Budapest Business Journal 20/17

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VOL. 20, NUMBER 17

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IS THERE AN APP FOR THAT?

There is still quite a lot of “terra incognita” for mobile app developers, where the brave and the well prepared can make their fortune. PAGE 20 LIST: SOFTWARE DEVELOPERS LIST: ERP COMPANIES

PAGES 24-25 PAGES 18-19

SPECIAL REPORT

Q&A

SOCIALITE

FS deals driven by rationalization

A Hungarian innovation

Touching up the city

Companies in the financial sector Europe’s were engaged in deals of the same value in Q1 as they were a year ago – however, if one looks at the motives, it turns out that they mostly derive from efforts to rationalize operations.

PAGES 12-13

Dániel Rátai’s Leonar3Do, a cutting-edge 3D system, could well take a leading role in the big boom that is expected on the 3D market. The young innovator tells the BBJ how his childhood enthusiasm for technology turned into a promising business.

PAGES 16-17

Civic initiatives prove that brightening up the city environment does not necessarily require huge financial investments and, as an additional benefit to the facelift, stronger communities might also evolve.

PAGES 28-29

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Grape harvest small but good Hungary’s largest student green project on show in Madrid

04 07

digest

It occurred to me that nothing is more interesting than opinion when opinion is interesting HERBERT BAYARD SWOPE, THE NEW YORK EVENING WORLD, 1921

HUNGARIAN DIPLOMACY UP IN FLAMES It is a mystery how the Hungarian government could have hoped to get away with extraditing convicted Azerbaijani murder Ramil Sahib Safarov without causing an enormous wave of international outrage.

And if it was aware of the consequences, the compensation that Hungary will get in return from the west Asian country must be valuable indeed. As it was, the action has not only resulted in serious diplomatic backlash for Hungary, but has also riled people all over the world.

Safarov was convicted in 2006 of premeditated murder and sentenced to life in prison after he killed Armenian soldier Gurgen Margaryan by nearly severing his head from his body with an ax in Budapest in 2004.

Both were participating in a NATO training course in Hungary. Considering the deeprooted hostility between their home nations, the investigation found that Safarov killed Margaryan for political reasons.

This summer Hungary extradited Safarov to Azerbijan, where he arrived on August 31 and was given a hero’s welcome. He immediately received a presidential pardon, was set free given back pay to the time of his arrest and even promoted.

Armenia was outraged and announced that it was severing diplomatic ties with Hungary. “Neither I or Armenia can accept this.

The Armenian people will not forgive this,” Armenian President Serzh Sarkisian said.

The Hungarian government, insisting that the transfer was in line with international law, condemned Azerbaijan’s actions and claimed it had only extradited Safarov after having been told that he would serve the rest of his prison sentence at home.

Prime Minister Viktor Orbán on September 3 said that the government was “acknowledging the debate with coolness and calm”.

However, most of the world, including the majority of Hungarians, does not seem to agree with Orbán.

Armenian communities across the globe were outraged at Hungary’s action. Demonstrations were held in front of Hungarian Embassy buildings in the capitals of Ukraine, Bulgaria and Norway.

Moreover, angry Armenian patriots burnt Hungary’s national flag in Yerevan as an immediate reaction on Saturday. Despite the diplomatic consequences, Sarkisian asked for some degree of moderation from his nation after the flag burning. “I would like to address our society and especially the young people and ask them not to burn Hungarian flags. The Hungarian flag does not belong to the ruling Hungarian party, it is not the symbol of the Hungarian prime minister,” Sarkisian said on September 4.

Many Hungarians are also desperate to stress the distinction between Hungarian society’s ideas and the actions of its government. At a demonstration in Budapest on Tuesday, an event which was probably the first spectacular domestic protest against the case, thousands of people got together to ask Armenians’ forgiveness.

At the same time, ideas about what Hungary gets from Azerbaijan in exchange for Safarov have also surfaced. International reports claim that Hungary is planning to issue €2-3 billion in debt to Azerbaijan, and some other bilateral economic deals were also suspected to be in the background.

As Hungary’s negotiations with the IMF and the EU about an aid package are dragging, and Hungary’s debt agency last month said it was looking at alternative markets to finance its debts, the possibility of a link between the delayed agreement on the aid package and Safarov’s extradition was also raised.

However, Azerbaijan’s ambassador to Budapest has dismissed these speculations, while the country’s oil fund also denied that it had any such investment plans. Hungary has also stressed that its developing economic ties with Azerbaijan had nothing to do with the release of the murderer.

Since the breakout of the diplomatic scandal on August 31, right-wing online and printed press outlets in Hungary have not published any opinion pieces about the case.

Moreover, during the first days of disgrace over the weekend, government-friendly papers did not even mention the case on their front pages. The opposition press, however, has had unprecedentedly strict words for the Hungarian government. In the meantime, the international press keeps up the guessing game about what bilateral deals might lie in the background.

BUT WE ARE PROSTITUTING OURSELVES FOR FREE.

Hvg.hu

SEPTEMBER 3, 2012 Russian news site Regnum cited several online sources claiming that the United States must have been aware of Safarov’s extradition. According to Azerbaijani political scientist Ilgar Mademov, it is unrealistic that Hungary, as a NATO member, could make such a deal without the United States being informed. “The Americans must be happy about Safarov’s release.

To say the least, Armenia’s Russian-friendly political system has suffered a great loss now.”

Regnum also cites Gejdar Djemal, the leader of the Islamic Committee in Russia, saying that it is “obvious that the moment of the extradition was carefully appointed and is linked to the Syria conf lict between Russia and the West. Armenia is the ally of Moscow,” he stressed.

SEPTEMBER 4, 2012 A tough-toned

article

headlined “Dubai business in Baku” (which refers to the common idea that young and attractive girls traveling to Dubai to work as hostesses in reality aim to earn good money as prostitutes) asks “where does the great sovereignty lead and how can we get money if the IMF aid stinks for us? With prostitution. There is money in the East, moreover, there is oil as well, but to get into the limousine, we have to fulfill the sheik’s wishes.

And he is a perverted guy.

About murder, for example, he thinks that killing an Armenian is not a sin but a feat.”

About the suspected deals in the background, author Árpád W. Tóta says that releasing a terrorist is disgusting even if Azerbaijan starts building the Eastern Stream gas pipeline on the very next day, but in that case “people would only say that Hungarians do not refrain from any tools in reaching their aims. But we are prostituting ourselves for free.”

In conclusion, W. Tóta says that being Hungarian at the moment is “embarrassing and inconvenient” and also stresses that it might have “tragic consequences if a nation is seen

as one homogeneous item”.

Therefore, the author calls upon everyone to go out to the streets and show the world that Hungarians do not agree with their government.

SEPTEMBER 4, 2012 The online edition of the Hungarian daily Népszava in the United States published the ideas of Imre Para-Kovács, an admired critic of the government.

Para-Kovács puts Orbán’s comment into focus: “Fidesz on its part considers the case closed.” He emphasizes the sarcasm by mentioning historical examples, such as “Hermann Göring considering the case of the Holocaust as closed (two days before the Nuremberg Trial) or the Japanese seeing World War II as closed on their part (half an hour after Pearl Harbor).”

As for the Hungarian government, he says that “they willingly spit in their own face and also on their people if doing so means they can find a stupid but rich country willing to finance the terrible errors they themselves made in their economic policy.” ■

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QUOTE OF THE WEEK

The IMF can help when the one who requested its assistance says what it is asking for and what it is giving in exchange JELASITY RADOVAN, CEO OF ERSTE BANK HUNGARY, IN AN INTERVIEW WITH INDEX.HU, EXPLAINING WHY HE DOES NOT BELIEVE HUNGARY WILL BE ABLE TO SIGN A CREDIT DEAL WITH THE IMF/EU THIS YEAR

NEWS FOR THESE PAGES IS TAKEN FROM THE BUDAPEST BUSINESS JOURNAL’S DAILY BRIEFING, HUNGARY A.M.

Hungary wine harvest smaller but quality excellent Hungarian vintners put this year’s wine output at around 2 million hectoliters compared to 2.5 million in 2011, Csaba Horváth of professional association HNT said. This year’s wine harvest is estimated at 380,000-400,000 tons compared to 450,000 tons last year, as vineyards have been hard hit by extreme weather conditions, but the quality of the harvest is expected to be excellent, Horváth said.

Wine imports, mostly from Italy, amounted to 515,000 hectoliters last year, while 590,000 hectoliters of Hungarian wine was exported. About 350,000 hectoliters of wine was imported from Italy in January-May. Hungarians consume about 2.3 mln hectoliters of wine a year.

ECONOMY BILL ON FINAL ACCOUNT OF 2011 BUDGET SUBMITTED Hungary’s general government deficit, excluding the effect of one-off measures, was 2.43% of GDP according to EU methodology in 2011, lower than the 2.94% target, a bill submitted on the final account of 2011 budget to Parliament by the government shows. Including one-off measures, Hungary’s general government ran a HUF 1,204.6 billion ESA surplus – equivalent to 4.3% of GDP – in 2011, the explanation of the bill shows. The 2011 ESA surplus resulted from the EU accounting of the transfer of private pension fund assets of leaving members to the state, worth about 9.6% of GDP, as revenue in 2011.

The budget position was an important factor in the

drop of Hungary’s government debt ratio to 80.8% of GDP at the end of 2011 from 81.4% at the end of 2010, the bill said, noting that the debt ratio fell to 76.5% if adjusted for the effect of the weakening forint.

GKI EXPECTS FURTHER DETERIORATION Economic research company GKI expects recession to continue for the rest of the year, and says additional measures will be needed to reach budget deficit targets this year, and especially next. As the government wants to carry on with its “prone-to-failure” economic policy regardless, there is little chance of an agreement with the IMF, so investors will not be confident enough to make investments that would kick-start economic growth, GKI said in a release. Apart from Mercedes, exports are grow-

ing slowly, and there is no improvement to be expected in domestic demand.

A stronger forint in the summer also proved to be ephemeral, the researchers added. GKI predicts Hungary’s GDP to shrink by 1.5% this year, in line with its earlier projections. The researchers expect real wages to decrease 1.5% this year in the business sector and by 2-2.5% overall, public fostered workers not counting. Inf lation would be 5.5% on average this year, GKI said. In its previous projection published at the end of July, it predicted 5.7% average annual inf lation for this year.

2011 TRADE SURPLUS REVISED UP TO €7.1 BLN Hungary had a trade surplus of €7.061 billion last year, the Central Statistics Office (KSH) said, revising the previously reported €6.886 bln surplus up by €175 mln.

