Navigant Research Blog

Is the Smart City Market Entering an Acquisition Phase?

Eric Woods — September 19, 2016

Intelligent BuildingIn my last blog, I wrote about how the smart city market is at an important point in its evolution. In that blog, I focused on the changing priorities for smart city projects. Another side to this evolution is the changing market dynamics as suppliers refine their approach to the market and look to extend their capabilities. The most recent Navigant Research Leaderboard Report on smart city suppliers shows the continuing evolution in strategy and offerings among key players in the market.

One important indicator of the maturity of any technology market is the level and focus of merger and acquisition (M&A) activity. It is a sign of the relative immaturity and uncertainty associated with smart cities as a market that there has been little activity in recent years. But there are indications this is changing.

Internet of Things Focus

The acquisition of sensor network company Sensity by telecoms giant Verizon is the latest example—and one of the most significant. Sensity provides sensors and network controls for street lighting systems and has been targeting the emerging market for city platforms. For Verizon, the move marks a step up in its Internet of Things (IoT) and smart cities strategy and gives it the ability to offer a range of city solutions beyond intelligent street lighting, such as traffic management, smart parking, security, and air quality monitoring. It also increases Verizon’s attractiveness as a partner in the complex ecosystem of smart city and IoT suppliers. The alignment with the company’s broader IoT strategy is important to this acquisition, as well. Indeed, the growing focus on IoT capabilities across the technology industry is one of the main reasons why the smart city acquisition picture is changing. Cisco’s $1.4 billion acquisition of IoT platform provider Jasper Technologies in early 2016 can be seen as part of the same pattern. While enhancing their ability to play a bigger role in the IoT space, Verizon and Cisco are also developing strong smart city platforms. Moves from other big players for sensor technology and IoT platform providers are likely to be on the cards.

Analytics Companies

It is not only IoT technologies that are being acquired; analytics companies are also on the shopping list. Urban Engines, a specialist in the use of advanced analytics for the Internet of Moving Things, has announced that it is to become part of Google Maps. Founded by former Google employees, this may be more of a homecoming than an acquisition. However, it suggests that some of the more niche analytics providers in the smart city space will eventually find their home as part of a broader platform offering from bigger players.

Application-Specific Solutions

The third area of the market that we can expect to see more M&A activity is in application-specific solutions. This is an area with a greater history of activity. IBM, for example, has been adding to its roster of government solutions for a number of years in areas like intelligence and social care. But there has been less activity in new application areas. One exception is Silver Springs Networks’ move to strengthen its hand with the acquisition of street lighting software specialist Streetlight.Vision. If acquisition activity is stepping up across the market, the next phase could see more activity in other emerging solution areas such as smart parking and smart waste, for example.

These important developments will add spice to the conversation at Smart Cities Week in Washington, DC next week. I will be attending with other colleagues from Navigant Research and look forward to discussing these and other issues. Let me know if you would like to meet up at the event.

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