0

70% of

Fortune 1000

80% of

Global 500

55

Conferences

4,000

CIOs

750 Analysts

Serving Clients

in 85

Countries

100,000

IT End-User

Inquiries

10,000

Media

Inquiries

2.7 Million

IT End-User

Searches

60,000

Clients

10,800

Client

Enterprises

5,500

Benchmarks

Welcome!Thank you for joining us on today’s Gartner webinar.

This presentation, including any supporting materials, is owned by Gartner, Inc. and/or its affiliates and is for the sole use of the intended Gartner audience or other authorized recipients. This presentation may contain information that is confidential, proprietary or otherwise legally protected, and it may not be further copied, distributed or publicly displayed without the express written permission of Gartner, Inc. or its affiliates.© 2010 Gartner, Inc. and/or its affiliates. All rights reserved.

Laura McLellanVice President

Marketing Strategies

Gartner Research

laura.mclellan@gartner.com

Alfonso Velosa IIIResearch Director

Semiconductor & Sustainability

Gartner Research

alfonso.velosa@gartner.com

Is Smart Cities The Next Big Market Worth Pursuing?

Bettina Tratz-RyanVice President

Environmental Sustainability Gartner Research

bettina.tratz-ryan@gartner.com

Caveat: Smart Cities Is Still Emerging

• There is no one Smart Cities market

- There are Smart Cities segments, threads, ecosystems, and subsystems

• Effect:

- Considerable variability exists in current forecasts

- It is not the technology, but rather the implementation of the technology solution that is critical for smart city

• Consequence:

- Engagements in the Smart city concept are consulting and services led

- Tailored solutions/frameworks for different subsystems as well as regions, and stakeholders are required

2

Smart Cities Opportunity Story Line

• Background and context:

- How - Who

- Why - What

- Where

• Preliminary assessment of your smart cities opportunity

• Recommendations

3

Polling Question 1

How familiar are you with smart cities opportunities on a scale of 1 to 5 where 1= not at all familiar and 5 = very knowledgeable)?

• 1 – Not at all familiar

• 2

• 3

• 4

• 5 – Very knowledgeable

4

How Do We Define Smart Cities?

5

Information Platform

Smart Buildings

Smart Education

Smart Health-care

Smart Public Services

Smart Transport-

ation

Smart Utilities

A Smart City looks at all the exchanges of information that flow between its many different subsystems. It then analyzes this flow of information, as well as of services, and acts upon

it in order to make its wider ecosystem more resource-efficient and sustainable.

Why Are Smart Cities Important?

• China will move 300 million people to cities by 2020

• 221 cities globally with more than 1 million citizens

• 90 % of those cities are in emerging markets

6

Population Growth Cost of City Services

Worldwide, city leaders and managers need cost-effective & smart solutions

Aging infrastructure, resource constraints & waste

• Washington DC’s water system has elements that date to the U.S. Civil War

• In-efficiency, leaks and waste rival maintenance and expansion costs

Where Are the Opportunities?

City Type Developed Markets Emerging Markets

Greenfield

(brand new)

• Limited opportunities-

examples include

Stockholm’s Royal Seaport;

PlanIT Valley, Portugal,

• High opportunities - expect a

broad range of brand new and

satellite cities in emerging

markets.

• Examples include:

• Songdo IDB, South Korea

• Dongtan China

Brownfield

(retrofit)

• Moderate to high

opportunities

• Large number of cities

with aging infrastructure

• Examples include:

• Grid work for

Amsterdam, Holland

• Water system for

Washington, DC, U.S.

• Moderate to high opportunities

• Examples include:

• District of Xicheng healthcare

work in Beijing, China

• Emergency Responder system

in Rio De Janeiro, Brazil

• Traffic Management: Ho Chi

Minh City, Vietnam

7

Who Are Major Stakeholders in the Ecosystem?

Smart City Ecosystem

Government

Financiers

Urban Development

Firms

Technology and Service Providers

Citizens / Business /

NGO

8

• Government: Includes national and state as well as local city

• Financiers: May include international development banks and private organizations

• Urban Developers: Includes real estate developers, engineering and construction firms

• T&SP: Includes software, consulting, services, computing, communications, and semiconductor firms

• Inhabitants: Includes all local city dwellers, including individuals, businesses and NGOs

Note: Terminology varies by geography

What Are the Sub-system Segments?

Buildings

9

Utilities Transport

Education Health Care Public Services

•Public Buildings

•General Use

•Residential

•Commercial Real estate

•Campus

•Culture

•K-12

•University

•Vocational

•Hospitals

•Medical centers

•Remote telemedicine

•Elderly Stay-At home care

•Emergency Responders

•Safety

•Social Services

•Welfare

•Tourism

•Airports

•Cars / Roads

•Railroads

•Logistics

•Energy

•Waste Water/Sewage

•Water

Cities Are Driven By Citizen Services. These Service Segments Drive The Sub-systems .

