Executive Summary: Navigant Research Leaderboard Report: Smart City Suppliers

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1 RESEARCH REPORT RESEARCH REPORT Executive Summary: Navigant Research Leaderboard Report: Assessment of Strategy and Execution for 15 NOTE: This document is a free excerpt of a larger report. If you are interested in purchasing the full report, please contact Navigant Research at research-sales@navigant.com. Published 3Q 2013 Eric Woods Research Director John Gartner Research Director

2 Section 1 EXECUTIVE SUMMARY 1.1 Market Introduction A growing number of cities are committing to a smart city vision in order to meet the challenges of sustainable growth, help rejuvenate their economies, and establish their place in the cleantech and IT-related industries of the future. The focus on cities as engines for sustainable economic development is closely associated with the unprecedented levels of urbanization that characterize the 21 st century. Most of the world s citizens now live in cities, but this is only the beginning of a global social, economic, environmental, and political transformation. According to Navigant Research s definition, a smart city is characterized by the integration of technology into a strategic approach to sustainability, citizen well-being, and economic development. Smart city projects span several industry and operational siloes: energy, water, transportation, buildings management, and government services. Most importantly, the smart city concept promotes new integrated approaches to city operations, leading to innovation in cross-functional technologies and solutions. As a market, smart city technologies encompass an incredible diversity of customers, suppliers, technologies, and requirements. Navigant Research estimates that the global market will grow from $6.1 billion annually in 2012 to more than $20 billion in 2020, a compound annual growth rate (CAGR) of 16.2%. This represents a cumulative investment of over $117 billion in smart city technologies between 2012 and Criteria Overview This Navigant Research Leaderboard Report offers an evaluation of leading players in the market that have the capacity to provide leadership on large-scale projects spanning multiple smart city requirements. It complements Navigant Research s Smart Cities report, which provides a deep dive into the market issues and demand drivers affecting the global smart city technologies market. Companies included in this Leaderboard meet the following guidelines:» Annual revenue of at least $1 billion» A global presence with the potential to work with cities in multiple regions» The ability to support cities across multiple operational and infrastructure issues (notably, energy, water, buildings, transportation, and government) Suppliers targeting a narrow element of the market or providing a single niche solution have been excluded. Navigant Research has also limited the selection to companies that already have a footprint in this market. In order to establish a reasonable model for comparison across diverse suppliers, Navigant Research has excluded some sectors including: telecommunications providers, building service companies, and real estate developers. 1

3 The criteria by which smart city suppliers are compared in this report include the following:» Strategy Criteria Vision Go-to-Market Strategy Partners Product Strategy and Roadmap Geographic Reach» Execution Criteria Market Share Sales and Marketing Product Performance and Features Product Integration Staying Power Detailed descriptions of each criterion are provided in the Criteria Definitions section of this report. 1.3 The Navigant Research Leaderboard Grid The smart city market has attracted a diverse range of suppliers spanning a number of industries, which makes a comparison of their strengths and capabilities a challenging exercise. However, such comparisons are necessary to differentiate between the various approaches presented to customers and to support city leaders evaluating suppliers in terms of their smart city vision and products. Two companies that have played a significant role in establishing interest in the smart city concept continue to stand out as leaders in this market. IBM s commitment to smart cities has become a key component of its broader smarter planet strategy. Its continued investment in research and development (R&D), products, and city engagements has allowed it to maintain its leadership position despite the growing number of heavyweight competitors. Cisco s investment in smart cities is also notable. Its market leader position reflects its early work with pathfinder cities, such as San Francisco, Barcelona, Amsterdam, and Songdo, and also its evolving approach to working with a wide range of other cities and communities and a strong group of industry partners. However, several other companies are contending for leadership positions in the market. Global infrastructure providers are particularly notable in their commitment to supporting urban development challenges and articulating a more integrated approach spanning multiple elements of their portfolio. Schneider Electric, Siemens, Hitachi, and Toshiba stand out for their efforts in this area. The ability of these companies to work with cities to realize their vision 2

4 for smart urban infrastructures will be critical if the promise of the smart city concept is to be realized. The Challengers group in this Navigant Research Leaderboard Report contains suppliers that are targeting the smart city opportunity but still have work to do in terms of establishing a broad market presence or a clear vision. Several of these players are developing smart city offerings based on their support for government services, including both enterprise software companies (Oracle, Microsoft and SAP) and IT services companies such as Atos and Capgemini. The challenge for these suppliers is to show they can offer cities a broader range of capabilities that go beyond traditional front- or back-office services and applications. Chart 1.1 The Navigant Research Leaderboard Grid (Source: Navigant Research) 3

