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Are Cost Savings the Main Driver Behind Smart Cities IoT Deployments? |
NEWS |
For the most part, cities are still run very inefficiently. At the same time, the scope for using IoT tech to optimize operational practices is virtually unlimited. Opportunities abound, from public services like waste management, safety, security, and emergency services to mobility, energy and other utilities, education, and healthcare. And, it’s not just about maximizing the value derived from tax payer’s money from a city government perspective (either by reducing overall costs or maximizing the value offered within a fixed budget), but also to maintain the affordability of living in cities all together by offering innovative mobility, energy, and other services based on new sharing and service paradigms, sometimes even allowing citizens to valorize their own assets such as cars, homes and micro-grids. This also holds for enterprises.
Clearly, from a city perspective, the promise of important cost savings represents a key driver for the deployment of smart IoT tech, perhaps even the single most important incentive for a cash-strapped city government. Additional benefits such as improved satisfaction through seamless public services and citizen involvement in public affairs, reduced environmental impact, economic development, and an overall improved quality of city living can further contribute to find support for smart city deployments. However, due to the very nature of the government sector, the cost dimension dominates while other private IoT markets are more squarely focused on new revenue opportunities.
Opportunity for Efficiency Improvements is Huge |
IMPACT |
Examples of smart city cost saving opportunities include:
Wherever one looks, cost savings opportunities are staring in the face.
Beyond ROI: Value Chain Complexities and Ecosystem Resistance |
COMMENTARY |
City services such as waste management outsourced to the private sector, which is often the case in the U.S., seem to escape the scrutiny often applied by governments running service operations themselves. A waste management service operator will be less incentivized to adopt smart bin technology, when paid by the city per container haulage. It’s just another example of longer value chains simply operating less efficiently though educated city governments can play a key role in maneuvering their suppliers into adopting more efficient, tech-driven practices.
Secondly, and maybe even more importantly, established supply chain relationships and operational practices fine-tuned over many years often result in inertia, even in the face of huge potential cost savings and quasi immediate ROI on technology investments. The highly disruptive impact of IoT tech on back-end processes and overall management are well documented, not just for smart cities, but also for other segments such as fleet operations. Hidden costs related to integration in or replacement of legacy IT systems, employee training and motivation, or simply the emotional cost related to change are often stopping IoT tech projects in their tracks.
While the smart city IoT tech ecosystem definitely needs to keep hammering on the huge cost saving opportunities, more needs to be done on allaying fears and concerns about the wider implications of embracing technology, including the psychological challenges of innovation and change management, going far beyond mere technical or financial considerations. In the future, the IoT ecosystem needs to profile itself as an enabler and supporter of change, more than anything else.
Finally, for governments and cities, cost savings achieved through automation-enabled employee reduction often need to be paid back in the form of lost political capital with both unions and citizens. On the other hand, the adoption of technology has shown to invariably result in economic development, a key driver of smart city deployments and off-setting the direct loss of government-paid employees by new jobs created in the private sector.