Exports in 2011 were slightly higher and imports lower than earlier reported. The revision reflects data correction by businesses, KSH said. The trade surplus widened by €1.546 bln in 2011 from the €5.515 bln surplus recorded in 2010, the revised figures show. KSH revised 2011 exports up by €69 mln to €79.978 bln, and 2011 imports down by €106 mln to €72.917 bln. Accordingly, in euro terms, exports rose 11.9% in 2011, slightly more than reported earlier. Euro-term 2011 import growth was revised slightly down to 10.6%. In volume terms, both exports and imports growth was revised down, with 2011 exports growing 9.9%, less than the 10.2% increase reported earlier, and the full-year import increase was revised slightly down to 6.7% from 6.9%. Terms of trade deteriorated 1.7% in 2011 compared to 2010 according to

the revised figures, Econews calculated, less than the 2% worsening reported earlier.

The forint weakened 1.4% to the euro and strengthened 3.5% to the U.S. dollar in 2011 compared to 2010.

INVESTMENT VOLUME FALLS 5.9% IN Q2 Investment volume in Hungary fell 5.9% year-on-year in Q2, data from the Central Statistics Office (KSH) shows. Investment volume fell a seasonally- and calendar year-adjusted 2.2% quarter-on-quarter. Yearon-year, second-quarter investment volume fell 5% in the manufacturing sector and was down 4.7% in construction.

Machinery and equipment investments fell 2.6%. Investments in the public administration, defense and social security sector dropped 6.7%. Energy industry investments were almost halved as a power plant project wound

up and network expansions slowed. The completion of a hotel renovation caused investment volume in the hotel and catering sector to drop about one-third. Investments in the infocommunications sector jumped 70.5% on network expansions related to a frequency tender. Investments in the wholesale and retail trade and vehicle repair sector were up 6.4%, supported by an expansion of chain stores. First-half investment volume was down 7.1% from the same period a year earlier. In absolute terms at current prices, investment volume came to HUF 920.3 billion in Q2 and HUF 1,630.9 bln in H1.

PMI SLIPS BELOW THE 50 THRESHOLD Hungary’s seasonally adjusted Purchasing Managers Index fell to 49.5 in August from 51.8 in July, slipping below the 50 threshold between contraction and ex-

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pansion, according to data by the Hungarian Association of Logistics, Purchasing and Inventory Management (HALPIM). The index was above the 50 threshold for the previous three months, HALPIM said. Among the sub-indices that comprise the PMI, the new orders index fell for the sixth time in 11 months. The production volume index fell compared to July, but was still above the 50 threshold for the fourth month in a row. The employment index fell and was below the 50 threshold for the second month in a row after registering above 50 from January to June.

sets of €7.39 billion on June 30, down 16.5% from 12 months earlier. Stock of client loans fell 11% to €5.49 bln and client deposits were down 8% at €4.77 bln.

in category “B”, but have no history of public transactions will have a one-year grace period to carry out a public transaction to stay in category B.

DAIMLER PLANT TO INTRODUCE SECOND SHIFT FROM MIDSEPTEMBER

MULTINATIONALS CONTENT WITH HUNGARIAN SMES

BUSINESS

MAGYAR SUZUKI TO SWITCH TO SINGLE-SHIFT PRODUCTION IN NOV, DEC

BUDAPEST BANK GROUP H1 AFTERTAX PROFIT DROPS 13% Budapest Bank, the Hungarian unit of GE Money Bank, had after-tax profit of HUF 9.7 billion in the first half of 2012, down 13% from the same period a year earlier, the bank said, publishing consolidated Hungarian accounting standard figures on its website. Pre-tax profit remained stable yr/yr, rising just 0.1% to HUF 13.3 bln in spite of negative market trends, the bank said. Overall loan stock fell 6% in 12 months to HUF 637.5 bln, while deposits rose 2% to HUF 731.1 bln. Retail loan stock fell 8.5% to HUF 428.3 bln. Corporate loan stock continued to decline but the loan stock, excluding leasing, rose 12% to HUF 245.4 bln in the SME segment.

The group did not experience any significant deterioration in its lending portfolio, and impairment and reserving remained around its level in H1 2011, the report said. The bank said the HUF 8.8 bln reserves set aside by the end of last year against the losses related to an early forex mortgage repayment scheme, running between the end of last September and end of February 2012, fully covered the related losses booked in H1.

RAIFFEISEN BANK LOSSES IN HUNGARY DOUBLE IN H1 Raiffeisen Bank International has reported a fi rsthalf net loss of €77 million at its business in Hungary, more than double the €37 mln loss in the base period. Net interest income fell 25% to €120 mln during the period. Net fees and commissions dropped 16% to €38 mln. Net provisioning for impairment losses dropped 6% to €108 mln.

The business had total as-

German carmaker Daimler AG’s new plant in Kecskemét (central Hungary) is to introduce a second shift from mid-September, managing director of MercedesBenz Manufacturing Hungary Kft Frank Klein told MTI. The plant is expected to turn out 100,000-120,000 cars a year.

Magyar Suzuki Zrt is to switch to single-shift production at its factory in Esztergom, north Hungary in November and December in response to declining European sales, the company told MTI. Magyar Suzuki emphasized in the statement that it has no plans to cut staff numbers and intends to return to double-shift production in January 2013.

EST MEDIA SLIPS DEEPER INTO RED Hungary’s Est Media group has reported a consolidated fi rst-half after-tax loss of HUF 2.08 billion, swelling from a loss of HUF 417 million in the base period as revenue plunged and fi nancial losses jumped. Revenue was down 45% at HUF 476 mln. Material costs rose 36% to HUF 510 mln. Est Media booked a HUF 250 mln loss at an operating level. The company’s bottom line was further hit by a HUF 2.08 bln fi nancial loss. Est Media had total assets of HUF 7.78 bln on June 30, down 10% from 12 months earlier.

BUDAPEST BOURSE INTRODUCES NEW CATEGORY FOR SLEEPER SHARES The Budapest Stock Exchange on Monday announced the launch of a new equities category (“T”, for technical listing), which will apply to shares that generate little turnover. By launching the new category, the BSE also aims to promote the option of technical listing, the simplest form of entering a regulated market, to companies considering going public. From category T, it is easier to move up to a higher category later if the company carries out a public transaction. Companies that went public in the past through technical listing and are currently included

Hungarian SMEs have to meet plenty of very strict requirements to become the partners of multinational companies, business daily Napi Gazdaság reported citing several businesses.

Big multinationals operating in Hungary are content with their Hungarian partners, the paper emphasizes.

However, to help businesses to meet the requirements of the multinationals, Hungarian Trade and Investment Agency (HITA) launched a program to provide network and service supply background for the Hungarian SMEs. Long years of experience as well as the integration of comprehensive technological developments and an appropriate business attitude are all necessary to start businesses with multinationals, the daily said, citing HITA. While the multis are content with their Hungarian partners in most cases, the lack of language skills and unreasonably high prices still often come up as problems, Napi Gazdaság said.

HUNGAROCONTROL INAUGURATES NEW AIR TRAFFIC CONTROL CENTER Hungarian air traffic controller HungaroControl has inaugurated its new air traffic control center building, completed at a cost of HUF 3.5 billion, in Budapest. The investment is part of a HUF 13 bln complex development program titled ANS III, co-funded with €6 million from the European Union as part of the Trans-European Transport Network (TENT). CEO Kornél Szepessy said the installation of the technological equipment in the building is expected to be completed by September. Air traffic control is scheduled to move to the new center in December. Construction of the building started in March 2011, and was carried out by a syndicate of Swietelsky and Közgép.

ISD DUNAFERR CONFIRMS LAYOFF OF 800 Hungarian steel maker ISD Dunaferr Zrt will layoff 800 workers by the end of this year, communications director Zsolt Várkonyi told MTI, confirming press reports.

The layoffs are necessary because the company is shutting down its Lőrinci Rolling Mill Kft and carrying

out a cost-savings program, Várkonyi said. The Lőrinci mill generated a loss of $5 million in the first half of the year, and there is no sign of any improvement, he added.

MTI learnt that ISD Dunaferr had a HUF 22 billion loss at group level last year.

MAGYAR TELEKOM TO SELL EMERGENCY SERVICES OPERATOR TO STATE Magyar Telekom Nyrt has agreed to sell its Pro-M unit, which operates Hungary’s emergency services communications system, to the state for HUF 19.9 billion. Pro-M, which Magyar Telekom established in 2005 to build and operate the system, will be sold to the National Infocommunications Service Company (NISz). The transaction price includes the cost of the shares as well as Pro-M’s loans and working capital.

The aim of the acquisition is to integrate Pro-M into the state’s telecommunications services. NISz will take over ownership of Pro-M on September 1. Under the original contract, Pro-M was to have operated the emergency services communications system for ten years.

ECE TO COMPLETE ÁRKÁD 2 IN MARCH ECE Projektmenedzsment Budapest will complete an expansion of its Árkád shopping center in March, making it the biggest in the country. ECE is spending €80 million to build “Árkád 2”, with 20,000 sqm of retail space, as well as renovate “Árkád 1”, which opened ten years ago. The shopping center will have combined retail space of 68,000 sqm when completed.

ELECTROLUX INVESTS HUF 5 BLN IN HUNGARY THIS YEAR Swedish white goods maker Electrolux has invested about HUF 5 billion at its operations in Hungary this year, adding two new models at its vacuum cleaner plant in Jászberény (eastern Hungary), according to plant director Ákos Lukáts.

Lukáts said production of one of the new models had been moved from China to Hungary. Investments at the plant, which will turn out about 2 million vacuum cleaners this year, are up 50% from last year, he added. Electrolux Lehel managing director János Takács said output in Hungary was down about 80% from 6 million units in 2007. Because of the economic crisis, the number of workers at Electrolux’s plants in Hungary has dropped from 4,500 to 4,000, with seasonal laborers rather than full-time

employees being affected, he added. About 99% of the vacuum cleaners Electrolux makes in Hungary are exported, 78% to Europe and 13% to Asia.

all passengers in July instead of 26% on average last year.

STATE SEEKS HUF 2.5 BLN INDEMNITY FROM SCD

BROADBAND DSL, CABLE AND OPTICAL INTERNET SUBSCRIPTIONS UP IN JULY

The state of Hungary is seeking a HUF 2.5 billion indemnity from SCD Holding for failing to fulfill obligations in a privatization contract, it was stated at a court hearing in Kaposvár. The case involves campgrounds around Lake Balaton that SCD bought from the state in 2004 and 2005. At the time, SCD announced plans to spend HUF 100 billion on tourism developments around the lake. In the summer of 2011, SCD said it sold its assets on Lake Balaton to Turisztika Hungaria, a company established with registered capital of HUF 500,000 a little before the transaction, and explained that it would concentrate on developments in Budapest.

