When considering the long-term viability of smart city initiatives, it is important to assess not just direct revenue-generating opportunity but also the broader return on investment, Arrowsmith said. This has implications for both the public and private sectors collaborating on smart city projects.

Because cities continue to face budget constraints, quantifying the level of cost reduction that can come about must be a top priority. Here the obvious effects of cost savings and other benefits can be measured.

Just as significant, however, are the intangible benefits to be derived. If city denizens feel that smart cities improve their way of life, the likelihood of them leaving is reduced, helping the city maintain revenue through the taxes that are collected. Meanwhile, territories can attract new talent or businesses dazzled by the prospect of living in a smartly functioning city. Ultimately, the intentions of smart city projects—and the associated return on investment—will depend on the smart city technologies being put to use, IHS believes.