Digitalization, Equity, and Sustainability Drive the Smart City Market

For more than a decade, the smart city market has been driven by visions of how technology can help address some of the most intractable urban challenges. The pandemic and growing recognition of the impacts of climate change have added new urgency to these issues. City leaders realize the need to rebuild better to ensure resilience to future pandemic events, accelerate the shift to zero carbon cities, and address the gross social inequalities in many cities. 

The need for cities to redirect their focus in 2020 and early 2021 to address the challenges presented by COVID-19 has meant that some smart city investment has been delayed, redirected, or canceled. However, recovery programs are already showing a strong commitment to infrastructure investment, digital technologies, and increased sustainability. Guidehouse Insights’ latest smart city report estimates that the global smart city technology market will grow from $101 billion in annual revenue in 2021 to $240 billion by 2030 at a compound annual growth rate of 10.2%. This represents a cumulative value of $1.65 trillion over the next 10 years. 

Smart City Solutions Support Pandemic Recovery

Although there has been some reduction in our estimate of market size compared with our 2019 forecast, the fundamental drivers for smart city solutions remain strong. Many city leaders have been advocating recovery programs that focus on digital and clean technologies to make cities more resilient and drive future economic growth. Smart city solutions that support these ambitions are expected to thrive even during a very tough period for local government finances. Focus areas for investment include: 

• Transforming through further digitalization of city services: Local governments have had to adapt to unprecedented changes in their service priorities. In addition to providing disease management, they have had to transform transport services, extend remote working, and provide new digital services. As a result, the flexibility and cost-effectiveness of cloud-based services has become even more apparent. 
  
• Establishing data-driven cities: There has been a significant expansion in the data analytics capabilities of cities over recent years. These new capabilities have been an important asset during the pandemic and are now being used to help target recovery programs. City platforms for data integration and dissemination have been particularly important. Cities are looking at how they can build on these innovations, including greater use of AI and machine learning tools. 
  
• Providing equitable and resilient connectivity: The need for remote working and schooling has illuminated the importance of urban communications infrastructure and services. It has also thrown a stark light on the social costs of digital exclusion. Post-pandemic, there is likely to be even more focus on the role of 5G in providing improved connectivity for all communities.
  
• Supporting flexible urban mobility and street management: The massive reduction in travel demand and the shift away from mass transit to other modes of transport are forcing cities to rethink their mobility strategies. This change provides new opportunities for smart streetlighting, video analytics, intelligent traffic management, and smart parking solutions that can support more flexible approaches to street and neighborhood management. 
  
• Meeting new health and public safety needs: The global health crisis has inevitably had an immense impact on the shape and delivery of health services in cities. Approaches that have become essential during the pandemic response include telehealth provision, monitoring and contact tracing, applications to monitor occupancy levels, and health communication. 
  

In these areas and others, smart city programs will provide significant opportunities for a broad range of technology and service providers, but only if they can demonstrate their ability to support sustainable and equitable city recovery programs.