The pursuit of sustainability roadmaps, the transformation of the urban landscape, and the improvement of the quality of life for citizens are simultaneous priorities for every major city. Emerging technologies are primed to play an influential role in facilitating success, and cities are eager to harness the power of one technology, in particular, moving forward – the Internet of Things (IoT).
There has been an exponential increase of smart city developments in the Middle East, aspiring to become global leaders in the space. In the UAE, several smart cities, including Masdar City and The Sustainable City, have already developed. And in Saudi Arabia, plans for a new smart city called “The Line”, which is a part of the USD 500 billion megacity development called NEOM was recently unveiled as part of the 2030 Vision to embrace a new economic era.
However, smart city development is not without IoT-related challenges. At present, the supplier landscape is considerably fragmented, with related products bound by various standards. IoT solutions struggle to work together – hindering data exchange and opportunities to capitalize on potential benefits.
Interoperability is a must for seamless information exchange to reap enhanced IoT advantages. After all, the number of IoT-connected devices worldwide is projected to be approximately 125 billion in 2030 from 11 billion in 2019 – emphasizing the need to unlock the full benefits of IoT solutions.
In many cases, cities are relying on vendors with end-to-end solutions that accommodate select needs but they are not compatible with other IoT systems. As a result, this generally entails smart city developers being accustomed to working with a smaller pool of suppliers and this does not allow the possibility of transitioning to better solutions from a cost-effective standpoint. As such, cities must take the initiative in solving the interoperability problem, something that can be done through two methods, having a uniform set of standards or a cross-vertical platform.
A Uniform Set of Standards
Several countries and cities are studying the possibility of using common standards to achieve greater interoperability between IoT devices. This approach can solve two major legacy issues that have hampered cities’ efforts in the past:
- IoT devices contain many components that were developed before the internet even existed and that use incompatible standards. With the rise in connected technologies, the weak interoperability of these standards has become self-evident.
- Over time, different standards developing organizations and industry consortia have produced standards to meet their own needs. This has led to a proliferation of diverse standards, some of which are more advanced than others. Initiatives to consolidate these standards have largely failed, owing to disagreements between organizations and companies.
Thibault Werle, Managing Director and Partner at Boston Consulting Group
For these reasons, a common set of global industry standards is unlikely to appear unaided in the short to medium term. If city governments and regulators can create a consensus among private-sector players, however, they may be able to develop a set of standards to accelerate smart city initiatives, lower market entry barriers to alternative providers, and promote greater innovation.
In theory, if a city applied uniform standards across all of its IoT-connected devices, it could achieve full interoperability. Nevertheless, we believe that cities and regulators should focus on defining common communication standards to support technical interoperability.
The reason: Although different versions exist, communications standards are generally mature and widely used by IoT players. In contrast, the standards that apply to messaging and data formats—and are needed for syntactic interoperability—are less mature, and semantic standards remain in the early stages of development and are highly fragmented.
Some messaging and data format standards are starting to gain broad acceptance, and it shouldn’t be long before policymakers can prudently adopt the leading ones. With that scenario in mind, planners should ignore semantic standards until clear favorites emerge.
Benefits of a Cross Vertical Platform
Building a platform that works across use cases can improve interoperability. The platform effectively acts as an orchestrator, translating interactions between devices so that they can share data and work.
In a city context, a cross-vertical platform offers significant benefits over standardization. Because such a platform functions as an interface between IoT solutions, devices can continue to use their existing standards. And because the platform, rather than common standards, is responsible for interoperability, cities can achieve both syntactic and semantic interoperability and so introduce more advanced smart city applications.
Platform economics also supports their use in metropolises that have a large number of smart city solutions. Revenues consist of subscription fees from participating cities, together with a transaction fee for every use case added to the platform. The more use cases (such as smart lighting or smart parking) a city maintains, the more money the platform makes. This arrangement makes platforms more commercially viable in cities with relatively well-developed IoT ecosystems that can combine existing solutions to create additional use cases. Indeed, whether with cross-vertical platforms or with common standards, pursuing interoperability for its own sake won’t create significant value. Players must apply it to generate entirely new use cases.
Rachid El Ameri, Principal at Boston Consulting Group
Although a private-sector consortium typically builds, owns, and maintains the cross-vertical platform, city governments can initiate the platform’s development by offering the consortium financial support and providing access to their data.
Cross-vertical platforms remain a relatively new concept. Owing to the diversity of IoT solutions and standards, developing a platform is a very complex undertaking, and most projects are still in the planning or testing phase. What’s more, the interests of cities and private-sector players do not naturally align. Municipalities and platform providers can derive significant interoperability benefits or revenues from cross-vertical platforms, but participating companies have less incentive to share their data through a platform. Resolving these challenges would help platforms gain popularity.
The Three Steps Toward a Connected Future
To unlock the full benefits of IoT solutions, cities should take the following steps:
- Select an approach. Metropolises must decide which approach is likely to work best for them. In making this determination, they should first look at their existing IoT solutions. If they have only a handful of solutions, standardization is probably the better option. If they have more than a few solutions, commercial and interoperability considerations favor opting for a cross-vertical platform. Other factors are likely to influence cities’ decisions as well, however. In highly regulated cities and regions, we expect standardization to be more popular; meanwhile, in deregulated markets that encourage competition, platforms are likely to be more prevalent.
- Ensure early buy-in. For either approach to succeed, cities must create a consensus among key stakeholders. Defining IoT standards that work for all participants requires the involvement of all important private-sector players from an early stage of the process. The same is true of platforms, as cities will have to persuade participating companies to share their data—perhaps by offering revenue-sharing agreements or other incentives.
- Promote IoT adoption. Cities should be proactive in increasing IoT adoption so they can reap maximum benefits from smart city solutions. They can do this by funding training, offering subsidies and tax credits, and providing centralized procurement support for the public-and private-sector organizations that are developing solutions. They can also build their own IoT wireless communications network to support adoption.
Fundamentally transforming the urban landscape and improving citizens’ quality of life are possibilities that can become reality with smart city solutions. Yet to be successful, interoperability is essential. Once attained, seamless data exchange will be guaranteed in every instance, leading to full IoT potential exposure.
• Thibault Werle, Managing Director and Partner at Boston Consulting Group (BCG) & Rachid El Ameri, Principal at Boston Consulting Group (BCG)