The state is seeking the indemnity for obligations related to the purchase of tourism company Siotour.

SCD also bought tourism companies from two county governments and promised to make HUF 16.4 bln in developments by 2013. It must pay a 1015% indemnity if it fails to complete the investments.

BUDAPEST AIRPORT FLIGHTS DOWN 24% IN Q2 The number of flights at Budapest Liszt Ferenc Airport was down 24% in Q2 yearon-year, but passenger numbers fell only 3.5%, Central Statistics Office (KSH) said.

In the Q1, flights were 20% fewer year-on-year and passengers numbered 5% less.

There were 19,710 flights to and from the airport in Q1, down from 25,700 a year ago. The number of scheduled flights dropped 20% to 16,702 from a year ago. Passenger arrivals and departures numbered 2,175,246 in Q2, down from 2,252,618 in Q2 2011. With national carrier Malév grounded on February 3, flight numbers fell more than 25% year-on-year in February and passenger numbers dropped 13% while passenger numbers for the destination of Vienna doubled. Since then the figures have improved as more foreign carriers have increased their flights, so for the whole calendar year Budapest Airport now projects a fall of 1013% in the number of flights as 99% of the transit traffic was lost with Malév, and discount airlines carried 53% of

DOMESTIC The number of broadband DSL, cable and optical internet subscriptions in Hungary reached 2,123,000 in July, up 5,000 from the previous month, a fresh report by Hungary’s National Media and Infocommunications Authority (NMHH) shows. The number of DSL subscriptions, which use conventional fi xed line technology, was 782,000 in July, down 2,000 from 784,000 in June. The number of cable subscriptions climbed 4,000 to 853,000, and the number of FTTH and FTTB subscriptions, which use optical technology, increased 2,000 to 292,000. Magyar Telekom controlled 34.9% of the market in July. UPC was runner-up with a 21.8% market share and DIGI was third with 13.2%.

NUMBER OF LANDLINES DOWN TO 1,992,000 IN JULY The number of landline connections edged down to 1,992,000 in July from 2,007,000 in June, a fresh report by the National Media and Infocommunications Authority (NMHH) shows.

The number of voice over cable television connections rose to 547,000 from 536,000 in the previous month, while the number of voice over internet protocol connections rose to 401,000 from 396,000. The number of landlines per 100 people was 29.58 in July.

GOV’T PROPOSES NEW SYSTEM OF LICENSE PLATES The government has proposed the introduction of new license plates indicating counties and administrative districts of the country, the National Development Ministry’s deputy state secretary for transport said. The concept is currently on the table of the interior minister, and a decision is expected to be made by the end of the year, said Zoltán Schvab at the formal inauguration of Gyula Győri, the new head of the Hungarian Transport Authority (NKH). The replacement would take place during the regular periodical vehicle inspection, in a single administrative procedure, he added. Under the current system, license plates carrying three letters and three numbers are issued in alphabetical order. ■

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RUSSIA SAYS IRAN’S NUCLEAR POWER PLANT FULLY OPERATIONAL Iran’s first atomic power plant, a symbol of what the Islamic Republic says is its peaceful nuclear ambition, is now operating at full capacity, Russia’s state nuclear corporation Rosatom said on August 31.

The Russian-built 1,000-megawatt reactor near the Gulf city of Bushehr was plugged into Iran’s national grid last September, ending years of delays and suspicions that Moscow was using the project as a diplomatic lever. The United States has long urged Russia to abandon the project, fearing it could help Tehran develop nuclear weapons. Iran says electricity generation is the main motivation, though others are skeptical of that. Israel’s Prime Minister Benjamin Netanyahu on Sept 2 urged the international community to get tougher with Iran, saying that without a “clear red line” Tehran will not halt its nuclear program, USA Today reported.

The States says sanctions and international diplomacy must be given more time to work.

Russia has warned Israel and America against attacking Iran and said it opposes further

regional SERBIA TO CAP MANAGERS’ WAGES, MERGE AGENCIES Serbia will limit the wages of managers in state-run companies, streamline dozens of government agencies and tighten control over their spending, even for institutions that have their own source of income, Bloomberg has reported.

The measures are part of a “fiscal consolidation” that will include a supplementary budget for 2012 set for adoption

by Sept. 15, Bloomberg quoted Deputy Finance Minister Vlajko Senic as telling reporters on August 31. Serbia is trying to reduce a budget gap that reached 7.2% of GDP at the end of June.

TYMOSHENKO LOSES APPEAL, STAYS IN JAIL A Ukrainian high court has rejected an appeal by former Prime Minister Yulia Tymoshenko against her conviction for abuse of office, upholding a seven-year prison sentence that has opened

sanctions beyond the measures approved in four UN Security Council resolutions, the most recent in 2010.

GERMANY BACKS CHARGING CONSUMERS TO CUT OFFSHORE WIND RISKS Germany backed measures to charge consumers and grid operators for risks linked to installing sea-based wind farms in an effort to support investments from developers, the media has reported. The draft bill endorsed by Chancellor Angela Merkel’s cabinet would make power consumers pay as much as 0.25 euro cents a kilowatt-hour if wind farm owners can’t sell their electricity because of delays in connecting turbines to the grid.

Originally, grid firms responsible for building cables from the wind parks to the mainland were supposed to compensate plant operators for failures in the connections. “With this regulation, the likelihood that liability losses will arise is now minimized,” Bloomberg quoted Economy Minister Philipp Roesler as saying to reporters.

SAN LEON ENERGY FINDS OIL IN POLAND San Leon Energy Plc, a hy-

drocarbon exploration company with projects in Europe and North African, has found conventional oil in an area of western Poland abandoned decades earlier by the country’s state-controlled oil and gas company PGNiG SA. San Leon said that its LelechowSL1 well, the first of a two-well exploration program on the Nowa Sol Concession in Poland near the German border, found oil and will be completed for near-term commercial production. The company will now begin testing to determine how many barrels of crude can be produced a day, said John Buggenhagen, San Leon’s exploration director.

VITOL SIGNS PARTNERSHIP TO INVEST IN UKRAINE’S GAS Swiss-based Vitol, the world’s top oil trader, has signed an agreement with London-based investment group EastOne to develop gas fields in Ukraine, the companies said in a statement, as the energy trader seeks to increase its stake in the world’s fastest growing fuel. The latest deal was signed between Vitol’s subsidiary Arawak and Eastone’s Ukrainebased independent gas pro-

ducer Geo Alliance, whichhas permits in the country’s eastern Dnieper-Donets basin, the firms said.

FILASA INTERNATIONAL PLANS TO INVEST IN WIND PROJECTS IN ROMANIA French company Filasa International plans to invest €3 billion in wind capacities over 2,000 megawatt through to 2013 and is also looking to develop a 300 megawatt photovoltaic park in Romania, state news agency Agerpres has reported. Filasa International will put up €1.35 billion for 10 wind parks in the Braila-Buzau area, in southeast Romania, and will develop other parks in the east and southwest of the country. “In 2013 we hope to have all the construction permits for Braila-Buzau,” Agerpres quoted Bernard Esquirol, general director of Filasa International as saying. The company estimates full capacity production in 2017.

BULGARIA SIGNS CONTRACTS TO START DEEPWATER GAS DRILLING Bulgaria signed a five-year contract with France’s Total, Austria’s OMV and Spain’s Repsol on August 29 to start exploration near a site in Romanian

waters where a successful gas discovery was made. The 14,440 square kilometer Khan Asparuh block is only 15 km from OMV’s Neptun block, which the Austrian company has said could produce up to 84 billion cubic meters of gas. Bulgaria receives more than 90% of its gas from Russia’s Gazprom and is seeking ways to diversify routes and sources to cuts costs and boost its energy security. According to Bulgaria’s Energy Minister, Delyan Dobrev, gas production could start in six years, provided that the exploration points to substantial gas reserves.

ENERGY SERVICE PROVIDERS IN HUNGARY COULD BECOME PARTLY NON-PROFIT Energy provision could be converted into a non-profit service for some retail consumers through the introduction of a consumption-based tariff system, Hungarian daily Magyar Nemzet said on August 24. Earlier Prime Minister Viktor Orbán told an annual meeting of diplomats that his government wanted to transform energy distribution into a “non-profit activity”. The paper has learnt that energy service providers have suggested to

divide the centrally regulated unified tariff into three ranges: low-income households with low energy consumption could even pay less for energy than they currently do, consumers using an average amount of energy would make up the second group, while consumers with higher-than average consumption could be charged a higher tariff. Non-profit operation could thus be implemented in the first tariff range, the paper said.

GAZPROM NEFT STARTS ARCTIC FIELD’S FIRST OIL OUTPUT Gazprom Neft, the oil arm of Russia’s state gas export monopoly, has started the first production well at a new Arctic field, Reuters reported.

Novoportovskoye, north of Gazprom’s main gas producing fields, is due to start commercial production in 2014 and hit its peak of 250,000 barrels per day in 2020. In addition to the new, 2,200 meter deviated well, Gazprom Neft plans to drill three new production wells and re-activate a production well this year, with plans to conduct hydraulic fracturing of several wells during the winter. ■

NEWS FOR THIS SECTION IS TAKEN FROM THE BUDAPEST BUSINESS JOURNAL’S DAILY BRIEFING, REGIONAL TODAY NEWSLETTER AT WWW.BBJ.HU/STORE/NEWSLETTER-PACKAGE

a rift between the former Soviet republic and the West. Tymoshenko’s defense lawyer said the ruling by a three-judge panel had been steered by President Viktor Yanukovich for political reasons.

“These findings have no relation to justice,” Serhiy Vlasenko told journalists after judge Olexander Yelfimov ruled that lower courts had delivered “correct decisions on the crimes of Tymoshenko”.

The abuse of office conviction relates to a gas deal that Tymoshenko brokered with Russia in 2009 when she was prime minister. The Yanukovich government says the agreement was reckless and saddled Ukraine with an enormous price for strategic supplies of gas which is taking a toll on the stressed economy.

SALES TURNOVER IN GREECE DROPS 40% WITHIN TWO YEARS The state of retail trade in Greece is continuing to deteriorate with no sign of any letup, as indicated

by the current summer sales, which have seen a contraction in volume totaling more than a third within just two years, Greek daily broadsheet I Kathimerini reported.

Retail turnover in the sales period that started in mid-July and ends on August 31 is not expected to top €4 billion this year, compared to €5 bln in the same period last year and €65 bln in the summer sales of 2010, according to the National Confederation of Hellenic Commerce. A recent survey by the General Confederation of Greek Small Businesses and Traders suggested that in the next couple of months some 11,000 small- and medium-sized trade and manufacturing enterprises would shut down.

