Smart City Philosophy by Euro India Consulting.

Smart Cities represent a new approach to the urban enterprise, The technologies behind Smart Cities evolve too fast to accommodate traditional models for municipal projects, which often involve long timelines and complex procurements, and typically require large budgets for capital projects and operations and as such they demand new thinking about how to conduct urban projects.

To realize the promise of Smart Cities, governments need a new approach for financing their projects, forming partnerships, procuring products and services, and providing governance. One model Euro India Consulting propose is called the Coalition route , which offers a way to develop new partnership ecosystems and conduct flexible procurements. It allows municipalities to quickly test and deploy Smart Cities solutions and scale up the ones that provide real benefits.

Smart Cities combine traditional infrastructure with the disruptive technologies that are transforming relationships between people and the urban environment.

These technologies include: automated/ autonomous vehicles; ride-hailing and -sharing services; cloud-based management services for improving municipal services delivery; IoT;  and road, water, and lighting systems with embedded sensors.

Smart city concept , although exists since 1970s with the Community Analysis Bureau in Los Angeles). Initiatives focused on big technology solutions, including command centers, transport management systems, and  city developments.

And such a large-scale urban transformation presents not just a technology challenge, but raises questions around new forms of procurement, financing/funding, and governance.

Attracting investors would also  require a comprehensive strategic plan that clearly communicates the opportunity and presents a robust business model, a creative approach to funding and financing—new sources of revenue, new models for recovery and value capture.

Today the  challenges are not building a new, in a blank urban space, deploying a new governance and public-private delivery model, but improving upon and repurposing legacy infrastructure and systems such as buildings, transit systems, and others services.

These are complex undertakings in any case, but especially when existing governance, procurement, and financial models are designed for 19th/20th Century city needs. When you layer in the core objectives that a Smart City should be economically and socially inclusive, resilient, and environmentally friendly, the challenge becomes greater still.

A key gating issue is that many cities don’t have the money required to develop large projects, not to mention the appetite to assume the risk associated with deploying new technologies on the city-scale. So if a city wants to realize the benefits that come with Smart -Cities initiatives, how can it proceed?

A couple of recent developments point at a solution. One is the emergence of new, more affordable technologies that cities can use to address some of their most pressing challenges.

Another is the rise of entirely new solution types, such as solutions-as-a-service, or interoperable solutions that distribute data across multiple organizations. During the past decade or two, for example, a city that wanted to improve mobility might spend millions of dollars on an infrastructure-heavy traffic management system.

Today, a city might achieve a similar goal by developing and deploying a cloud-hosted mobility-as a-service (MaaS) platform using open APIs, based on relatively inexpensive technology, delivered via an IoT enabled network and smart phone, that lets travelers plan, book and pay for multi-modal travel on demand.

This solution would integrate data and services from multiple partners, such as the city’s bus system, a ride sharing service, a state-owned commuter rail service, and commercial airport shuttles. It could create a new market for trip-level insurance coverage, opportunities for real-time retail and foodservice delivery, and all the associated data—travel, purchasing, etc.—could create a new, potentially monetizable data stream for business.

While these new solutions help reduce cost as a challenge, cities contemplating Smart Cities initiatives still face a lot of questions. For example, when you construct a new building for a Smart City (take, for example, a city hall or library), you don’t just hire an architect and a general contractor: you also need partners that can integrate technology: sensors and networks for smart lighting and smart HVAC.

To start a smart city project, let us as some logical questions.

1How do you procure the necessary products and services, especially when the project might involve multiple government agencies and private sector vendors?

2 How should you finance the project, where there are multiple vendors with different risk and return requirements?

3How can you test a new technology or concept on a small scale and then, if the results look good, quickly extend it across the city or even a larger region?

4 How do you coordinate the activities of all the project partners?

The answer is

Euro India Consulting ‘sCoalition route.

The Coalition routeoffers answers to those questions and more through attention to four areas  financing, partnership, procurement, and governance. Innovative Financing Cities with strong credit ratings can use general obligation bonds or revenue bonds to finance SmartCities projects.

As in traditional infrastructure projects, money to repay a loan may come from user fees such as tolls, from taxes, or from savings produced by the new project.

Steps involved in Smart City project Delivery Model

  • To define the objectives and the desired outcomes, so participants can tailor their efforts toward those goals.
  • Develop an inventory of existing assets that may be available for use by the smart city
  • Define the business model that will show the project generate economic value?
  • What new value chains will arise from advanced technologies and related services?
  • How, the project will generate revenue and free cash flow.
  • Will the project require more funding than it can recover from its project revenue?
  • What sort of value will the project create (directly or indirectly), and how might you (monetize) that value?
  • Last a plan for funding and financing the smart city project must be developed.

Smart cities initiatives require innovative business and revenue models

A smart city project leveraging digital resources on existing assets, brings many opportunities and  new revenue channels .One important factor that can make a smart city project successful its revenue model. The historical way to finance a smart city project is public sector  but the government can also redirect its investment by getting the public to pay fees (directly or indirectly) to use the service. Revenues can also be received for smart city project by selling value generated to other third parties for e.g. by monetizing the data that the service collects for marketing. Also commonly known digital revenue models to date are using advertising to support a service, selling an “all-you-can-eat” subscription data monetization for marketing purposes and pay-as-you-go user fee.  Any opportunity should be looked for to leverage the technology platform and network to generate additional revenue streams, also Vendors and partners can find generate revenue from the solutions and services they provide in each layer of the business architecture.

The sponsor must address some questions

  • Does the project capture economic benefit through direct revenue streams?
  • Will it generate any free cash flow that can be used to cover various expenses, such as on-going operation and maintenance and up-front finance costs?
  • Can public and private sources of finance be combined? This is sometimes done if the cash flows are insufficient to repay finance from the private sector.
  • What risk is connected with free cash flow and how do those risks affect the sponsor?
  • Is the present value of the total investment costs greater than the present value of net revenues? If such a funding gap exists, the sponsor will need to identify alternative funding mechanisms.