smart city projects and those that citizens and businesses considered priorities. This new study shows hyperconnected cities are addressing that disconnect. More than half (52%) say gaining the support of citizens and other stakeholders is critical, while almost a third of leader cities (32%) have appointed a “chief citizen experience officer,” responsible for, among other duties, the effectiveness of a widening array of communication platforms, including websites, email, call centers, mobile apps, text messages, and social media sites.
The previous study made the point that smart cities must establish a technology framework, align their initiatives with government priorities, prioritize data gathering and analysis, and stay current with emerging technologies.
A year later, the new study notes that those efforts are just the means to an end. Success requires cities to optimize their relationships with businesses, improve interactions with citizens, and ultimately elevate their constituents’ quality of life. Only then will the “hyperconnected city” truly arrive.