ROMANIA’S PARLIAMENT CLEARS PRESIDENT’S RETURN TO OFFICE Romania’s Parliament recognized on August 27 a court decision that the country’s suspended president should return

to office, drawing a line under a political row that has brought criticism from the European Union and the United States.

The Constitutional Court ruled that a referendum to oust President Basescu was invalid because turnout was less than half the electorate, even though 88% of those who voted wanted the president removed from office. The government had threatened to remove court judges or limit its powers, before backing down under pressure from Brussels, and also tried to prove the electorate was smaller, in an attempt to show the turnout requirement had been met.

POLES’ SAVINGS FALL Poles’ savings diminished

by PLN 300 million (€73.3 mln) in the first quarter, since they needed to use the money for everyday spending. This is the first time Poles have faced such a situation since 2000, according to a report by the National Bank of Poland,

wyborcza.pl reported. According to a 2011 study by pollster TNS OBOP, almost half of surveyed Poles do not have savings. Poles aren’t able to save for the simple reason that they aren’t earning enough, and prices are high. Although wages are growing, they are not keeping up with inf lation, which is now at 4%, it said.

WTO ADMITS RUSSIA AS 156TH MEMBER Russia became the 156th member of the World Trade Organization after completing almost two decades of negotiations, bolstering President Vladimir Putin’s efforts to gain greater inf luence in global affairs, media reported on August 22.

Russia’s entry into the organization will add about $162 bln each year to economic output over the long-term by improving market access and luring foreign investment, the World Bank said in March. WTO members carry out 97% of global

trade, according to the Washington-based lender.

FRANCE TO CONSIDER OPENING JOB MARKET TO BULGARIANS, ROMANIANS France will make it easier for Roma immigrants from Eastern Europe to obtain work and residence rights, the government said on August 22, after years of expulsions and more police raids on makeshift campsites where they often live in squalor. Socialist Prime Minister Jean-Marc Ayrault, under pressure to break with a practice the left condemned when conservative President Nicolas Sarkozy was in charge, announced the policy shift after meetings with leading ministers and representatives of the estimated 1520,000 Roma people living in France. One of the main changes is a pledge to waive a heft y tax French employers must pay to the immigration office if they hire a Romanian or Bulgarian worker - a levy that can run as high as €1,800 ($2,200), government figures show. ■

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Odoo in Madrid – the largest ever student green project from Hungary More than 100 Hungarian students have created a solar house in the past two years to participate in the most prestigious green-tech innovative expo, the Solar Decathlon Europe in Madrid.

The HUF 200 million Odoo project is not only an unprecedented student experiment in Hungary, but also an exemplary act toward raising awareness of renewable energy sources.

“We do not understand exactly how we finally managed to finance our dream. It involved a bit of gambling as well, since up until the last few months we were not sure if we were really going to be able to attend the Solar Decathlon Europe,” Balázs Zeitler, project manager of Odoo, acknowledged in a recent interview with the Budapest Business Journal.

He added that determination and dedication were the key driving factors in not giving up on their dream.

Indeed, it takes a while to comprehend how Hungarian students from the Budapest University of Technology and Economics (BME) could achieve such a result. The first step was to get in among the best 20 participants out of about 50 universities from all over the world, but the biggest task was finding partners for realizing the project. This is what seems like an astonishing feat: to accumulate the needed HUF 200 million budget. “The best team-building we could ever have dreamed about as students was this process, which involved different faculties, students, professors, sponsors, and governmental participants as well,” summarizes Zeitler, who as a recent economist graduate was responsible for the business management of the project.

Their Odoo (which in Hungarian means a hidden place, burrow or cavity) solar house was planned as a symbol of sustainability and energy efficiency. These were the basic criteria for attending the Solar Decathlon Europe 2012, which is the largest European competition among universities and promotes research in the development of efficient houses.

The event was originally established in the United States ten

years ago by the Department of Energy, and this is the second time it has been held in Madrid. The competition, which is taking place as this article is published, features Hungarians among the participants for the first time.

An estimated 200,000 visitors will attend the event, which provides an extraordinary possibility to showcase their work and talent and to promote Hungarian creativity. Perhaps this large access to publicity also helped the students, who managed to collect more than 70 private companies to back them, altogether funding half of the budget. The remaining financial support came from the Ministry of National Development and main sponsor, Siemens. The German industrial giant’s Hungarian communication director Orsolya Nevelős explained to the BBJ: “Our company has a long tradition in supporting innovative research at universities, and we have been cooperating with the Budapest University of Technology and Economics for a while.”

Nevelős emphasized the unique multi-level cooperation they experienced from the students: “This was like a grassroots movement. The students organized everything from zero right to the final steps.

They got their professors and the whole university interested in the project. They persuaded companies and even the authorities to play an active role in its realization by pushing hard and consistently. This is a very inspiring initiative. We are proud to be their main sponsor with an estimated HUF 50 million in backing.”

The concept of Odoo’s solar house is based on designing and building an energy-effi-

cient, eco-friendly, light-structured residential building which only uses solar energy.

Under to the strict rules of the competition, the Hungarian team also had to find solutions to generate social and market support for green technologies and to integrate solar technologies into building structures in an organic and visually pleasant way. The design re-interprets the house-court relationship, using elements from traditional Hungarian folk architecture, the self-powered house features a closed courtyard that becomes a summer house. The concept was to challenge the present standard of spending more than 90% of our lives within closed walls, excluding outdoor spaces.

Odoo also aims to advance and accelerate the process of collective acceptance of a sustainable and energy-efficient lifestyle. As Zeitler shared with the BBJ, the more than 100 participating students did not invent any new technology or products, only assembled already existing ones into one complex project. Beside the significant effectiveness of the house – it produces twice as much energy as it uses, purely with its solar panels – there are two unique elements that stand out. By saving energy, consumers obviously spend less on utility bills, but with the special devices incorporated into the house it can also provide electrical power for cars, so the house can function as a power station as well. On average, the house can save enough power each day for a 50-70 km ride in an electric car. The other striking comfort device is the intelligent controlling system: the owner of this house could switch off the lights, turn on the heating, and even get the oven ready for a meal all via internet connection. This provides ultimate comfort and makes it easy to take care of forgotten or prearranged housekeeping duties using only a smartphone.

The students in Team Odoo (future architects, engineers, economists and communication experts) are currently re-assembling the house in Madrid before the official opening on September 13.

Their two years of collabora-

tion made them very competitive, confident and perhaps quite attractive on the labor market – this will be a definite future benefit for every participant. The project will be exhibited in the next two semesters at their university, where it can be visited and studied by anyone. They have also compiled 1,500 pages of theoretical material to inform professionals and the wider public about the competition and their achievements.

Their ultimate goal is to create a viable, innovative product marketable in Hungary.

That will be another hard task to accomplish, since the most important stimulus for spreading this new technology is currently missing in Hungary.

Consistent government fund-

ing has made Germany, Spain, Greece and Austria the leading solar powers in the EU. “Unless the government intervenes with substantial grants, we will be lacking these new eco- and budget-friendly solutions,” Zeitler concludes.

Béla Glattfelder, the president of the Hungarian Solar Association, told the BBJ, “Odoo’s realization is a great success that can raise awareness about environmentally conscious solutions in Hungary. This is an important step, because many people still do not know what opportunities we have for saving energy and reducing our power bills.” Glattfelder, who is also a Member of the European Parliament, is hopeful.

He mentioned an upcom-

ing EU agreement that will oblige all member states to set a realistic percentage target for using renewable sources in new buildings. As for the individual state funding in Hungarian houses, Glattfelder is realistic: lobby organizations can only ask for tax cuts for private projects, and at present the government can only fund public projects. The lobbyist did, however, express his firm belief that, in the near future, there can be a significant improvement in the spreading of renewable energy sources in Hungary. “There is a HUF 40 billion sum waiting to be distributed in the sector, which we received from EU funds. That could accelerate the market and also generate new jobs”. RVW

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The end of a hot and golden summer Talk of voter registration has intensified over the summer, and while some argue that Fidesz will ultimately balk because of the unpredictable outcomes and fear of judicial intervention, the introduction of some form of registration still appears likely. Registration is intended to (and almost certainly will) depress turnout significantly, although both the scope and nature of its impact will depend on a variety of details that are as of yet unclear. Unless the country’s economic fortunes improve, Fidesz will desperately need the dissatisfied majority to stay at home. For now, the situation is getting worse rather than better, as Hungary is officially in a recession. Still, the government has responded with an action plan that seeks to promote employment, and – quite atypically – that plan has met with approval even in normally critical circles. The general sense among experts is that although it is a step in the right direction, yet more will be needed.

Like most everywhere else, summer is the one season in As anticipated, the summer was rather mellow politically. In addition to the normal pacifying effect of widespread vacationing – which thankfully extends to politicians and scribes, too – the mood was also ameliorated by Hungary’s stunning performance at the Olympics, which reversed the country’s recent decline at the games and reinforced her historical position as the most successful small country. In addition to their other prizes, Hungarian Olympic champions are also slated to receive a record financial award of some HUF 35 million (€125,000) – though considering the effect of the country’s eight gold medals on the public mood, that is a bargain for the government. Nevertheless, whatever improvements the Olympic performance might have wrought on the public mood, it probably will not last: looking at current trends, Fidesz’ best bet remains keeping unhappy voters at home, which is precisely what it intends to achieve.

VOTER REGISTRATION STILL APPEARS A GO During most of the sum-

mer, news reports – reinforced by Fidesz politicians, most significantly the prime minister himself – have treated an impending introduction of registration as a near certainty. Some recent news items indicated that there is some nascent hesitancy in Fidesz concerning the benefits of voter registration. While there is of course a theoretical possibility that the idea could backfire for the governing party, it appears unlikely, which is why we would wager that registration will be introduced in the end.

This assumes of course that what will ultimately decide the question is whether voter registration benefits Fidesz and how certain it is to do so. As far as the former is concerned, two key factors support the notion that Fidesz will benefit. In spite of considerable public disillusionment with the main governing party, it still commands by far the highest number of committed voters. Moreover, compared to its main competitor, MSzP, Fidesz will likely enjoy more support among many of the groups with high voting propensities, such as the well off and the educated

strata. The biggest threat for Fidesz is the mass of disaffected voters, who are often politically unmotivated and without a clear preference for any of the opposition parties. Such voters might make up their mind at the last minute, but if they turn out in large numbers – motivated by an intense campaign, for instance – they might well sway the election against Fidesz. Introducing an additional hurdle would keep many of them from the ballot in any case; forcing them to register very early would make this instrument more effective still.

