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Smart City Market will Reach $1.565 Trillion in 2020

Local government CIOs across the globe have been planning to introduce new technology-based services into their communities. New digital services may be coming to a municipality near you, perhaps as soon as 2015.

A smart city is one that has digital technology embedded across all city functions. The global smart city market will be valued at $1.565 trillion in 2020, according to the latest worldwide market study by Frost & Sullivan.

Over 26 global cities are expected to be smart cities in 2025 -- with more than 50 percent of these smart cities from Europe and North America.

By 2025, it is expected that around 58 percent of the world's population -- about 4.6 billion people -- will live in urban areas. In developed regions and cities, the urban population in cities could account for up to 81 percent of total population. This will pose serious challenges for city planners, who will have to re-think how they provide basic city services to residents in a sustainable manner.

Governments of smart cities are transforming from a traditional model of a silo-based organization to a more collaborative, integrated service delivery model. Moreover, progressive city managers will work with their peer group -- regionally and globally -- to drive smart city innovations.

"Technology and ecosystem convergence, collaboration and partnerships between stakeholders from different industries, such as energy and infrastructure, IT, telecoms and government will also expedite the delivery of integrated services," said Ivan Fernandez, industry director at Frost & Sullivan.

Smart cities are built on intelligent solutions that will lead to the adoption of at least 5 of the 8 following parameters -- smart energy, smart building, smart mobility, smart healthcare, smart infrastructure, smart technology, smart governance and smart education.

Smart Energy is the fastest growing market segment within Smart Cities and will be driven by the large scale adoption of smart grids and intelligent energy solutions. Smart Energy will make up 24 percent of the total global smart city market in 2025, growing at a CAGR of 28.7 percent from 2012-2025.

In the last ten years, distributed energy generation is estimated to have more than doubled. Strong growth is expected to 2020, corresponding to nearly half of the increase in total electricity use. The game-changer will be electricity storage -- it will help manage peaks, drive renewable energy uptake and support electric vehicle infrastructure.

Smart Infrastructure will make up 11 percent of the total global smart city market in 2025, growing at a CAGR of 12 percent from 2012-2025. Key parameters of Smart Infrastructure include sensor networks as well as digital water and waste management.

"For smart cities to work, begin with the end in mind. Tailor the technology solution to the DNA of the city -- not the other way round," concludes Mr. Fernandez.

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