What Are Smart Cities?

Technology is powering the rise of smart cities, transforming everything from traffic management to waste collection. We dig into the digital revolution giving rise to cities that are more connected, sustainable, and efficient — and what the future of urbanization might look like.

Cities are evolving at a rapid pace.

Over half the world’s population currently lives in urban areas. By 2050, that number is expected to jump to 70%. 

Along with a growing population, new challenges are emerging as cities look to improve everything from infrastructure to connectivity. Many see this as a viable business opportunity, developing technology to help cities efficiently provide proper foundation, energy, transportation, resources, jobs, and services to their residents.

As a result, cities are undergoing a digital transformation — that is, they are turning into “smart” cities.

Smart cities are not merely a far off dream of the distant future. Thanks to innovative technology, smart cities are already a reality — and they continue to expand and become more refined. In fact, the global smart cities market size is projected to be worth $1.4T within the next 6 years, according to CB Insights market sizing data.

Several players, from tech giants to telecom companies to governments, are working on initiatives to make cities smarter and more efficient. Sidewalk Labs (a subsidiary of Alphabet), for example, is working on creating a community that “combines the best in urban design with the latest in digital technology,” as part of a larger initiative in the city of Toronto.

In this analysis, we look at what smart cities are, the various components of the city that are becoming increasingly connected, players across the ecosystem, emerging challenges, and what the future holds.

Table of Contents

What is a smart city?

A city is considered to be “smart” when it can collect and analyze mass quantities of data from a wide variety of industries, from urban planning to garbage collection. In a smart city, a complex network of interconnected sensors, devices, and software must be built and maintained.

This should allow the city to become a more sustainable and efficient environment for its residents.

Smart cities are supported by several types of technologies, including:

  • Information and communications technology (ICT)
  • Connected physical devices using the Internet of Things (IoT) network
  • Geographical information systems (GIS)

Each works together to collect and contextualize massive amounts of data that can be used to improve the components and systems running within a city.

The ICT framework, for example, is made up of various machines and sensors that are all connected to the IoT network, and can instantly transmit data using wireless technology and the cloud. Traffic in a given area, for instance, can be monitored using sensors.

Cloud-based IoT applications can then receive, analyze, and manage that traffic data in real-time. This data can also be used to better understand and respond to a city’s constantly changing needs over time, and can even be used to better optimize for safety.  

Smart cities can also leverage GIS for planning and mapping purposes, as well as for improved development of cities. As a result, urban areas are able to better manage issues from water management to excessive energy consumption to insufficient waste management, and more.

Smart Water Network

Using GIS for smart water management. Source: Ceinsys Tech 

Smart cities may also utilize artificial intelligence and blockchain technology for certain systems. Some companies, for example, are working to make parking easier and more efficient using AI-directed facilities. Other companies allow city dwellers to buy and sell energy to their neighbors via blockchain technology.

These are just a handful of technologies working to support the emergence of smart cities. And over time, a successful smart city should in theory be able to respond to incoming data much like a single intelligent organism, seamlessly and efficiently providing itself with exactly what the city and its citizens need, without wasting any resources and without any human error.

Smart City startups

These 200+ companies are developing solutions and services for cities of the future, revolutionizing sectors like public safety, transportation, and utilities management. Stay up to date by looking for Smart Cities in the Collections tab.

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Smart city breakdown

Several areas across the city are becoming “smarter,” from traffic control to water management, with various companies working across the different components.

We dive into several spaces below.

Traffic Management

Smart technology can be used to connect vehicles, infrastructure, public transit, and people to improve mobility and safety.

Streets can be outfitted with sensors that can track data both on the roads and through citizens’ cars and smartphones in order to gain insights on traffic flow patterns, road blockages, roadwork, road conditions, etc. 

Amsterdam City project City Alerts enables city-wide messaging

Amsterdam, for instance, already uses a smart traffic management system, where traffic is monitored in real-time. This allows the city to broadcast information about current travel times on roads, helping motorists decide on the best route to take at a given time. 

Innovation platform Amsterdam Smart City was created to develop solutions for a wide range of metropolitan issues. Projects include everything from building a smart playground to enhancing smart grids to creating a city-wide messaging system, and more.

Barcelona has also integrated components of smart transportation technology into its city. The data gathered from traffic patterns has allowed the city to design a new, more efficient bus network.

The city utilizes intelligent vehicle technology to help manage traffic at its airport El Prat. In 2 months, smart vehicle company Sensefields has helped El Prat implement traffic control in short stay “parking express” areas located in departure terminals, as well as in taxi pick-up areas. “Control stations” have been introduced to collect data on number of vehicles present at a location across different times.


Aimlessly driving to find a parking spot wastes energy and increases traffic congestion. With the use of smart technology, however, this may become a problem of the past.