OPEN QUESTIONS There are of course some unresolved issues that will have a decisive impact on the actual effects of this instrument. The most important details are how registration will work – that is, how cumbersome it will be – what the deadline will be, and whether those who registered will be compelled to vote. Especially with regard to access to registration, Fidesz faces a dilemma: unless registration points are offered in even the smallest municipalities, left-leaning urban voters will have easier access than

the residents of Fidesz’ main bastions, municipalities with a population of less than 10,000. So in some sense the best method for Fidesz may be to ensure widely distributed geographic access without fully taking into account population density.

Compelling registered voters to actually turn out is another thorny question.

Clearly, if Fidesz operates under the assumption that those who register will – as compared to the overall population – be more likely to support the governing party, then it would be beneficial to ensure that they vote. Still, the measure would almost certainly be unpopular and may cause a backlash among undecided voters and those more loosely aligned with the ruling party. Voter registration is therefore potentially a double-edged sword for a variety of reasons.

PRAYING FOR GOOD NEWS AHEAD Economic policy remains the focal point both for the government and the public evaluation of Fidesz. And in this key area, the summer offered mixed results.

On the one hand, Hungary is now officially in recession. Considering that as late as spring last year György Matolcsy’s optimistic plans had projected robust growth for 2012, and even the more pessimistic subsequent projections were brighter than the current reality, this is devastating news indeed.

Nevertheless, it appears that both experts and the public had already priced in the negative growth figures.

The reaction to the quarterly growth figures was relatively laid back, probably also on account of the summer atmosphere.

At the same time, the forint has shown marked improvement in the last

couple of weeks, which was fortuitous timing indeed.

Although many citizens skipped their foreign vacations on account of financial troubles, those who chose the traditional month of August to travel in Europe got lucky, as the Hungarian currency was at an all-year high during these weeks, making foreign trips slightly but palpably less expensive for those who exchanged late.

CREATING JOBS A more important piece of good news is that Fidesz finally adopted an employment stimulus package that most experts agree has many of the components the dried up labor market needs. The government is also putting up some HUF 300 billion (€1.07 billion) in forfeited revenue to support its measures. The ambitiously named Labor Protection Action Plan offers a drastic 50% cut in employer’s social contribution co-payments for employees over 55 and under 25, the two most difficult-to-place age groups.

For the long-term unemployed, co-payments can be completely suspended for a while. The government is also offering significant financial incentives for people to move to find work, which is smart, considering that lacking mobility is a major contributing cause to the phenomenon of longterm unemployment.

There are also new tax rules for small businesses, which are likely to reduce both tax and administrative burdens for micro-enterprises. The latter are also effectively major parts of the labor market. A small but significant minority of – often white collar – work-

ers has resorted to operating as a business, usually using the Simplified Business Tax scheme, known as EVA in Hungary. The EVA scheme will likely end this year, but by suggesting a lump sum tax for micro-enterprises, at least this category will have a financially viable alternative.

Small enterprises will also benefit from tax simplification. There are also a number of other measures aimed at making the life of businesses easier and facilitating their decision to hire new staff.

IS THAT ENOUGH? Unusually, with its recent action plan the government has found a set of policies that most experts are happy with. Still, this in itself will be hardly enough to stimulate the stagnating economy.

The government appears to be hoping that a labor market policy – the current action plan was preceded by drastic measures cutting employee rights – rooted in conservative economic philosophy will set the ground for explosive growth once cyclical growth, which has eluded Hungary for a while now, returns.

The plan is clearly not foolproof, as Hungary remains very exposed to international economic fluctuations and is also hampered by the government’s unpredictable economic policies in other areas, which appear to give many potential investors a pause. Nonetheless, if the stars align for Fidesz, at some point these policies may fulfill at least a portion of the grandiose hopes that the PM appears to have vested in them.

Whether another set of policies might have achieved those changes more quickly is a different question. ■

www.policysolutions.hu Political Research and Consultancy Institute

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Lighten up

Deconstruction

A big bite

Phasing out old-style incandescent light bulbs will be complete once stores run out of stock

Industry experts say positive changes are at least six months away

Analysts pleasantly surprised to see dwindling gap between projections and actual figures

10%

414

THE RATIO OF CONSUMED ENERGY A TRADITIONAL LIGHT BULB TRANSFORMS INTO VISIBLE LIGHT

The European Union has banned the import and production of traditional light bulbs in all member states effective August 31, 2012 in search of more energy-efficient and environment-friendly alternatives. Once all light bulbs on stock are sold from the shelves, customers will have to look for another option, like a compact fluorescent lamp (CFL) or LED bulbs. This latter technology delivers 85% energy efficiency (that is, it transforms 85% of the energy it consumes into light) in contrast with the 10% rate of traditional bulbs. The higher price of these LED lights is offset by their longevity: an average LED will last five times longer than a normal bulb.

Due to the difference in the technology, there are other advantages as well: a LED bulb does not contain a filament, it is shockproof and is considered a lot more reliable than traditional light bulbs. It will start working with full efficiency right after switching it on (unlike halogen technology), and it does not contain mercury. With these advantages translating into some 15 extra years in a light bulb’s lifespan, the LED bulb is currently acknowledged as the best option both in terms of energy-friendliness and the time needed to return the investment in the more advanced technology.

According to a recent report published by the Climate Group, lighting is responsible for some 19% of the world’s electric power consumption.

Switching from traditional technologies to more advanced LED technology could mean a 40% drop in this field, which would equal some EUR 130 billion in savings and also a 670 million ton drop in the world’s CO2 emissions. This latter figure roughly equals the yearly emission of the entire aviation industry, experts say.

The phase-out of incandescent light bulbs, which becomes complete with the current ban on production and import, was started by the European Union in 2005, along with Brazil, Switzerland, Australia and Venezuela.

Other nations have joined in implementing new energy standards with the aim of phasing out old-style light bulbs: Argentina, Russia and Canada all start their programs in 2012, and Malaysia and the United States will join in 2014. ZsB

Shedding light on light

Average amount of time an incandescent light bulb will last Total amount of time a LED light bulb can last Percent of electricity that a traditional light bulb converts into light Percent of electricity that a LED light bulb converts into light Average ratio of electricity bill that is from lighting Source: Wikipedia/Verbatim

THE NUMBER OF NEW LIQUIDATIONS IN THE CONSTRUCTION SECTOR IN JULY 2012

HUF

The quarter ending July 2012 proved to be the worst yet for the Hungarian construction industry, figures from Opten Kft revealed.

Although the July figure in itself is not extremely high, it is in line with the yearlong trend of a massively growing number of bankruptcies in the sector. According to the seasonal trend, the peak of newly initiated liquidation procedures is between March and May, with some 500 to 600 procedures a month. The quiet summer months also contribute to the negative trends of the industry.

While the number of new liquidation processes in July is only slightly higher than last year (the volume of similar processes was above 400 both in 2011 and 2010), the number of winding-up procedures shows a significant drop. While this might also be seen as a positive trend, industry experts say that the misleading difference is the result of a simple procedural change and does not reflect the performance of the sector. Previously, abandoned (and, in most cases, emptied) companies were ex officio wound up by the authorities, but a recent change in legal regulations allows these companies to be automatically struck from the register, avoiding a long and costly procedure.

As an effect of this regulatory change, the number of winding-up processes dropped to 209, by one third year-on-year, in July. The average of the last three months, however, is still much higher at 478, which is in line with the trends of previous years.

The number of new companies in the industry showed a peak in the period between December 2011 and March 2012, followed by a spectacular plunge in April. Following this fluctuation, the number of new companies has stabilized at around 230 to 240 companies per month. While the number of new contracts in the industry is some 14% higher than last year, the increase is generated solely by industrial, agricultural, and state- or municipality-funded projects. Due to the nature of these projects, industry experts expect that it will take at least another six months until these new assignments cascade down to companies and possibly result in more favorable trends. ZsB

14bln

THE AMOUNT THE “CHIPS TAX” HAS DRAWN IN FOR THE CENTRAL BUDGET TO DATE IN 2012

This year’s increase of the NETA tax (the tax on “unhealthy” products such as energy drinks and certain sweets and snacks, commonly known as the “chip tax”) and the broadening of its scope of products have resulted in increasing income for the central budget. While the gap between the government’s preliminary estimates and the time-proportional figures of the first few months was significant, analysts now highlight that the difference is swiftly decreasing. It seems that although the tax is said to have an insignificant impact on the health status of both the central budget and Hungarians, people who are willing to consume these products continue to do so at substantially higher prices.

The monthly trends show that events such as the Football European Championship have a tangible effect. In June 2012, the monthly amount drawn in by this tax was HUF 1.9 billion, largely due to the increased consumption of flavored beers, snacks and alcopops. April proved to be another peak month, with revenue in other months averaging HUF 1.54 billion.

If the current trends prove consistent, the gap between the income projected by the government (HUF 20 billion) and the actual figure will be considerably smaller than the market previously expected. Market calculations in the spring topped out at HUF 16 billion, while the current monthly average projected to 12 months adds up to HUF 18.5 billion. The government’s projection proved to be relatively accurate last year, with an estimate of HUF 5 billion against the actual revenue of HUF 4.7 billion.

Analysts, on the other hand, highlight that either way, the amount coming in from this tax has virtually no effect on the country’s overall budget of HUF 6,829 billion.

While consumption trends show no dramatic changes, the only segment that is visibly impacted by the new tax is that of energy drinks. After a drastic drop in H1 2012, however, there are now signs of recovery according to industry experts. The majority of the tax revenue comes from pre-packed sweets, candy bars, salty snacks and soft drinks. ZsB

No solid foundations for building trade

NETA revenue per month since the introduction of the new tax (HUF bln)

Source: Opten/ÉVOSz

Source: NAV

750 hours 10,000 hours 10% 85% 25%

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Financial services transactions driven by rationalization Missing resources, missing plans Virtual reality - Hungarian innovation to change the world?

12-13 14 16-17

Hungary’s new nationalization plans

STATE AGAINST METAL THEFT Prime Minister Viktor Orbán announced last week plans for the government to take over metal recycling operations in a bid to curb theft and illicit trade. Fidesz MP János Pócs said metal purchasing points should be connected to the information network of tax and customs authorities and the police. Like other countries in Central and Eastern Europe, Hungary has suffered from the theft of electric cables and metal

E.ON IN THE SCOPE But the plan is just the latest in a series of the Prime Minister nationalization concepts. One week earlier, the center-right leader said the government would “buy back E.ON from the Germans momentarily”, without specifying whether he meant the German utility’s gas trading and storage units or its broader business in Hungary. His deputy, Tibor Navracsics, said such a move would fit into the government’s plan to put utilities “on a nonprofit basis”. Hungary’s plan to nationalize E.ON’s local units could help Orbán win the election in 2014, said an analyst interviewed by Reuters. ‘The

government wants to have the gas business in its own hands. Once they have that, they can sit down to negotiate cheaper gas tariffs in the new long-term gas deal with the Russians from 2015 onwards, and that can win elections,” Erste’s analyst József Miró told EurActiv. More than 80% of Hungary’s natural gas comes from Russia, and the supply contract with Gazprom will expire in 2015.

