If the customer asks about the cost and the benefits for the city and the citizen of a project, then you must provide a RoI (Return on Investment) estimation.
Building a system is usually a long-term investment. The lifetime of a system can be estimated in the order of years, up to 20 years for some systems. In principle, a system is worth building if its lifetime exceeds the Return on Investment (RoI) period.
In practice, eager investors would demand that we get an interest rate with the investment far better than the interest rate offered by other investments.
Let's call B(t), the cumulated savings obtained by the system at year t:
B(t) = A Sum{k=1}_to_t((1+c)/(1+r))^k - M Sum{k=1}_to_t((1+i)/(1+r))^k
Then, we have the Return on Investment (RoI) for B(RoI) = C (see picture attached below):

where:
- A: total savings achieved by the use of the system in its first year of functioning
- M: differential cost of maintenance of the system during the first year (with respect to the old system in use, if any). It can be estimated as 3% of C, see definition below.
- C: differential cost of the system with respect to current system in use cost. You can discount any helps provided by the government to build the system to C, if any.
- c: inflation rate with respect to the energy or other consumables needed by the system
- i: inflation rate affecting the maintenance costs
- r: money interest rate
Numeric example (from a domestic solar energy installation project):
A = 682.76 Eur
c = 0.08
C = 4540 Eur
i = 0.07
M = 137 Eur
r = 3%
Then, t = 7 years.
It means that year 7 you have paid the system with the savings, then you can enjoy the savings obtained as benefits.
If you set t equal to the estimated system lifetime and solve for r, you would get the interest rate offered by the investment on the system, which should be far better than the estimated interest rate of just leaving the money on a bank account. In this case, if t = 20 years, then we get r = 19.4%.
Best Regards,
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David Fernández Piñas
Indra Sistemas S.A.
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Original Message:
Sent: 02-06-2017 16:55
From: Alberto Bernal
Subject: Key messaging for SmartCity/IoT projects
I have found that when explaining a Smart/IoT/IoE project for a city, the client asks about the cost and the benefits for the city and citizens of such projects. It can be difficult to give key messages that demonstrate the value and the concrete benefits of these initiatives and are accepted by non IT people and therefore the project goes down a level because the political or strategic profiles does not sponsor them.
What are the key messages to tell a potential public sector client to convince him to embark on a substantial IoE project?
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Alberto Bernal
Indra Sistemas S.A.
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