• The revenue volume of the German Smart City market is set to grow from 38.5 billion Euro in 2021 to 84.7 billion Euro in 2026
• A study by the eco Association and ADL describes innovative business models, success factors and trends of the Smart City, covering nine market segments
• Data ecosystems form the basis for successful Smart City platforms
• From pilot project to implementation: Study proposes three-stage master plan

The future belongs to Smart Cities, as evidenced by the new joint study by the eco Association and the management consultancy Arthur D. Little, supported by NetCologne, Cloudflare, Uber and the Vodafone Institute. The study forecasts an average annual growth in Germany of over 17 percent. This corresponds to an increase in revenues of over 46 billion Euro within five years. Trends and challenges for a total of nine segments of the German Smart City market are described in detail. The authors forecast particularly high revenues in the market segments of Digital Education (16.6 billion), Transport & Logistics (14.8 billion) and Building Automation (14.1 billion).

“To see Smart Cities as science fiction is a thing of the past. They now present a very attractive market—and not just for companies in the Internet industry,” says eco Chair of the Board Oliver Süme. “Advancing digitalisation and the associated availability and increasing importance of data, the growing challenges in the areas of energy efficiency and sustainability—and not least the ongoing pandemic—are giving rise to numerous innovative business models with great potential for more livable cities,” Süme continues. In order to leverage this potential, what is needed above all are high-performance and secure digital infrastructures and clear governance for dealing with data, as well as holistic concepts and strong cooperation between companies and public administration. Süme not only expects politicians to provide appropriate political support and framework conditions. The state and public administration must also take on a pioneering role in the application of smart technologies and digital solutions. As Süme notes, “Smart Cities ultimately only work with Smart Government.”

Data ecosystems as the basis for successful Smart City platforms

The foundations of the Smart City ecosystem are communication networks, data centres and security infrastructures. “In the near future, the European cloud and data infrastructure Gaia-X is likely to become an important basis for successful Smart City platforms for both cities and municipalities,” says Süme.

As a result, the Internet industry is benefiting from the ongoing trend toward outsourcing, not to mention the increasing need for additional data storage and computing power capacities and the associated requirements for cloud capacities, data management platforms and cybersecurity solutions. This relates in particular to the area of Colocation & Housing, but also the Services & Applications area.

“Especially in the past months of the pandemic, it has become clear that resilient infrastructures and cities are vital for the survival of our future society and economy. Digital infrastructures are a key foundation for this resilience,” says Timo von Lepel, Managing Director of the regional telecommunications provider NetCologne. Digital sovereignty is a decisive success factor for successful Smart Cities: “We will only be able to build our societal and economic future with a Smart City if we can act and decide in a digitally self-determined way,” von Lepel maintains. To achieve this, NetCologne is working with other partners in various Smart City model projects in the City of Cologne, primarily on three focal points: the development and operation of a high-performance and secure digital infrastructure, the development of key skills and technologies, and the establishment of a functioning digital ecosystem.

Looking at the individual market segments of Smart Cities, it becomes clear that cybersecurity is an elementary factor in maintaining connectivity and functionality and, above all, protecting the city from possible harm. “Smart Cities need to be secure and reliably connected,” says Thomas Seifert, Chief Financial Officer of the infrastructure and cybersecurity company Cloudflare. “Whether it’s to do with building-automation systems, health data or democratic processes: All levels of urban life will be built on the Internet in the future. This entails risks in terms of safety and speed. Cybersecurity is essential to maintain the interconnectedness of public spaces and prevent critical damage—after all, the future of life in cities should not be characterised by fear of attacks and data loss, but by progress,” Seifert continues.

German cities lagging behind in international comparison: Study proposes three-stage master plan

Despite promising best practices and flagship projects, many German cities are moving only gradually from isolated pilot projects to the holistic expansion of segments and platforms. German cities are not yet taking advantage of the opportunities available on the capital market. “There are numerous infrastructure investors here who are eager to invest capital in German Smart Cities,” says Lars Riegel, a partner at Arthur D. Little. “That’s why we recommend that cities take a close look at how smart partnerships can provide the latest infrastructure to citizens, while at the same time protecting the environment and preserving their own budgets.” The study also suggests a three-step Smart City master plan for financing Smart City projects that takes an integrated approach across key project phases.

Smart Neighbourhoods are good testing grounds for such holistic considerations, as demonstrated by examples from leading German Smart Cities—Berlin, Cologne and Munich.

To pave their own way to the Smart City, German cities and municipalities should continuously scrutinise their existing database landscape and validate it with technological trends and their requirements. This is because a cross-segment architecture of data ecosystems and corresponding “data governance” allow the countless data points to be aggregated, new business models to be developed, and synergies between the segments and the Smart City building blocks to be exploited.

The new study “The Smart City Market in Germany 2021-2026” is available for download here