E.ON’s Hungarian subsidy is described as “Hungary’s leading energy provider”, supplying 2.5 million domestic gas consumers. Its gas business was purchased from Hungarian energy company MOL in 2005 in a deal then valued at up to €2.2 billion including debt. But conditions became difficult for E.ON since the elections in 2010 as the Orbán-led government froze gas prices for the majority of households and capped the return on capital. E.ON Földgáz Trade Zrt posted an aftertax loss of HUF 606 million (€2 million) in 2011.

PENSION ULTIMATUM Amongst its first nationalization steps, the government gave an ultimatum to Hungarian citizens to move private pension fund assets back to the state system or lose the state pension. In a desperate attempt to artificially reduce the public deficit and debt under the Maastricht criteria, the government drove more than HUF 3,000 billion of privately managed pension assets under state control.

People who opted against returning to the state system stood to lose 70% of their pension claim, although this was later dropped by the government. But after losing 97% of clients, most private pensions funds were forced out of business anyway.

MOL SHARES BOUGHT BACK As part of its moves to draw the domestic energy sector into its sphere of competence, the Hungarian government bought back 21.2% of MOL from Russian oil company Surgutneftegas, paying €1.88 billion for the package. Under the purchase agreement, Hungary will pay €1.88 bil-

lion (then worth HUF 505 billion) to the Russian company, which corresponds to the average share price recorded during the last three months prior to the agreement. The transaction was financed partly from the HUF 3,000 billion gained from the privately managed pension assets.

SMALLER TARGETS This was followed by the acquisition of 73.84% of shares in the Győr-based automotive parts maker Rába and the Budapest City Council buying out a 25% stake in its waterworks from French firm Suez and Germany’s RWE. “We bought back MOL shares from the Russians, a part of the waterworks from the French, and very soon we will buy E.ON from the Germans,” news agency MTI cited the Prime Minister as saying. “We bought back Rába from the Malaysians and Fradi from the English,” he added.

The latter is a reference to Ferencváros, one of Budapest’s oldest and most popular football clubs.

But buying back private companies could prove a costly deal at a time when Hungary has been struggling to keep its budget deficit low and wants to secure a credit line (a bailout in reality) from the International Monetary Fund and the European Union. According to Texas-based global intelligence company Stratfor, the nationalization of E.ON alone is expected to cost nearly €2 billion. Several experts have pointed out that Hungary might have to use the last of its 2009 bailout reserves for the deal. EU energy liberalization legislation requires member states to maintain healthy market competition in their energy sectors in order to prevent state monopolies. Romania, for example, is privatizing a significant portion of its national gas company Transgaz in order to comply with EU membership stipulations. Hungary is heading in the opposite direction, which could further strain the already complicated relationship between Budapest and Brussels, Stratfor notes. ■

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H-1051 Budapest, Vörösmarty tér 4.

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parts used in infrastructure, which are sold as scrap metal to private companies.

The announcement caused a huge uproar amongst licensed metal dealers, who instead expect results against illegal metal trading through the enforcement of existing laws and the elimination of illegal settlements.

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Hungary’s plans to partly nationalize sectors of its economy have raised eyebrows, as the costs can jeopardize keeping the budget deficit at levels the European Union and the International Money Fund would like to see.

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Looking for new solutions SENIOR ASSOCIATE GIDE LOYRETTE NOUEL BUDAPEST

LOCAL PARTNER GIDE LOYRETTE NOUEL BUDAPEST

The crisis seems not to be temporary, and nothing will ever be the same as it was before 2008, say Dr. Eszter Kamocsay-Berta, Local Partner and Dr. Ákos Kovách, Senior Associate of Gide Loyrette Nouel Budapest. According to the legal experts it is a whole new skill set, and also a whole new mindset that is needed to best serve today’s clients under the new circumstances in a rather volatile and constantly changing economic environment.

We have kept hearing about the economic slowdown for the last four years, but one might think that the growing turmoil is a great source of new assignments for law firms.

Bankruptcies, the concentration on certain markets, with major players acquiring their smaller competitors all create room for an increasing number of M&A transactions. ÁK: True, there are certain specific cases, when trouble means work for law firms, but in the current situation it is definitely not a growing number of transactions that characterizes the market. In fact, what we see in today’s environment is that the volume of M&A transactions has plunged, partly due to companies running out of financial resources, partly because the lessons of 2008 force everybody to steer clear of unnecessary risk. There is, however, increased activity in the regulatory segment, where companies are struggling to cope with the rapidly changing legal environment. Gide Loyrette Nouel opened its Budapest office in 1993, almost two decades ago, so we can say that we have seen a thing or two in the region. This new situation, however, triggers completely new challenges, and we have to take a different approach to provide our clients with the solutions they need.

EKB: What we see since 2008 is not an ordinary crisis that we will simply have to wait out. It is rather a complete shift of paradigms, and whether we like it or not, we will have to face the fact that there is no way back to “business as usual”.

Some three years ago Gide Loyrette Nouel’s Budapest office was fully restructured, partly in answer to these changes.

It was decided to reinforce the existing practice groups and broaden our client base. This new structure also reflects the different market tendencies and the redefined needs of our clients since the financial shock of 2008.

While we tend to talk about the crisis as a homogenous period, this four-year time is actually more complex than that. Just like we saw a slight recovery in mid-2009,

and a second decline in 2010, by now we see that companies have practically run out of all of their resources and reserves.

It is, therefore, obvious that they completely abandon their previous policies in search of new solutions. I strongly think that this approach is here to stay.

Are there differences amongst specific sectors in terms of slowdown and the volume of M&A activity that still exists?

EKB: Sure, there are. The real estate segment is still at rock bottom, and despite optimistic voices there are only slight signs of recovery. There is some movement in the energy industry, although with the disappearing of the marketbased financing primarily it is Statefinanced projects that keep soldiering on. The chemical segment, the car industry and the food sector also show some activity whereas some signs of regression may already be perceived, especially in the food industry On the other hand, we have to highlight that there are still a few standalone projects that are independent from the market tendencies. An example could be the green field investment of the Danish toy manufacturer LEGO, in a new factory in Nyíregyháza. The key to the basic changes is that among the continuously changing legal environment, it becomes difficult for companies to work out and implement their business plan. As long as macroeconomic necessities keep overwriting the demand for legal certainty, these risks, i.e. risks arising from the change of law, are almost impossible to hedge.

What are the most important new challenges this new situation means for law firms?

EKB: In today’s economic environment, we always have to go the extra mile and provide our clients with more than just answers to their questions. We have to gain a full understanding of the business concept, identify and assess possible risks attached to their business objectives and be able to give them possible solutions to their problems.

We talked about Hungary’s regulatory environment, but Gide Loyrette Nouel’s Budapest office also operates as a regional center. The former Yugoslavian countries have a reputation for having a volatile legal system. How can you help your clients under those circumstances?

EKB: True, our Budapest office is a regional hub, and the Hungarian market aside, we assist and advise our clients on their projects in the former Yugoslavian countries, most prominently in Serbia, where we are in exclusive cooperation with a law firm that used to be Gide’s Belgrade office. We have to see that this is an emerging region, with lots of possibilities opening up just now, but neither the economic nor the legal environment are mature enough to make these markets safe enough for our clients.

Our main task here is to fully structure our clients’ needs, and provide them with fullfledged solutions, including quality control.

It’s important to see that the legal systems of these countries are simply not developed enough to accommodate a complex transaction by the standards of our clients. ÁK: These former Yugoslavian markets not only provide us with a significant amount of work, but they are also complex and complicated enough; however, we can handle them as one single package based on these countries’ cultural and geographic proximity.

tractual documentation. When this happens, we obviously need to closely cooperate with our local partners, because on top of the general professional knowledge, we also have to make sure that the given contract is both secure and enforceable in the specific country’s legal environment.

Can you give us an example, where wellprepared contractual documentation can make up for gaps that exist within the legal regulations? ÁK: Without entering into details, we had a recent acquisition assignment in Bosnia.

The buyer first decided to entrust a local legal firm to assist them throughout the deal, but they soon got the answer from the local adviser that the legal scheme they wanted to implement was not possible under Bosnian law. It was at this point that we got involved in the deal, and with long and somewhat tiresome negotiations, we managed to close the deal in a way that satisfied the needs of every participant. This case was a good indication of the fact that, with our extensive experience and becoming a regional knowledge center in the past years, we are able to provide our clients with a unique level of services. While this means an extra cost for clients, the gains are even bigger, and we find that they are happy to pay for the legal security and quality we provide them with.

Do these different circumstances mean different approaches and strategies on your clients’ part?

EKB: It is generally perceived that there is a certain line that divides Central Eastern Europe, as the northern part of the region from the emerging markets, that mostly consist of the Balkan countries. While there might be problems on both sides, in terms of predictability and the maturity of the legal system, the two regions are still a world apart.

The Republic of Serbia or other former Yugoslavian countries are still far from being in the same league as those states who have been members of the EU for almost a decade now.

It is also natural that our clients have very different expectations of these markets, than they do for Hungary or Czech Republic, especially if they already have well-established business operations in these latter countries.

These different expectations include accepting a higher risk factor, obviously in the hope of a bigger profit.

What makes our services unique is that, we have a complex view and extensive knowledge of the entire region, including former Yugoslavian countries.

Gide Loyrette Nouel is known to be an active player when it comes to transactions in the energy industry. What are the specific difficulties and characteristic issues of this field?

EKB: The issues of legal certainty and the drawbacks of a volatile legal environment are tangible in this industry. Since energyrelated projects are always planned as long-term investments, to plan ahead for at least a 15-25 years’ timeframe is a huge issue in this sector. Another problem is the disappearing of market-based financing. The majority of the projects that are ongoing are funded by the State.

And while we have a lot to do to meet our EU undertaking of increasing the rate of green energy production to 20% by 2020, and the minimizing of energy-dependency is still a priority, sufficient progress will still have to be boosted.

Financial difficulties aside, we also see a tendency of the government’s intentions, to play a more central role in this field.

While these strategic moves might not have a direct impact on minor projects, still they have to be factored in, when analyzing the trends of this industry.