10

What: Intelligent Energy System, Smart Grid Example

• Energy Consumption and Efficiency

• Price Sensitivity

• Control Layer and Visualization

• Interoperability of Technology and Management

End to End Energy

Management

• Feed in Tariffs and Regulatory Compliance

• Renewable Strategy

• Sensor and Automation of variable energy sources, generations and storage

• Advanced Metering Infrastructure

Interactive Energy Flow

• Business Intelligence for on-demand and real-time supply

• Energy brokerage and open markets

• E-Mobility and E-Vehicles

• Energy Security, Authentication, Billing

• Demand Response Management Systems

Intelligent Energy Applications

10

Bi-directional Business Model

Smart Cities Opportunity Story Line

• Background and context

• Preliminary assessment of your smart cities opportunity

• Recommendations

11

Polling Question 2

Which of these do you think will be the biggest hurdle you’ll face if you decide to enter the smart cities market?

• Affording the upfront investment

• Poor partnering skills

• Little experience with city government

• Our brand may not give us ―permission to play‖

• Lack of professional services capabilities

12

Decisions To Be Made

• Is it strategically important for us to be in the smart cities market?

• What business risk are we willing to take?

• What’s our cost of entry?

• What’s our expected time to revenue? Breakeven? Profit?

13

Can we afford not to be in this market?

Action – Data Gathering/Risk Assessment

• Types of goods and services needed

• IT’s role vs. other players

• Current purchase behavior

• Timing

• Market dynamics, policies and government involvement

• Life cycle of software, technology or service offering

• Profile of early adopter in smart city – new builds & retrofit

• Profitability

14

Appetite for risk?

Determine Strategic Importance vs. Your…

• Business strategy

• Core business

• Current customers – government?

• Current footprint (incl. regionalpresence)

• Current partners

• Offerings

• Capabilities

• Ability to innovate

15

Weight the elements

Roughly Calculate Revenue & Cost of Entry

Step 1. Build a simple model:

- aa# cities > 1M people X

- bb% likely to purchase X

• City type new:

- Subsystem 1 - cc$ deal size

- Subsystem 2 – dd$ deal size

• City type retrofit:

- Subsystem 1 – ee$ deal size

- f% of your type of business X

- g% of you could win

= potential target opportunity

16

Estimate Time to Revenue, Breakeven & Profit

17

$

Time

Variable Costs

Revenue

Fixed Costs

Breakeven

Build 3 scenarios – most optimistic, most pessimistic, and middle ground

Polling Question 3

What information would help you the most to assess the smart cities market to determine if it could be a real opportunity for you?

• Information on customers

• Information on competitors

• Information on potential ecosystem partners

• Information on technologies required

• Information on market size, growth, timing, etc.

18

Smart Cities Opportunity Story Line

• Background and context

• Preliminary assessment of your smart cities opportunities

• Recommendations

19

Use Decision Matrix to Make Initial Go-No Go Decision After Preliminary Assessment

20

Remember –you’ll be doing deeper analysis if the answer is yes, to pursue further

Be scrupulously honest about your resources & capabilities

Investigate Engagement Models

• Urban infrastructure development, design and construction

• Program and project management skills

• Regional presence

• Examples: GE, Siemens, Gale International, Arup, Living PlanIT, United Technologies, Johnson Controls

Real estate & urban

developers

• Mix of Consulting, Services, SI and technology

• Geographic reach

• Financial support for emerging projects

• Project management skills between IT and OT

• Examples: IBM, HP, Accenture, Cisco

Technology consulting

and services

• Know-how between IT and OT (construction of railway, smart building, etc…)

• Navigation of local regulation, rules and market issues

• Opportunity and expertise in technology and services niches

• Vendors: Johnson Controls, Juniper, Bosch

Technology components or solutions

21

Eco-systemsCo-opetition

Eco-systemsEcosystems

Recap

• City requirements for services are expected to grow, driven by population changes, aging urban infrastructure and new requirements

• The smart city market is still emerging.

- Considerable variability exists in current forecasts

- Repeatable processes & ecosystems not in place

- Opportunities by provider type are still ―fuzzy‖

• Evaluate attractiveness

- First with a preliminary assessment for ―go – no go‖

- Then fill in details

• Decide if you want to pursue the opportunity & how

22

Recommended Reading

• "Market Insight: 'Smart Cities' in Emerging Markets"

• "Market Insight: How London Is Meeting the Sustainable Challenge of 'One Planet' Olympic Games in 2012"

• "Market Insight: 'Smarter Cities' Event in Shanghai Reveals IT Vendor Opportunities for Intelligent Urbanization"

• "The Five Dimensions of Smart Government"

• "Marketing Essentials: How to Choose the Right Alliance Partners for Your Needs“

• Market Trends: Worldwide, Smart City Ecosystems Point to Changing City IT, 2011 (Work in progress)

• Marketing Essentials: How to Evaluate a Complex Solution Opportunity (Work in progress)

• Marketing Essentials: Three Steps to Help You Assess Your Smart Cities Opportunity (Work in progress)

• Marketing Essentials: Developing your Smart Cities Strategy (Work in progress)

23

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