Continuing the business case for the City Broker concept…

Considering the reality of increased costs, for both power and equipment it makes logical sense to create the non-profit entity that would become the City Broker. I dropped cloud, from the City Broker title because while it would be a Cloud Broker, the City Marketplace would encompass so much more. One of the questions I’ve gotten several times is how would you fund this.

Yes, the cost of setting a City Marketplace and a City Broker would be a large number. In the seven figure range when you consider the items that to be built:

· City Services Catalog

· Non-City (business affiliate) Services Catalog

· Cloud Connections between broker and CSP’s

· IoT gateway and deployment team

· Non-City non-compute services

Now like I said there is a cost. No matter what it will cost money to start the City Broker. The first reality of solving this problem is taking apart the overall economics. Knowing that it will cost between 4-10 million dollars to configure all of the hardware and software to build the broker initially. There will be ongoing costs associated (maintenance, upgrades etcetera, etcetera). So a five-year program would have a fairly significant budgetary impact.

But, it wouldn’t have to be a negative impact. Step one would be to have an initial relationship with the power provider. The power company would agree to deploy Solar Panels on City buildings, in return they would reduce the cities cost of electricity. The excess power created by the new Solar arrays would go back to the power company for them to resell. Over time, the city would receive a continued reduction in cost as more arrays are added to the system. The more power the city produces the more revenue they get. The power company is bound by law to resell that power at a fixed rate, lower than the current cost of producing power via coal power plants or nuclear. The city and the power company can even work out a tax arrangement that would allow reduced taxes overall for the power company to support the new arrangement.

The next revenue stream that would offset the set-up and ongoing costs of the project would be the overall business relationships with various suppliers. From office supplies to computer hardware manufacturers the city would offer small, large and even home users the opportunity to use the larger buying power (and reduced cost) of the city’s buying power. The vendor gets a steady stream and stable continued source of revenue, again the city gets a small fee off each transaction and the provider also gets a tax break.

Another model is that of cloud broker and IoT broker. In both cases the city can provide secure cloud services too small, startup, medium and large companies. The cities buying power will allow them to have enough of a discount as a Value Added Reseller of Cloud Services that they can pass savings along to small and medium business. Combining that with over time adding large companies (once they exceed the discount level the large companies already have) they can continue to offer reduced costs. The broker would be a fee based addition to the cities offering. The value proposition for vendors and companies being the ability to advertise on the City Marketplace site. The fees would be structured not as a one-year payback for the cities initial investment, but a 3 to 5 years’ payback. That way the initial fees wouldn’t be out of the realm of affordable for small and innovative startups.

In fact, the incubation facilities the city could offer would even further benefit the customers of the City Broker (realtors, office space leasing companies and office supply companies) would be easily accessed and utilized by small and innovative startups. The investment made by vendors could be offset by the city reducing taxes for investments in innovation. The increased number of small and innovative businesses would increase the cities impact and economy greatly.

It could be effectively built and deployed overtime. That way the city could recoup cost as it goes along rather than having to recoup the cost by charging customers more for services. This doesn’t even include the risk reduction of deploying home security devices managed by the City Broker. Overall this would not be impossible to implement cost effectively.

City Broker© and City Marketplace© are copyright Scott Andersen.

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City Broker and City Marketplace designer