Creating the smart cities of the future

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Smart cities development gather pace around the world

The development of smart cities – enabled, powered and integrated by digital
technologies – is set to be one of the crowning achievements of societies worldwide in the 21st century. Already, the everyday lives of people living in countless cities are being made easier, more fulfilling and more secure by previously undreamt-of services enabled by digital. Yet the transformation of our cities has barely begun. And looking forward, as citizens’ expectations grow, urban populations continue to expand, energy efficiency and sustainability rise in importance and government systems are upgraded over time, the pace of progress and innovation isn’t likely to let up.


Smart cities of the future

Steady growth expected for global smart city market

We expect a steady increase of smart city development around the world over the next seven years, with the total value of the global smart city market projected to exceed $2.5 trillion by 2025.

As this growth continues, one of the most important and dynamic aspects of smart cities is the evolution of the roles and relationships between the key participants involved in envisioning and creating them; namely, the government bodies aiming to transform the lives, wellbeing and safety of their citizens; and private sector players helping to realize these aspirations, by building, managing and funding digital urban infrastructure and services.

A three-tier development model for smart cities

The evolution of smart cities needs more than technology; it requires good relationships between key stakeholders. Government and the private sector must partner to turn their vision of connected, efficient, 24x7 citizen services into reality.

In PwC’s view, the relationship between these two principal stakeholders is evolving along a three-tier continuum – reshaping how smart city digital infrastructure will be developed, financed and delivered in the years and decades to come.

Tier one

Relies on traditional contracting structures between public entities and private sector providers, delivering services and infrastructure; e.g., parking management system, public Wi-Fi.

Tier two

Facilitates the development and deployment of additional services on the base digital city infrastructure; e.g., mobile transit payment card systems.

Tier three

Focuses on the development of a digital ecosystem in and around the city’s digital infrastructure, creating new products/services, businesses and government revenue opportunities.

Examples of near-term smart city initiatives

In cities where financial and technological enablers are in place and functioning properly, the result has been a diverse set of near-term technology initiatives.

Key questions for stakeholders in smart cities development

Given the evolving smart cities landscape, stakeholders need to ask some searching questions to help them navigate and avoid pitfalls.


Some key questions for government to consider:

  • As you envision and build your digital smart city platform, what additional solutions or services could be built on it?
  • How can you assess that citizens are getting best value from both current and anticipated future solutions and services? 
  • What are the development and monetization rights of the government, the current contractor or third parties with respect to these “add-on” services/solutions?
  • Is your current contracting structure limiting the potential for digital innovation, or creating a protected market for the private sector contractor?
  • How can you build a permitting and regulatory framework that facilitates smart infrastructure deployment?
  • What considerations around IP and data rights, data security, interoperability and privacy protection arise, not only to contracted services but for future potential services on the platform, including private-to-private transactions?
  • How might regulatory changes impact data rights and privacy protections?
  • What formulas for sharing revenues and risks should you be considering for tier-two and tier-three services and solutions? Do you have the contracting know-how to secure these?
  • How will you manage changes in technology and services under these contracting arrangements?
  • How can you ensure the ability to exit from arrangements without incurring undue penalties or disruption?

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Private sector providers

Some key questions for private sector technology and solution providers to consider:

  • How can you develop and present technology solutions to government that meet current needs while also offering downstream potential for new solutions and services, without over-complicating the initial proposal?
  • How can you enter into contracts that allow you (or third parties) to innovate, develop and deliver new services and solutions based on already-installed technology? How will you monetize capability while giving government latitude to create open markets?
  • How can you educate government on financing, risk and reward scenarios inherent in new technology solutions and services, and share both risks and rewards equitably with government?
  • How can you engage early with potential third party participants in this digital ecosystem and secure their participation in the framework of government-invested service/technology solutions?
  • How can you foster engagement with citizens to secure their buy-in for smart city development and its benefits for a new “citizen experience”?

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Contact us

Greg Chiasson


Daryl Walcroft

Principal, US Capital Projects & Infrastructure Leader, PwC US

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