Are the issues you as a law firm have to tackle in these countries of a different nature to those in Hungary?

EKB: Definitely, they are. As I said, the legal systems of these countries are not as mature as those of Hungary or the Czech Republic. As a consequence, we often have to face certain situations or scenarios which are simply not regulated by the law, so we have to deal with such issues in the con-

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Dr. Ákos Dr. Eszter Kovách Kamocsay-Berta

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Financial services transactions driven by As indicated by M&A transactions including CEE-related deals in the first quarter of this year, Europe’s financial sector is finally showing signs of activity. Companies in the financial sector based in Europe were engaged in deals of the same value in Q1 as they were a year ago – however, if one looks at the motives, it turns out that they mostly derive from efforts to rationalize operations.

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The total disclosed value of European financial services’ M&A announced during the first quarter of 2012 was €9.7 billion. Although this represents a 40% decline from the prior quarter’s figure of €16.3 billion, it is only a marginal fall of 1% from the comparative figure of €9.8 billion recorded in the first quarter of 2011.

In spite of encouraging news in early summer, such as the cooperation agreement between Gránitbank and Coop Gazdasági Csoport – the two companies agreed to acquire ownership in each other to a value of HUF 100 million each – and OTP Bank’s announcement about further Serbian acquisitions, there were still

fewer transactions in the first quarter of 2012 than before the crisis, an analysis by PwC on European financial services M&As reveals.

At a regional level, one of the largest deals last year was when Russia’s Sberbank acquired the Eastern European operations of Volksbank, including its Hungarian unit.

Also, there was news in February about France’s Credit Agricole pulling out of several markets, Hungary among them.

MKB Bank also sold its Romanian subsidiary Romexterra to United States-based fund manager PineBridge in April and Aviva disposed its assets in Czech Republic, Romania and Hungary.

The total value of insurance deals with disclosed values also fell during the first quarter of 2012, in contrast to the sector’s busy previous quarter, according to the PwC study. One of the quarter’s most notable insurance deals was KBC’s sale of Polish insurer Warta for €770 million to Talanx of Germany and its minority partner Meiji Yasuda of Japan.

This interesting transaction illustrates the attractions of Eastern European growth to insurers from more mature markets in Western Europe and Asia. Several other international groups were reported to have expressed an interest in Warta.

TWO MAIN DRIVERS There are two main trends that can be spotted in mergers and acquisitions in the financial sector, says Ervin Apáthy, PwC Hungary’s M&A direc-

tor, commenting on the company’s analysis.

“On one hand, companies that received life-saving capital injections earlier need to carry out restructuring and asset sale obligations that were the conditions of the bailout package,” Apáthy explains. “On the other hand, there are the rationalization efforts dictated by large Western European banks – putting it less loftily, this basically means the cutback or sale of loss-making or less profitable business units. This includes simplifying the operations of parent banks, too.”

But as part of the restructuring scenarios, financial institutions in many cases get rid of non-core business units or assets in order to strengthen capital ratios, even though they were making some profit. The reason for such an exit is usually a smaller-than-expected market share in a certain segment, or, occasionally, a certain market is seen as carrying too many risks, Apáthy adds.

FEWER BUT LARGER DEALS IN EUROPE At face value, it is encouraging that, despite the decline, the quarter’s total of €9.7 billion still exceeded the figures of €6.7 billion and €5 billion recorded in the second and third quarters of 2011, respectively. However, the total disclosed value for the first quarter of 2012 is distorted by one very large deal – Royal Bank of Scotland’s €5.8 billion sale of RBS Aviation Capital to Sumitomo Mitsui. Without this transaction, the first quarter of 2012 would have

seen a total value of just €3.9 billion for European financial services’ M&A – one of the weakest quarterly results in nine years of data.

Quarter-on-quarter, the main driver of weaker deal values and volumes was a comparative absence of M&A involving banking targets. The total value of banking deals with disclosed values was €1.9 billion, compared with an average figure of €6.6 billion for the previous eight quarters.

Furthermore, most of this €1.9 billion was due to two deals, CaixaBank’s merger with local counterpart Banca Civica, valued at €977 million, and KBC’s sale of Polish banking unit Kredyt Bank to Santander’s local subsidiary Bank Zachodni in a share exchange valued at €790 million.

Given that quarterly figures in banking transactions are usually much higher than this amount, the movements that can be spotted in this segment are utterly cautious, the PwC study notes. The firm says this is an understandable response to ongoing valuation difficulties, which in turn reflect factors such as financial market volatility, an uncertain economic outlook and the limited availability of debt finance.

PRIVATE EQUITY LOOKS FOR NEW STRATEGIES Private equity firms continue to play a modest but influential role in European financial services’ M&A, particularly in habitual areas of interest such as wealth management and transaction processing. However, limited access to debt finances significantly reduced

Source: PwC analysis of mergermarket, Reuters and Dealogic data

NUMBER OF DEALS

DEAL VALUE (€ BLN)

EUROPEAN FS M&A BY DISCLOSED VALUE (€ BLN) AND NUMBER OF DEALS, (Q1 2010 - Q1 2012)

the possibilities of PE firms, the PwC study observes. But in spite of the fact that their activity has been tempered by uncertainty over the sovereign debt crisis since last year, deal making has continued, especially at the middle and lower end of the value spectrum. While access to debt finance is more constrained than a year ago, many PE

funds are sitting on significant pools of uninvested capital accumulated in the leadup to the financial crisis.

PE investors have always been reluctant to take on the costs and complexities of compliance or to tie up funds and curtail yields through high capital charges.

Within financial services, less capital- and compliance-

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rationalization ther opportunities for PE investors come from the desire of governments to promote greater competition and encourage new entrants into the financial services market.

heavy service-based businesses with strong and predictable cash flows have, as a result, tended to attract the most interest from PE buyers. This includes companies with recurring fee income such as asset managers and fund administrators. It also includes intermediary businesses such as IFAs and insurance brokers, or companies

servicing underwriters such as claims managers and loss adjusters. In contrast, balance sheet-intensive businesses such as banks, insurers and reinsurers, which are subject to tighter regulation, capital charges, business model complexity, inherent leverage and long-term risks, have tended to be less attractive to PE buyers. According to PwC, fur-

MODEST RECOVERY AHEAD Although PwC emphasizes the current unpredictability of European financial services M&A, the study predicts a modest rise on the market. Barring any major economic shocks, there are several reasons to hope for at least a modest improvement in deal activity in the near future, the company says. The study identifies specific prospects for upcoming M&A activity: these include Deutsche Bank’s anticipated disposal of its alternative asset management business RREEF, the possible sale of the LME, and the ongoing battle for control of Italian insurer Fondiaria. Also, several European financial services markets have particular potential to generate deals. The Spanish banking sector is among the most obvious, but Italian banks, under pressure from ratings agencies, also continue to offer scope for consolidation.

In general, PwC expects to see a rebound from the exceptionally low level of banking M&A in the first quarter of 2012. “We also question how long the decline in small- and medium-sized transactions can continue, especially considering the gradual improvements in financing conditions.

At this point in the cycle, an improvement in the volume of deals could be a more significant indicator of a recovery in European financial services’ M&A than an uptick in deal values,” the study reads.

As for the foreseeable future in Hungary, current tendencies are expected to continue, says Apáthy.

“In a basically depressed economic environment, we expect to see deals deriving from the rationalization efforts of those large international banks that dominate the market,” he concludes. “Several foreign banks are expected to give up their positions in Hungary, but this also means great expansion opportunities for those competitors who have already taken the necessary steps earlier or weathered the crisis in a better condition.” ■ This article is based on PwC’s Sharing deal insight report issued in May 2012

[ EXPERT OPINION ]

Cross Border Mergers: Striving for a simplified corporate structure As M&A lawyers craving for the recovery of the transaction market, it is always exciting to come across challenging projects. Cross-border mergers certainly qualify as such. The process develops in parallel in two jurisdictions until the actual merger takes place which may well generate collisions between the different legal regimes. Predictable challenges are heightened by contingent difficulties that easily increase costs. This applies even to intra-Community transactions, despite the EU Directive 2005/56/EC on cross-border mergers.

Dr. Andrea Dr. Péter Jádi Németh Garancsi LL.M. (HARVARD), MANAGING PARTNER bpv | JÁDI NÉMETH ATTORNEYS AT LAW

LL.M. (CEU), SENIOR ASSOCIATE bpv | JÁDI NÉMETH ATTORNEYS AT LAW

X-borders are mainly exploited as an intra-group restructuring tool and Hungary is more of an “outbound” country in terms that usually it is the Hungarian company absorbing into a foreign one, whereas the local business activity is sustained via a newly set-up branch office as replacement vehicle. The financial sector was particularly active in such restructurings over the last few years (e.g. ING, Citibank, Deutsche Bank).

gap given here. This follows that on the legal effective date the branch office will stand empty handed, absent of any Hungarian court document to substantiate legal succession toward the licensing authorities, for instance tax and customs, whilst the already merged affiliate should no longer do any business from an accountancy perspective, although even a one-day breakdown can be crucial businesswise.

A key issue is the preservation of business flow so that the new branch office can forthwith take over commercial operation from the x-merging entity. Still, in Hungary it is never as easy as it seems. Let’s take the differentiation between the economical and legal effective dates of the merger (EED vs LED). In most EU jurisdictions it is possible to stipulate a different date for economic effectiveness of the merger, from which point the migrating company is deemed to make transactions on the account of the absorbing one. The EU Directive follows this concept, too. The Hungarian law, however, does not recognize the economical effectiveness theory. Strictly from a legal viewpoint it may be feasible to disregard the EED of the absorbing legal regime, as Hungarian company law does not attribute any effect thereto, whilst the counterparty’s lawyers can act taking into account the EED. Given, however, that in the course of the transaction the participant companies must furnish two-three different financial statements each, not to mention ongoing business operations, the accountants on both sides of the border must pay due attention to avoid discrepancies.

Also, there may be tax-driven or labor related considerations that require the use of a shell company into which the affiliate first merges cross-border and which on the same day gets absorbed into the ultimate acquirer.

Such duplex mergers represents additional complexity; a practical issue is that the resolution of the Hungarian court cancelling the transferring company indicates only the first successor, which, however, had also ceased to exist at the same legal moment. Therefore the succession chain vis-à-vis the terminated affiliate and the new branch office will not be apparent from the Hungarian court documents, which could be problematic when arguing legal succession before authorities, account holder banks, even business partners.

