Cisco wants a piece of the ‘smart cities’ business by Clay Dillow @FortuneMagazine February 18, 2014, 5:02 PM EDT E-mail Tweet Facebook Google Plus Linkedin Share icons A screen shots from the Smart Grid tech AGT is developing in Saarlouis, Germany, showing a heatmap for energy consumption in a single neighborhood. FORTUNE — When it comes to building so-called smart cities — the data-driven, ubiquitously connected cities of the future where everything from traffic signals to law enforcement to trash collection is optimized to algorithmic precision — IBM has largely driven both the narrative and the marketplace. But a new partnership between Cisco and Swiss technology and analytics firm AGT International suggests Big Blue isn’t the only one that thinks there’s big money in making over the world’s civic infrastructure. The Cisco/AGT alliance plans to roll out its own flavor of smart city technologies across 30-50 cities worldwide over the next five years, leveraging the emerging “Internet of Things” to drive efficiency up, costs down, and associated revenues to $1 billion annually by 2020. The strategic partnership will meld a range of Cisco’s vast hardware and software tools with AGT’s expertise in civic data analytics and predictive software to create novel architectures that, if all goes to plan, will help cities both generate and manage huge amounts of data, initially for traffic management and public safety purposes. (More applications, including smart grid management, are in various phases of development.) But perhaps more interesting is the fact that IT powerhouse Cisco CSCO is making a concerted push into the municipal space in the first place. “We believe the future of competition is going to be between cities,” say Wim Elfrink, Cisco’s executive vice president for industry solutions and chief globalization officer. “Economically, but also socially. Where do young people want to live, to work? So it’s also a competition for talent, and for environment. Energy consumption, pollution — there are more and more criteria that people care about.” MORE: Meet Microsoft’s new (old) head of Lync and Skype Cisco has actually been active in this space for several years now, though not as visibly or actively as IBM IBM , whose Intelligent Operations Center software is deployed in cities across the globe to help manage various aspects of civic operations. For its part privately held AGT is a relatively young company (just seven years old), but with revenues of $1.2 billion the Zurich-based company has established itself as a presence in the city management technology space, helping cities like resource- and space-constrained Singapore leverage data and technology into greater efficiency. The aim of the Cisco/AGT partnership, Elfrink says, is to take advantage of the growing Internet of Things — the explosion of devices, appliances, automobiles, and other physical objects beyond computers and smartphones that are plugged into the Internet — and enhanced data analytics tools to solve the current and future challenges faced by cities around the globe, which are growing at a rate of 10,000 people per hour according to Cisco. If all that sounds a lot like what IBM’s Smarter Cities already does for its civic clients around the globe, that’s because it is. But the Cisco/AGT partnership is starting from a different place and time, and the differences between the two are more philosophical, says AGT founder and CEO Mati Kochavi. While both companies rely on the proliferation and installation of inexpensive sensors, Cisco and AGT aim to alleviate the costs associated with installing new sensors by instead focusing on connecting the sensors that are already out there. (Further cost and IT burden will be alleviated by hosting all that data and some of the computation in the cloud — Cisco’s cloud, to be precise.) One primary source of sensor data will be citizens themselves via a series of smartphone and tablet apps that will connect people directly to their city governments (and vice versa) in a way that ensures citizens have to participate in the system to solve their own problems and that — because of the direct digital link between citizen and city government — agencies can’t ignore those issues that citizens bring to their attention. Corollary to this, Kochavi says, will be a stringent focus on individual privacy — something both governments and citizens are keenly aware of in the wake of the ongoing NSA data collection scandal. Where possible data will be anonymized, that data which is not needed could be discarded rather than stored, and citizens would have control over how much of their own data they share and how precise that data is. MORE: Could there be a $50,000 bitcoin? “I believe when we enter the Internet of Things we’re talking about another layer of information that’s bigger than social media,” Kochavi says. “We don’t want to wake up in five years and find out again that we should have done things differently.” That reliance on personal data via citizen-owned devices plugged into the Internet of Things could make Cisco/AGT’s architecture precariously dependent on peoples’ willingness to share information, but Kochavi thinks they will, especially since doing so means they’ll also get information and services in return that will help improve their own lives. Such a system will impose transparency on government, Kochavi says, “closing the circle” between cities and citizens. The partnership hasn’t yet disclosed where it will begin the rollout of its technology, but Kochavi says the first client city will be announced in roughly two months. From there it plans to expand rapidly to dozens of cities over the next three to five years, focused largely in Europe, Asia, and South and Central America.