Smart City is on its way – towards interoperable systems or vendor lock-in?

Blog post

Digitalisation is rapidly taking over every part of the urban environment: roads, vehicles, energy networks, security systems, and water and waste systems. Information can be gathered from places of all kinds, and used in all kinds of ways to provide better services. This evolution is developing into a megatrend known as the Smart City: an urban environment in which full use is made of ICT technologies and where services are flexible and run in real-time.

Smart City has been described  as a development trend from large, centralised units towards distributed and networked solutions. In its essence Smart City will enable more modular, decentralized operating models and empower citizens and businesses to create valuable services in the urban environment. Although Smart City still lacks a precise definition, it is generating a huge amount of buzz both internationally and nationally. Leading cities and technology companies are currently investing heavily in new Smart City solutions. The Smart City market is expected to grow significantly in the next few years and will thus also present a major possibility for Finnish companies.

Smart City is also an important theme domestically in Finland. It offers cities the opportunity to create new valuable services, improve productivity, streamline processes and save costs. It also introduces new ways to engage citizens and businesses, and tools for more sustainable and environmentally aware city planning.

Fragmented Smart City solutions a key challenge

Despite the huge potential, in practice Smart City solutions tend to be fragmented, where cities but also the different Smart City sectors such as mobility, built environment and energy work in isolation. This has created a situation in which innovations do not diffuse between cities and sectors, economies of scale are not reached and markets do not grow to their full potential. Traditionally IT procurements by cities in Finland and by the public sector in general, have been problematic. In many cases procurements lead to a vendor lock-in situation where large closed and vertically integrated solutions are procured that are not interoperable with the systems of other cities. Even though the needs are to a large degree the same, dedicated solutions are built for each city. This poses challenges also for the suppliers, which have to spend a great deal of resources to unnecessary tailoring and integration, instead of benefiting from economies of scale. On the other hand, also SMEs have suffered from large procurements, which typically favour large companies.

Although the Smart City evolution is still in its early stages, there is a danger that such fragmentation continues and that dedicated vertically integrated solutions are built for each city and sector. At the other end, a scenario can be also envisioned where a single player (whether public or private) takes a gatekeeper role and creates one huge silo to which all of the data is integrated.

Interoperability and modularity in a key role

Interoperability and modularity should be at centre of Smart City development. It is worth remembering that for example the global success of the Internet and mobile networks was based largely on interoperability and a modular, scalable architecture both on a technical and business level. Valuable lessons can be learned from these historical examples and leveraged also in Smart City development.

Many positive development trends are emerging in Finland. For example open source code is increasingly used in procurements. Also, the use of open data and open APIs is becoming more common and seems to be a very promising trend. In parallel to these, additional ways to achieve interoperability and a multi-buyer and multi-vendor market could be introduced. A key tool in this respect could be the testing and certification of the interoperability of the systems. Recently for example in Finland, the National Archive of Health Information Services (Kanta) has introduced a testing and certification service, which suppliers can use to validate system interoperability and enable the transfer of prescriptions from health centres to pharmacies. System interoperability could also be enhanced by city procurement. When many cities are procuring  systems for similar purposes, they could agree on common principles and interfaces that would be used, but still procure the systems independently, and thus enable the emergence of multi-vendor market.

Towards more interoperability in Smart City

These kinds of horizontal processes could be developed for all Smart City sectors and all cities in Finland. Many activities are ongoing which support the evolution towards interoperability, such as the joint strategy between six leading Finnish cities – 6AIKA, the creation of a National Service Channel based on Estonia’s Data Exchange Layer X-road, Tekes programmes (e.g. Witty City and Smart Procurement), the increased usage of APIs and the introduction of MyData, i.e. personal data gathered from each and every one of us. Additionally, single actors such as Forum Virium (e.g. the CitySDK project), Association of Finnish Local and Regional Authorities, The Finnish Centre for Open Systems and Solutions (COSS), buildingSMART Finland and ITS Finland have shown good example and also VTT plans to contribute in order to make this evolution path a reality.

Interoperability will be a key issue in the evolution of Smart Cities. The different stakeholders working with Smart City solutions need to be challenged to come up with new ways to support modularity and interoperability. Finland could also lead the way in enabling an open multi-buyer and multi-vendor environment in the global Smart City competition. Now is the right time to move firmly towards a horizontal Smart City market-structure, before it gets locked into closed solutions.

Thomas Casey,

Research Scientist, Business Ecosystem Development

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