At last week’s India analyst briefing, IBM outlined urbanization as a key factor driving “Smarter Cities” initiatives in India.

IBM expects India to invest about $1.2 trillion over the next 20 years in areas like transportation, energy, and public security. The second phase of the Jawaharlal Nehru National Urban Renewal Mission (JnNURM), which covers $40 billion in infrastructure-related projects, will play a key role in improving the country’s infrastructure capacity to support urbanization over the next five years.  IBM is currently working on approximately 3,000 smart city projects globally; of those, about 30 pilot projects are from India.  

About a year ago, I published a report on how cities are undergoing rapid transformation and creating massive opportunities for ICT vendors across Asia Pacific. Although the urbanization rate still stands at about 30% in India, it is growing fast. Also, an increasingly Internet-savvy population is demanding better citizen services.  Indian state and city governments will make investments to build infrastructure on a large scale to meet the needs of their surging urban populations, creating opportunities for vendors. —

Despite the promise and opportunities that India provides for Smarter City initiatives, IBM has to deal with key challenges:

-          Twenty years ago, the government of India passed The Constitution (Seventy-Fourth Amendment) Act, 1992, focused on strengthening urban local bodies (ULBs) in the country. The amendment was supposed to make urban governments accountable and become self-sufficient. However, even after two decades, Indian cities have yet to get full autonomy from state governments, as they continue to rely heavily on state governments to meet their funding needs. IBM will face significant challenges in finding funds for its Smarter City program when working with cities in India.

-          According to a government official I spoke with earlier, the government of India has been able to provide the ICT infrastructure and connectivity to only 20% to 30% of local governments. However, according to the same official, the government plans to cover more than 90% of local government in the next five years. Incidentally, this highlights that Indian cities have great opportunity to jump ahead of the technology maturity curve and adopt an integrated and synchronized solutions such as Smarter City. However, IBM will continue to be challenged by disjointed efforts within city and state governments when pursuing technology initiatives, which may result in delays and complexity in project execution.

-          IBM appears to be open to pursuing public-private partnerships (PPPs) to create city-level opportunities — but I believe that bureaucracy, corruption, and the inability of some states and cities to generate revenue will limit the success of PPP initiatives in India.

IBM has an early mover advantage around Smarter City projects in India and company’s strategy of providing grants to cities (recently shortlisted Ahmadabad and Pune for IBM Smarter Cities Challenge Grant for 2012) to assess city-level infrastructure puts IBM in a unique position to address challenges highlighted above. What do you think of IBM’s Smarter City Strategy from an Indian perspective?