Smart city: opportunity and challenge for enterprises

China's urbanization and Chinese cities' eagerness to "go smart" could mean great business opportunities for enterprises, but only after they find feasible business models to cooperate with local governments and put technology into application.

China has attached great importance to building smart cities, the vice minister of Housing and Urban-Rural Development said that the ministry will launch pilot smart city programs in east, north, south, west and central China in the next five years, according to local media.

As many as 154 Chinese cities have raised proposals to build a smart city, according to the China Communications Industry Association under the Ministry of Industry and Information Technology.

The association is a leading organization in promoting the idea and application of smart cities in China.

Wang Yanjing, executive vice-director of the Internet of Things under the CCIA, said in China the major problem in bringing a smart city into reality is the funding and division of work between the government and enterprises.

"Local governments are fond of the idea of a smart city and want companies to invest, but companies are cautious about investment before they can see a feasible profit model," Wang told China Daily website during the 2012 Smart City Expo World Congress in Barcelona, Spain. "What we do is to solve these problems and act as a bridge to facilitate the cooperation of local governments and enterprises."

Wang believed that local governments should first guarantee the continuity of the policy since building smart city could be a long process, and then governments should offer an open platform so that enterprises in various sectors could get involved and share data and resources.

As for funding, Wang said the resources for capital should be considered while the smart city is being planned instead of seeking capital after a design is in place. The funding should come from all sources, including local governments and ministries, urban construction companies, financial institutions as well as IT companies who do the design.

As smart city construction involves many factors in citizens' lives and city governing, the undertaking could be tremendous and requires the work and cooperation of many enterprises.

"Companies should cooperate if they want to take a bite of the huge cake," Wang said, "some IT companies have very advanced technology, but there is not a qualified system integrator, which means they can not integrate all the resources efficiently, so they need to cooperate with other companies or a system integrator."

In the case of foreign companies, the key is localization, Wang added, advising them to cooperate with local companies or industry organizations that have a deeper understanding of Chinese cities' needs.

The advantage of foreign companies in smart city building is application and promotion, said Yu Jie, vice secretary general of the Internet of Things under the CCIA. "Chinese companies' technology and solutions are also very good, definitely not overshadowed by their foreign counterparts. What we need to learn from them is how to put the technology into application."

Companies involved in smart city building show great confidence in the prospect, Wang Jinhong, vice-president of Beiming Software Co Ltd, a solution supplier for Guangzhou's smart city design, told China Daily website.

China is the largest market in the smart city scene and the trend could boost the development of the whole industry chain, Wang said.

"Enterprises used to produce something and deliver it to the client and get paid. But smart city enables enterprises to lead a new business model. Once a smart city is built, firms could participate in the governance of cities, they become a supplementary part to the government. Instead of being paid once for all, the profits would continue to flow in," Wang said.