What has made Vienna the “smartest” city of 2017 is to also finally find its way into German cities. A current study predicts sales to double along the smart city value chain in the coming years.
“The future of the earth is decided in the cities”, it states. In Europe, 70% of people already live in cities. Globally, around two thirds of earthlings will be city dwellers in the next two to three decades. The consequences of this rapid urbanization cannot be overcome using traditional concepts. Therefore, cities need to become smart. Consequently, in the years to come, the associated market will be one of the fastest-growing sectors in the world and therefore also in Germany.
According to the recent study by eco (Association of the Internet Industry) and Arthur D. Little “The German smart city market 2017–2022. Facts and figures”, this market will record turnover of around €20.4 billion in 2017. By 2022, sales in Germany are expected to more than double to around €43.8 billion – this corresponds to an average annual growth of 16.5%. The study by Roland Berger published some months ago was not quite so optimistic. It anticipates Germany’s share of the global market for smart city solutions to be about $28 billion by 2023. Today, it is $13 billion. This significant discrepancy is certainly also due to the fact that “smart city” is a diffuse collective term. And everyone subsumes something different under the concept.
Nevertheless, modern mobility strategies such as those already partly implemented in Vienna, for example, need to also become established in Germany. However, according to the study, German companies will only be able to take a slice of major international mega projects if they begin to bring products and services to market for the “smart city” ecosystem with test customers and reference projects now, as the solutions of international corporations from the USA and Asia are already covering more and more subareas of the smart city business. Strategic, long-term partnerships with cities (Cisco and Hamburg, for example) and investments in digitalization projects (for example, the $500 million that Cisco plans to invest during the course of the “Deutschland Digital” program) are often the key to success.
For this reason, the study therefore predicts a wave of cooperation between a wide range of providers. Nearly 50 competencies (from sensor technology and connectivity through to application software) along the value chain are needed to cover a large part of smart city applications. Even big corporations cannot do this by themselves. Having the right partners in this complex ecosystem thus decides who succeeds and who fails.
Lion’s share for transport & logistics
The biggest market volume goes to the transport & logistics industry. For example, in the form of intelligent parking systems, smart traffic management, or the integration of different traffic systems. The IT security and network infrastructure sector also benefits from particularly large investments – with sales of around €3.5 billion in 2017 and average annual growth of more than 13%. Together with the physical security sector, which includes audiovisual surveillance, intelligent access control systems, identity management, and building automation, the above-mentioned growth areas will account for over 65% of the total smart city market in 2017.
Education and health in the smart city
With annual growth of around 27%, the education market segment will grow particularly strongly. The digitalization of educational institutions is still in its infancy. High expenditure on hardware, software, and services such as cloud platforms as well as digital teaching content are expected in this area.
The study also predicts high investment in health infrastructure, for example in mobile healthcare devices such as portable blood glucose meters. The aging population will increasingly benefit from digital patient records and personal health management.
In order to keep up with international competition, German cities need to work together more closely and integrate the wide range of different smart city offerings with a coherent strategy – from mobility and energy management through to security solutions. The study thus ultimately proposes a cross-segment smart city platform as a link to all services.
The German smart city market 2017–2022. Facts and figures (PDF)
eco members can receive the study free of charge by sending a request to firstname.lastname@example.org. Non-members receive a free management summary or can purchase the study for €149.