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Report claims $5.4 trillion annual savings from smart cities by 2022

InterDigital smart city diagram

© Chordant

  • New research report conducted by ABI Research
  • Calls for governments, enterprises and citizens to work together
  • Actual city government savings make up $580 billion of the total
  • Enterprises and citizens make up the rest

According to a new report from ABI Research on behalf of InterDigital’s Chordant subsidiary and CA Technologies, the scope for efficiency improvements across all urban sectors and segments amounts to more than $5 trillion in yearly cost savings globally by 2022. Yes, $5.4 trillion to be exact; a staggeringly large amount. The reality, though, is that this is a theoretical maximum estimate that will never be achieved.

According to the report, “Smart Cities and Cost Savings”, the use and deployment of IoT and smart technologies will be pivotal to the future success of smart cities, but only if stakeholders collaborate. With higher concentrations of people and enterprises in cities, smart city and IoT technology, along with new sharing and service economy models, will be key for cities to optimise the use of existing assets, maximise efficiencies, obtain economies of scale and ultimately create a more sustainable environment. At least that’s the theory.

“The true potential of smart cities won’t be realized if governments, enterprises and citizens don’t work together in harmony,” said Jim Nolan, EVP of Chordant at InterDigital. “Doing so will promote the emergence of smart city marketplaces and open platforms, where third-party players are able to ensure seamless integration of new smart city technologies into legacy platforms and systems.”

This is the key to the $5.4 trillion: the report considers the potential cost savings across three levels – governments, citizens and enterprises. The reason for expanding the scope beyond just government, according to the report’s introduction, is that both citizens and enterprises will enjoy cost savings through lower prices for energy, transportation, communication, healthcare and other services.

Cutting to the chase, the $5.4 trillion is calculated thus: 

  • $0.58 trillion in city government savings,
  • $1.66 trillion in enterprise savings, and
  • $3.15 trillion in citizen savings

These figures were calculated by first considering all 75 cities with a total urban population of more than 5 million, accounting for a combined population of 850 million. The report notes that while this still only represents a fraction of the global urban population, it does account for around 50 per cent of the cost-saving opportunity, due to the decreasing scalability of smart city technology deployments across the long tail of smaller cities. Hence the estimated global total savings of $5.4 trillion per year from 2022.

“While smart cities technologies offer multiple benefits, very significant direct cost savings represent a key incentive to embrace urban innovation for city governments, citizens and enterprises alike; this allows building stronger business cases with faster ROI, facilitating project approval and accelerating deployments,” said Dominique Bonte, VP President, Markets, ABI Research.

“Smart cities are built upon IoT allowing citizens to reimagine how they work, live and play,” said Rahim Bhatia, General Manager, API Management, CA Technologies. “We’re excited to see quantifiable outcomes being delivered across today’s local governments, with APIs playing a fundamental role in seamlessly connecting the critical infrastructure that makes smart cities a reality.”

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