According to Pike Research’s definition, a smart city is characterized by the integration of technology into a strategic approach to sustainability, citizen well-being, and economic development—and as such, smart cities cannot be understood as a normal market.

Pike suggests in the report Smart Cities that the smart city should be seen as a complex confluence of several existing markets, as well as the driver for new, emergent solutions that span several of these traditional domains such as energy, water, transportation, buildings management, and/or government services. The smart city is becoming a space for the testing and implementation of cross-functional technologies and solutions.

Between 2010 and 2050, the number of people living in cities are projected to increase from 3.6 billion to 6.3 billion, with almost all of that growth occurring in developing countries. By 2025 there will be 37 megacities, each with a population greater than 10 million; 22 of those cities will be in Asia.

The impacts of this new phase of urbanization on economies, urban infrastructures and resources are already being felt, and are also spurring innovation in urban design, technologies, and services, Pike says.

The rapid expansion of the urban population in the world’s developing countries is the primary driver for the interest in developing new approaches to city development and the use of smart technologies to improve efficiency and reduce costs. A new focus is emerging on the role of cities in North America and Europe as these economies come to terms with the impact of globalization on their industries and economies.

The provision of basic infrastructure for the world’s new urban populations is a critical requirement. However, the deployment of smart technologies is happening most quickly in countries that need to go beyond basic infrastructure and address the transportation, energy, and housing needs that will ensure they are successful and attractive cities.

—“Smart Cities”

According to the report, key challenges facing smart city leaders and suppliers include:

• Developing effective financial models. Funding remains the critical issue for large-scale deployment of smart city solutions.

• Moving from pilots to large-scale deployments. A city that finds a model for moving from pilots to large-scale deployments across a number of operational areas will have the right to be called the first true smart city.

• Developing a holistic view of the city. A broad perspective on the operations of a smart city is vital not only to ensure that environmental targets are met, but also to get maximum benefit from investments.

• Improving governance and citizen engagement. Many current smart city pilots are characterized by limited engagement with the wider public. Smart cities will need to engage in new ways with citizens, who are becoming more active participants in the city simply as a result of the new communications models.

• Identifying the customer. Cities are not companies with clear leadership and well-defined decision-making processes. A city is more accurately viewed as a space for opportunity to be realized through collaboration. Delivering significant projects means developing complex collaborations across multiple levels of government, local partners, and (in some cases) international development agencies and other sponsoring organizations.