As a buyer of IoT solutions, the smart city differs from enterprises in several subtle, but important, ways
IBM, Cisco, Accenture and other leading information and communications technology companies have been trying to ignite the smart city market for more than a decade, but the deployment of computing and connectivity in urban environments has been a slow burn. One of the major stumbling blocks is a culture clash; selling ICT to a municipality is very different from selling it to an enterprise.
Although the smart city is finally coming of age, as explained in our new in-depth report and an associated webinar, some of the distinct characteristics of this market can trip up an unwary ICT supplier. Below are five factors that make municipal buyers different from their enterprise counterparts.
Dilution of power and a shortage of levers: In many cities, the mayor’s ability to bring about change is limited by political checks and balances. He or she may be constrained by central government, by other local administrations and by the scope of their remit. “The Mayor of London isn’t actually in charge of very much,” notes Jeremy Green, principal analyst at Machina Research. “He doesn’t have many levers to pull.” At the same time, many cities don’t have an overarching CIO. Instead, individual services such as waste disposal and traffic management plan and procure their own ICT.
Broad objectives and the pursuit of the general good: Whereas an enterprise’s primary responsibility is usually to make money for its shareholders, a city administration can be answerable to an array of stakeholders including residents, national government, commuters and local businesses. Moreover, cities typically have goals and objectives that aren’t financial, so money isn’t always a key driver. For a smart city solution, this can be a positive. “If you explain to people there is a social and community benefit, they may be prepared to share data,” said Green. “People are unhappy sharing data that will be monetized … but municipalities are in a strong position because they aren’t a commercial organization. The data can be used for the general good.”
Privacy issues can be accentuated: Smart city solutions are generally designed to improve daily life. To do that, they need to monitor daily life, which can be highly intrusive. Although smart city data will usually be anonymized and aggregated, it also needs to be quite granular to enable local planning and resource allocation. For example, data collected by street-level sensors, monitors and cameras could conceivably reveal how many days residents are taking off sick or how many visitors they receive in their homes. While enterprises that monitor how employees spend their time risk damaging staff relations, in a city government the political backlash could be much greater.
Competition between cities is limited: Unlike enterprises, cities don’t generally have direct competitors. Although a municipality may sometimes compete with another municipality to attract businesses looking for offices or factories, cities typically don’t see market share as a key performance indicator. In practice, that means telling city leaders they have to deploy a particular solution to stay competitive with another city and is unlikely to resonate with the municipality. Having said that, mayors do have a sense of civic pride and some want to position themselves and their cities as pioneers.
Cities have very blurred boundaries: Although municipalities are responsible for a clear geographic area, individuals and businesses immediately outside this area can have a big impact on city life. Commuters can dramatically increase congestion, while the creation of business parks and shopping malls outside the city limits can change demand in the city centers. Ideally, municipalities’ long-term planning should be coordinated with that of the surrounding region. But, in practice, differing election cycles and political priorities can make coordination difficult.