5 Section 7 TABLE OF CONTENTS Section Executive Summary Market Introduction Criteria Overview The Navigant Research Leaderboard Grid... 2 Section Market Overview Market Definition Market Drivers Demographics Environmental Pressure and Climate Change Economic Development and Regeneration Citizen Expectations Market Barriers Finance An Integrated View of the City Governance and Citizen Engagement Who Is the Customer? Privacy and Security Market Trends... 6 Section The Navigant Research Leaderboard The Navigant Research Leaderboard Categories

6 3.1.1 Leaders Contenders Challengers Followers The Navigant Research Leaderboard Grid... 8 Section Company Rankings Leaders IBM Cisco Contenders Schneider Electric Siemens Hitachi Accenture Toshiba General Electric Challengers Oracle Capgemini Microsoft SAP Atos ABB LG CNS

7 4.4 Followers Section Company Directory Section Acronym and Abbreviation List Section Table of Contents Section Table of Charts and Figures Section Scope of Study and Methodology Scope of Study Sources and Methodology Vendor Selection Ratings Scale Score Calculations Criteria Definitions Strategy Execution

8 Section 8 TABLE OF CHARTS AND FIGURES Chart 1.1 The Navigant Research Leaderboard Grid... 3 Chart 3.1 The Navigant Research Leaderboard Grid Chart 4.1 IBM Strategy and Execution Scores Chart 4.2 Cisco Strategy and Execution Scores Chart 4.3 Schneider Electric Strategy and Execution Scores Chart 4.4 Siemens Strategy and Execution Scores Chart 4.5 Hitachi Strategy and Execution Scores Chart 4.6 Accenture Strategy and Execution Scores Chart 4.7 Toshiba Strategy and Execution Scores Chart 4.8 General Electric Strategy and Execution Scores Chart 4.9 Oracle Strategy and Execution Scores Chart 4.10 Capgemini Strategy and Execution Scores Chart 4.11 Microsoft Strategy and Execution Scores Chart 4.12 SAP Strategy and Execution Scores Chart 4.13 Atos Strategy and Execution Scores Chart 4.14 ABB Strategy and Execution Scores Chart 4.15 LG CNS Strategy and Execution Scores Table 3.1 The Navigant Research Leaderboard Overall Scores

9 Section 9 SCOPE OF STUDY AND METHODOLOGY 9.1 Scope of Study Navigant Research has prepared this report to provide an analysis of the current landscape of major global suppliers addressing the smart city market. The report is intended for city leaders and managers responsible for smart city projects and suppliers seeking to understand how they fit in to the overall landscape. The major objective of this Navigant Research Leaderboard is to provide a timely overview of the companies involved in this market, as well as their strategy and execution in developing and marketing smart city solutions and services. Note that the company rankings capture the vendor s standing at the time of the report and are not a retrospective of past accomplishments or an indication of future success. The ratings are likely to change rapidly as this market matures and business models continue to evolve. The report is not exhaustive, as there are other global and smaller players in the market that were not included because of their specific focus on one aspect of the market or their lack of geographic reach. 9.2 Sources and Methodology Navigant Research s industry analysts utilize a variety of research sources in preparing Research Reports. The key component of Navigant Research s analysis is primary research gained from phone and in-person interviews with industry leaders including executives, engineers, and marketing professionals. Analysts are diligent in ensuring that they speak with representatives from every part of the value chain, including but not limited to technology companies, utilities and other service providers, industry associations, government agencies, and the investment community. Additional analysis includes secondary research conducted by Navigant Research s analysts and its staff of research assistants. Where applicable, all secondary research sources are appropriately cited within this report. These primary and secondary research sources, combined with the analyst s industry expertise, are synthesized into the qualitative and quantitative analysis presented in Navigant Research s reports. Great care is taken in making sure that all analysis is well-supported by facts, but where the facts are unknown and assumptions must be made, analysts document their assumptions and are prepared to explain their methodology, both within the body of a report and in direct conversations with clients. Navigant Research is a market research group whose goal is to present an objective, unbiased view of market opportunities within its coverage areas. Navigant Research is not beholden to any special interests and is thus able to offer clear, actionable advice to help clients succeed in 42