Sensors embedded in the ground can identify what parking spaces are available or occupied. These IoT sensors can transmit this data to a cloud-based smart parking platform, which is then aggregated onto a real-time parking map of the city. Drivers can pull up this map through an app on their phone that showcases the nearest parking spots available to them, thus saving time and money.

Additionally, this technology can be used to easily alert parking enforcement officers when a car has parked somewhere illegally.

Tracking and managing parking spots might even allow lot owners to implement dynamic pricing. For example, Sidewalk Labs’ portfolio company Coord (which grew out of its transportation coordination platform Flow), looks to improve mobility and efficiencies across cities by opening up its Tolls API to third-party developers.

The company is working on products that can aggregate pricing and toll data to give consumers exact transparency on how much an entire trip might cost. In the future, it might be able to use this information to help lot owners price their spaces in real-time.

Planning for a future with fewer cars

Another aspect of smart cities is shared ride technology.

With companies like Uber and Lyft entering cities across the world, there might not be as much of a need for parking as there is today. In Sidewalk Labs’ vision for Quayside, the Eastern waterfront it plans to develop in Toronto, the company outlines a stacked parking lot that might transition into other things once autonomous or shared vehicles reduce the need for parking garages. This includes green spaces and shopping centers.

Quayside parking lots will transition over time


A wide range of IoT solutions can be implemented in cities to improve energy efficiency. 

Smart street lighting can reduce energy consumption by staying dim when no cars or people are around, then lighting up as sensors detect someone is coming. Chicago has created a program that will replace 270,000 lights with LED lighting equipped with intelligent controls by 2021, saving the city an estimated $10M a year in energy costs. Worldwide, an expected 73M connected street lights are to be deployed by 2026, according to Navigant Research.

Chicago’s city-wide lighting initiative

Other ways to promote energy efficiency include tapping into forms of energy (i.e., heat, waste) that might otherwise be neglected.

In Sidewalk Labs’ Quayside, for example, Alphabet has outlined a method to pilot an electric grid, which would recycle energy from buildings and other energy use cases to heat and cool the neighborhood. “The thermal grid will tap and export multiple sources of waste or free heat and cool in the area: geothermal, waste heat from sewers and the Portlands Energy Centre, deep lake cooling, and the capture and reuse of waste heat and cool from within the buildings themselves,” the company explains.

Smart cities can also promote renewable energy by allowing rooftop solar owners to sell to each other or by operating microgrids that can produce energy on-site.


Smart waste management solutions can be implemented to improve waste removal services, reduce operational costs, and improve sustainability.

This can be accomplished through smart waste receptacles that have sensors attached to them that measure fill level. When a bin is full, it can instantly send this information to a cloud-based application that can then optimize the route of waste collection trucks, which can then prioritize pickups at locations with full bins and skip over areas with empty ones.

This is just what the city of Santander, Spain has done. Santander partnered with Japanese firm NEC to deploy ~6,000 IoT-connected devices around the city to learn the locations and fill levels of garbage bins and containers. The municipality then uses GPS tracking to optimize its waste collection route.

The waste collection service uses M2M sensors that record the volume of rubbish in the bins

Smart bin

Smart bins can also help encourage and monitor rates of recycling. Times Square in New York City has set up 197 smart waste and recycling stations with built-in compaction, fullness sensors, and collection notifications. This has resulted in a 40% proper recycling rate and a 50% reduction in collections per week.

Sidewalk Labs outlines waste management as an important part of a smart city.


Smart water technologies can help improve the sourcing, treatment, and delivery of this essential resource. Through tracking consumption patterns for both the utilities and end users, cities can optimize and reduce water waste as well as delivery costs.

Sensors could automatically alert a city to water leaks so it could fix them as quickly as possible. Smart water systems can also measure rainfall and provide real-time flood analysis for flood control.

The city of Castellon, Spain has piloted a new smart water platform to reduce utility costs and optimize resources. It has accomplished this through the use of smart water meters equipped with long-range sensors.


Normally, the various systems within a building — such as lighting, video surveillance, climate control, ventilation, and fire protection — do their jobs separately. Smart buildings, however, have all these systems connected through an IoT network, allowing them to communicate with each other and work together to make the building as efficient as possible through continuous adjustments.

Sensors can detect when a particular room or office is vacant and dedicate less lighting and temperature resources to that space. This cuts down the total energy consumption of the building as a whole.

For example, Comfy — which was acquired by Siemens in June 2018 — has created limited, occupant-facing controls that can be used with existing HVAC systems. The company installs sensors and IoT devices in buildings so that occupants can adjust temperature and lighting.

This is incredibly important for reducing the carbon footprint of a city, since buildings account for up to 70% of total energy consumption within a city and 30% of greenhouse gas emissions globally.