10 the industry, unfettered by technology hype, political agendas, or emotional factors that are inherent in cleantech markets Vendor Selection Ratings Scale The diverse nature of smart city market means there are potentially hundreds of companies that can be considered as part of this market. This Leaderboard Report necessarily focuses on a subset of suppliers that are able to work to lead large-scale smart city projects spanning a number of operation areas and city services. Navigant Research excludes companies that focus on one particular industry or operational area (e.g., intelligent transportation solutions or street lighting systems). All the companies included in the report have revenue greater than $1 billion and operate globally. They also offer a portfolio of solutions that span at least two of Navigant Research s core smart city operational areas (energy, water, building, transportation, and government). These companies were also selected to provide a cross-section of infrastructure, IT, and service suppliers. While the suppliers included in the report cover a wide range of solutions and services, Navigant Research has also excluded some sectors in order not to cast the net too wide. Telecom providers, building service companies, and real estate developers are among those excluded for this purpose. The selection spans North American, European, and Asia Pacific companies. There is still considerable divergence in the types of products and solutions offered by these companies and their go-to-market strategies. Navigant Research has assessed each company in terms of its strengths relevant to its core market and to the needs of smart cities. Companies are rated relative to each other using the following point system. The ratings are a snapshot in time, showing the current state of the company. These scores are likely to be fluid as new competitors enter the market and customer requirements evolve.» Very Strong » Strong 70-80» Strong Moderate 50-60» Moderate 30-40» Weak Moderate 20-30» Weak 10» Very Weak Score Calculations The scores for Strategy and Execution are weighted averages based on the subcategories. The overall score is calculated based on the root mean square of the Strategy and Execution scores. 43

11 9.2.3 Criteria Definitions Strategy» Vision: Measures the company's stated goals in designing market solutions against the actual needs of customers based on the entire environment in which they will operate. Clear and compelling visions that are effectively communicated to the industry result in higher scores.» Go-to-Market Strategy: Evaluates the company's strategy for reaching the target market, including the sales and marketing channels to be used, as well as the processes established for informing the target market about brand differentiation and unique product value. Assesses specific innovations in the engagement with city leaders and other stakeholders.» Partners: Measures the company's established partnerships with key organizations that will provide an advantage in financial backing, sales, business, and product development. The breadth of partnerships across the potential smart city market is assessed, as are specific partnerships to address emerging requirements and gaps in the market.» Product Strategy and Roadmap: Evaluates the long-term competitiveness of the product strategy as an effective solution that satisfies market requirements and meets market capacity needs. A component of this is an evaluation of the ability of the company to show innovation in product development to meet emerging market demands.» Geographic Reach: An evaluation of companies ability to reach national and international customers through networks of distributors and resellers. Scores are lower if the company does not have a sales or dealer strategy suitable for sales in multiple regions. 44

12 Execution» Market Share: Evaluates the company's current position in the smart city market as defined above, including involvement in large demonstration projects, recent sales agreements, and key customer accounts that are likely to affect sales during the next calendar year.» Sales and Marketing: Evaluates the capabilities of the existing company sales and marketing resources, its understanding of the most suitable target markets, its understanding of the various needs of different end users, and its ability to successfully influence customer perceptions and purchases.» Product Performance and Features: Higher scores are given if the company's technology is already a proven market success or delivers unique product attributes. The maturity of its smart city solutions is also taken into account.» Product Integration: Evaluates the completeness of the company's portfolio and the level of integration of the smart city solutions. Higher scores are awarded for a common architecture and specific smart city platform offerings that have been deployed to customers.» Staying Power: Evaluates whether the company has the financial resources to support large-scale smart city projects on a global basis. 45

13 Published 3Q Navigant Consulting, Inc Pearl Street, Suite 300 Boulder, CO USA Tel: This publication is provided by Navigant Research, a part of Navigant Consulting, Inc. ( Navigant ), and has been provided for informational purposes only. This publication is intended for the sole and exclusive use of the original purchaser under terms and conditions agreed to by the parties. This publication may not otherwise be reproduced, recorded, photocopied, distributed, displayed, modified, extracted, accessed, or used without the express written permission of Navigant. Navigant makes no claim to any government data and other data obtained from public sources found in this publication (whether or not the owners of such data are noted in this publication), and makes no express or implied warranty, guaranty, or representation concerning the information contained in this publication, its merchantability, or its fitness for a particular purpose or function. Any reference to any specific commercial product, process, or service by trade name, trademark, manufacturer, or otherwise, does not necessarily constitute or imply an endorsement, recommendation, or favoring by Navigant. Navigant does not assume, and hereby disclaims, any liability that may result from any reliance on or use of any information contained in this publication, or for any loss or damage caused by errors or omissions in this publication. If you do not have permission from Navigant covering this publication, please refrain from accessing or using this publication. Please contact Navigant at research-info@navigant.com to obtain permission to use this publication Navigant Consulting, Inc. Notice: No material in this publication may be reproduced, stored in a retrieval system, or transmitted by any means, in whole or in part, without the express written permission of Navigant Consulting, Inc. 46