(Clients can check out 55+ companies working on making buildings smarter, cleaner, and safer here.)

Environmental Monitoring

Through the use of wireless sensor networks, a smart city can gather and analyze data related to environmental factors such as temperature, humidity, and air quality, all throughout specific areas of a city. This is especially critical for reducing levels of air pollution within densely populated areas.

The World Health Organization has reported that an estimated 92% of the global population lives with pollution above recommended limits. About 3M deaths each year are linked to outdoor air pollution.

Varying particle pollution (PM) levels. Source: WHO

To combat this, smart cities are implementing technologies, such as the Bosch Climo climate monitoring system, to collect highly localized air quality information.

Each device throughout a city collects air quality measurements that are then sent to a cloud-based application, where it is broken down into analytics for the government and the public to see. This helps policymakers identify which areas need the most environmental improvements, and helps the public avoid areas that may be especially harmful on a certain day.

Public Services

Governmental services provided to the public tend to generally be very slow and inefficient processes in many cities. However, with the use of digital technology, public services can be streamlined in a number of innovative ways.

Buenos Aires used to rely on an inefficient telephone hotline system where citizens had to log a complaint or request for public services. This system was so slow at addressing complaints, it took an average of 600 days — almost two years — to resolve issues.

The city has since switched to a mobile app where citizens can snap a photo of the complaint, from a large pothole in the road that needs filling to vandalized public property that needs repairing. The app, using an integrated geographic information system (GIS), instantly sends the location and information of the complaint to the ministry, and work is assigned to the closest vendor that can resolve the problem.

Once the issue has been solved, a city street inspector validates the completed work and uploads a picture of the resolved issue to the mobile app, so citizens can see the problem has been fixed. Citizens can even give the public services a rating based on how satisfied they are with the quality of work, so the government can see where it can improve. The average time required to solve a complaint in Buenos Aires has since fallen by 93% with no increase in budget.

Singapore’s government has created an e-appointment system for the Ministry of Manpower’s Employment Pass Services Centre that has managed to slash average appointment wait times from 4 hours to 15 minutes. The Municipal Services Office has also developed a centralized mobile app called OneService, where the public can access services across 11 government agencies and 16 town councils, all from the comfort of their phones.

Who’s investing in the future of smart cities?

As illustrated in the examples above, cities around the globe are already implementing smart technologies to improve many aspects of urban living. Yet, these technologies are still very new to the world and it will take time before widespread adoption takes place.

Plenty of the world’s leading corporates and governments have invested in smart city technology to help further realize this goal. It’s clear that the smart city revolution is in full swing as governments, cities, and companies around the globe continue to make investments into developing and implementing smart technology that will transform life in urban areas as we know it.


Below are the top 10 smart city suppliers, according to Navigant Research:

  1. Cisco
  2. Siemens
  3. Microsoft
  4. IBM
  5. Hitachi
  6. Huawei
  7. SAP
  8. Panasonic
  9. Ericsson
  10. GE

In 2017, Cisco invested $1B dedicated to building smart cities around the globe through the use of its Kinetic Cities IoT platform.

Its City Infrastructure Financing Acceleration Program has the goal of making it easier and more affordable for existing cities to become smart cities, by helping them deploy their technology with minimal initial investment. This assistance is crucial for many cities that struggle to find the funding to implement new smart technology.

Microsoft has also announced that it is investing $5B in IoT technology from 2018 to 2022, which will attempt to improve the technologies required for smart cities to function.

Companies including Steelcase, Kohler, Chevron, and Johnson Controls all use Microsoft’s IoT platform for a wide range of technologies. For example, Johnson Controls has created a smart thermostat for homes and buildings that optimize temperatures automatically.

Bill Gates’ investment firm Cascade Investment has bought a stake in 24,800 acres outside of Phoenix, Arizona, which will become a new smart city. The firm has invested $80M into designing and creating features such as high-speed digital networks, data centers, infrastructure for autonomous vehicles, automated logistics hubs, and more.

Telensa street light

Another company, Telensa, has globally deployed over 1.5M smart street lights that have saved cities up to 30% in energy costs. 

Big Tech

Sidewalk Labs — the aforementioned urban innovation subsidiary of Alphabet, Google’s parent company — is currently working on turning 800 acres of Toronto’s waterfront into an advanced smart city. Dubbed Quayside, this city-within-a-city will have features such as dedicated self-driving car lanes, smart street lights, public Wi-Fi hubs, real-time transportation & parking information for the public, adaptable buildings, and other cutting-edge innovations designed to improve quality of life and increase sustainability.

Amazon Web Services (AWS), a subsidiary of Amazon, offers a broad set of cloud-based products for smart cities, including IoT sensors and devices, management tools, storage, databases, analytics, and more. These technologies are used for a wide range of applications, including water quality monitoring, remote patient monitoring for healthcare providers, flood detection, snow level monitoring, smart analytics for transportation, public transportation applications, and more.

For example, AWS has a software platform called PARK SMART that uses video sensors to provide real-time parking information that’s available on a mobile app.

Microsoft, as mentioned above, is also working on smart city tech — the CityNext solution aims to “[empower] cities and citizens to unlock their potential by delivering innovative digital services and smart city innovations that can help them lead safer and healthier lives, enriched by high-quality education.”

The initiative is working on solutions for everything from parking management to traffic optimization to digital patrol, and more.

Snapshot of Microsoft’s Parking Management solution

Government Initiatives

The United Nations Economic Commission for Europe (UNECE) has established a global initiative called the United Smart Cities (USC) program. USC provides cities with support to develop smarter and more sustainable urban solutions by collaborating with international organizations, companies, governments, and high-level decision makers.

Its platform is helping cities all over the world in the transition to become smart cities, from Barcelona all the way to districts in East Java, Indonesia.

USC does this by first evaluating a city to determine its performance in sustainability. It provides advisory services to help a city decide which areas to focus on and assists in creating a tailor-made action plan for each city. USC then gives funding support while also assisting in partnerships between the public and private sectors to help cities develop and attain their goals.

The Government of India has begun Smart Cities Mission, a 5-year program with the goal of developing 100 smart cities across the nation. The government has invested in order to fund the implementation of smart technology that will allow cities to become more citizen-friendly and sustainable.

Selected cities plan to show results from 2022 onwards.

In the city of Jaipur, for example, the Indian government is assisting with the deployment of air quality monitoring technology to create “mega data” that will be accessible by citizens through a mobile app. Smart parking management technology is currently being implemented in the city of Indore in Madhya Pradesh, where sensors and cameras will collect data on parking lot capacity.

The mayor of London, Sadiq Khan, launched a roadmap to make London the “smartest city in the world,” called Smarter London Together.

This city-wide initiative intends to harness London’s tech talent in collaboration with the capital’s boroughs and public service sectors to improve sustainability and quality of life within London. These initiatives range from increasing public Wi-Fi availability to deploying “smart parks” that gather data on microclimates and air quality.

London’s efforts are paying off, as it has been rated the number one smart city government in the world, according to Eden Strategy Institute.

Challenges and criticisms

The smart technology that gets implemented in cities has the potential to provide tremendous cost savings — in fact, an estimated $5T per year could be saved by governments, enterprises, and citizens throughout an aggregated 75 smart cities by 2022, according to a study by ABI Research.

However, cities need to first invest large amounts of money into these projects before they start paying off. Lack of proper funding is a large barrier that is keeping many cities from moving towards implementing smart technology.

Moreover, building the new infrastructure for smart cities is a complex process that takes years to complete. Thorough research is required before making such large and costly decisions, especially because each city must develop their own unique plan of action. The right smart solutions for a city in Nigeria would look very different from a city in Japan, for example.

Some criticisms have also been made about potential downsides a smart city could pose.

Since smart cities rely on acquiring, recording, and analyzing data, there are concerns surrounding the privacy of citizens. The governmental bodies that aggregate all this information must use transparent practices to help assure the public that their data is not being misused. Should a corrupt government misuse the data it has on its citizens (like selling it to third parties), this would be a huge invasion of privacy. Therefore, city governments must have rigorous privacy protections in place that are known to the public.

There is also potential for public data to get stolen by hackers, which could be a large threat to the safety and security of individuals, governing bodies, and even the city itself. If smart technology is not securely encrypted or is without strong security protections, a hacker could manipulate devices around the city.

For example, someone could hack into smart traffic lights, take control and turn them all red. This would wreak havoc on a city, as cars would inevitably begin running the red lights, resulting in accidents, while emergency vehicles such as police and ambulances would be prevented from getting to their destinations. A security researcher actually proved this was possible in Washington DC when he successfully hacked the system himself.

Putting high priority on strong security systems will be essential for smart cities, or else such vulnerabilities may leave them exposed to all manners of potentially catastrophic and costly events.


The development and implementation of smart technology systems throughout cities around the world is not going to stop any time soon. The smart city trend will continue to spread rapidly to every corner of the globe, as it provides new solutions for urban areas to become more efficient and sustainable.

There is still a long road ahead, as new infrastructure must be built and technological innovations must be perfected before they can go live. Yet, there are already aspects of smart technology systems in place and working successfully in many cities around the world, quietly improving efficiencies and quality of life.

With some of the biggest companies, organizations, and governments working together to invest in and develop smart cities, we can expect to see urban areas continue to evolve and transform over time. 

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