Another topic is the parallel registration acts of the involved national courts. If conditions are met, the Hungarian registry court issues a premerger certificate manifesting legal compliance. This is followed by the registration act of the host country’s court, which normally constitutes the legal effectiveness of the merger. Furthermore, the transferring company has to be cancelled from the Hungarian commercial register, which requires official notification from the host court. Practically, however, the Hungarian commercial register will still enlist the merging company until the foreign court documents are delivered and examined, which can easily take weeks. The result is that the transferring entity remains virtually existent in Hungary yet, by virtue of the foreign court’s act, it has ceased to exist already. This can cause a handful of problems in terms of business continuity between the merging subsidiary and the Hungarian branch office. Any activities subject to administrative authorization require the reissuance of underlying licenses. The sector-specific inferior provisions do not at all regulate x-border mergers and the inherent time

The list could easily continue. All in all, the efficiency of transaction advisors depends on how well they can anticipate foreseeable hardships and how readily overcome incidental ones. As they are likely to have a fair share of both when it comes to x-borders, successful management of the transaction requires special care, especially when undisturbed business continuity is at stake.

Dr. Andrea Jádi Németh received her JD “summa cum laude” from the ELTE School of Law in Budapest and her LL.M., with a concentration in International Finance, Corporate Finance and Corporate Law, from Harvard University at the Faculty of Law in Cambridge (MA), USA. Elected President at the Hungarian Harvard Club, a forum for alumni and friends of Harvard University who reside in Hungary, she is involved in organizing recruitment events at high schools to push students towards the “unique Harvard experience”.

A mother of two, Jádi Németh was elected Second VicePresident of AmCham last year, and is the returning Hungarian Woman of Excellence Award jury chair.

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Docler Investments provides €1 mln to CE On-Demand Hungarian venture capital investor Docler Investments has signed an agreement to provide a €1 million mezzanine finance facility to CE On-Demand, the fast-growing cloud delivery company based in Budapest.

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CE On-Demand has recently been cited among the seven leading cloud enablers for telecom operators worldwide by industry research firm Informa Telecoms & Media. The company creates cloud providers by assisting telcos, system integrators and end customers in realizing and implementing their cloud strategies.

Since its launch in 2008, CE On-Demand has supported more than 25 partners, primarily tier one telecommunication service providers, in deploying their cloud strategy.

“Docler Investments has been looking for innovative businesses with considerable growth potential and an international track record. CE On-Demand possesses all of these qualities and a valid business plan for the future. This financing commitment is the first step towards a long-term relationship with this extraordinary company,” said Zoltán Bernáth, managing director of Docler Investments Ltd.

Docler Investments is the second institutional investment partner of CE On-Demand after venture capital fund DBH’s investment last year.

“As an investment fund, DBH searches for, analyzes, and invests into future top performers in the market who have the potential to become global players in their industries,” said Sándor Erdei, chairman-CEO of DBH Investments.

“CE On-Demand is a company that is on track to be considered a role model in this respect. We expect much from them and so far they have delivered, so we are looking forward to our collaboration with Docler Investments in planting the seeds of future growth at CE On-Demand.”

CE On-Demand plans to finance the company’s services portfolio development and look for further geographical expansion. “We see increasing demand in the market for cloud brokerage that we can best capitalize on by enhancing our services portfolio to offer specialist and localized services to our customers,” said Viktor Kovács, founder and CCO of CE On-Demand.

“With the extended portfolio, we aim to give our partners the ability to build ecosystems that connect their customers to a wide variety of solutions and enable them to take advantage of the business benefits of the cloud.

This financing facility will also help CE On-Demand expand to the Middle East, North Africa and Asia, emerging markets with high cloud needs.” ■

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Missing resources, missing plans The number of new enterprise resource planning (ERP) investments is plummeting, with the majority of companies trying to get the most out of what they already have, say industry experts. While there are a few promising trends around, many Hungarian companies are still struggling to find the optimal cost-benefit ratio using what today’s technology has to offer.

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“It was a little less than ten years ago, in 2003, when ERP software first became a huge hype in Hungary,” says Tamás Giller, division manager of DLM Solutions Kft, and the author of Hungary’s only blog dedicated to ERP and CRM applications. “Back then, everyone was more than excited to see a system that would incorporate numerous previously independent processes, many of which were still paper-based, into one single application. Companies bought these software products like there was no tomorrow, and the first sales representative who got there had a pretty good chance of closing the deal.”

Things have, of course, changed drastically in recent years, and by now the industry has practically come to a standstill. “The number of new ERP investments is very low,” says Attila Biber, application director at Oracle Hungary, adding “the activity that still remains is the upgrading and extending of applications already in use”. According to him, companies usually focus on modules with easily quantifiable added value like sales, production or logistics, and

short term ROI is of the highest priority.

“Decision-makers nowadays require a much more solid business case for any sort of ERP project than a few years ago. ERP investments are usually not made out of necessity, but as a result of long-term strategies. Since most companies find it difficult to plan too far ahead, most of them will turn down any initiative regarding a new project in this area unless there is a really good reason not to do so,” he explains.

COMPETITION STILL STRONG Balázs Ablonczy, MD of SAP Hungary Kft, agrees.

“At the beginning of the crisis in 2008, most companies delayed or completely shut down their ongoing ERP projects, but after a while ever more IT investments, the short term ROIs of which were well-founded and relatively risk-free, were greenlit,” Ablonczy says. “In many cases, we also saw a change in the decision-making process: financial directors or even CEOs began to take part in strategic deci-

sions on major IT investments.” Ablonczy believes that this change reflects technology becoming a necessary component of the core business to implement its basic strategy, rather than the supporting service it used to be a few years ago.

While the Hungarian ERP market is still dominated by the three major suppliers, SAP, Oracle and Microsoft (“Each one of us can find the appropriate statistics to prove that we are the market leaders,” says Attila Biber of Oracle), competition amongst Hungarian providers in the SME sector is still strong. Most of these providers do not try to cover the entire market, however, but rather specialize in certain sectors.

“The main priorities in the SME sector are that the ERP application has to be completely compatible with the industry, it has to be easy to implement and inexpensive to maintain,” says Tamás Giller. He says that clients do not really have high standards when it comes to evaluating their possibilities.

“The system, obviously, has

to be completely in line with the current legal regulations, but other than that, SMEs mainly focus on their costs and whether the software will boost their sales potential,” he says.

Biber, on the other hand, highlights a very interesting trend he finds characteristic of Hungarian clients.

“While most international users try to make the most of what the application already has, Hungarian clients tend to insist on being unique and try to insert as many custom-developed elements into these systems as possible.” And while these developments are rather expensive, the service providers who implement the software more often than not cover the costs in an effort to keep customers, given the difficult market conditions.

Making the most of what these applications readily have to offer is, indeed, a sensitive point, Giller says. According to him, one of the main problems is that while the crisis resulted in an increase of staff turnover, training is not considered a priority when it comes to using these complex software products. “After a short while, the employee who is using the software has no clue what these systems are capable of. They are sometimes surprised to discover a functionality that has been present in every single ERP application for ten years,” he says.

“The ERP penetration of Hungarian companies is approaching that of Western Europe. However, the gap is still substantial, particularly in the SME segment, among minor companies,” Ablonczy concludes.

A way to overcome this difference could be the growing popularity of cloud-based software as a service (SaaS) solutions where, instead of implementing seemingly expensive software, companies can use these services for an affordable monthly fee. But until companies see a clear indication of a fast return on their investments, a radical change is unlikely to happen anytime soon. ■

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A field of lifelong learning A few years ago, all the job market needed was engineers, while universities kept churning out economists, lawyers, communication specialists and teachers. Although things have improved slightly over recent years, a real breakthrough is still to happen, and there a long way to go until tertiary education will be able to fulfill the increasing demands for highly-educated IT professionals.

“The excellent quality of the Hungarian higher education in the IT sector presents Hungarian employers with a really difficult situation,” says Dea Frankó-Csuba, marketing director of the internationally renowned information management company Kürt Zrt. The director also looks after Kürt Akadémia, the IT and business school funded by the company.

two to adapt to market conditions and become an engineer of full value,” says Charaf.

“We simply do not have that time anymore. Our curriculum needs to find a delicate balance between a really massive background in theoretical sciences and readily usable, up-to-date, practical knowledge so that our graduates can start their careers full-force from the first moment on.”

DIVERSIFY AND SPECIALIZE Becoming an instantly useful developer, however, does not mean that the story ends there.

Since technologies as well as market trends are changing rapidly, this area is truly a field of lifelong learning.

Kürt Akadémia, for example, specializes in extending and broadening the knowledge and expertise of already wellestablished professionals. “Kürt Zrt has been a key player in the field of information security for more than 20 years, and we

found that the knowledge and experience we accumulated in the area was worth sharing,” says Frankó-Csuba. “And indeed, we found that the best engineers are very openminded and also demanding towards themselves to continuously look for new things they can learn. One of our most popular courses, for example, is our certified ethical hacker program, which is designed particularly for highly educated engineers.”

A major market trend, industry experts agree, is the diversification and specialization of various courses. While company-run, softwarespecific courses are almost always attended by specialists who are running these applications on an operational level, overlaps are inevitable, and these courses are sometimes attended by senior professionals or even executives, and vice versa: those who only require basic skills for their everyday jobs some-

times enroll in courses that provide them with a lot more professional knowledge than would be necessary.

“When we talk about great IT professionals, we mean university degree and up,” says Charaf, adding that there exists a market demand for lowerlevel expertise as well. “There are efforts to enroll our university dropouts in courses that would still make them good professionals, if not engineers,” he explains, saying that no one in this field is likely to end up on the streets.

“Differentiation of ITrelated studies is a crucially important and highly favorable trend,” agrees FrankóCsuba. “Information technology is a huge area already, and this is the only way to avoid the situation when people with the same knowledge flood the job market, making it impossible both for them to make a living and for companies to find the right experts,” she concludes. ZsB

SAP solutions at your convenience The biggest business-IT event of the year is approaching – the SAP Forum Hungary expects to see nearly 700 visitors at its traditional venue in Tihany on the weekend of September 9-11.

“If the only thing I consider is the number of requests hitting my mailbox every day, it will still take years before we are be able to meet the market’s demands,” exclaims Hassan Charaf, associate professor at the Budapest University of Technology and Economics (BME). “But even worse than that, demand is increasing at a higher pace than our capacity to educate IT professionals,” he claims.

A BME graduate is of real value to both Hungarian and international employers. “Of the 12 institutions where IT engineering education exists in Hungary, the BME’s degree is valued highest by the market,” insists Györgyi Dallos, head of PR at BME’s Fac-

ulty of Electrical Engineering and IT. According to her, the average time a BME graduate will spend looking for a job is some 2.8 months, but the majority of its students can expect to be employed well before passing their final exams. If you combine these figures with the fact that, in 2012, some 620 students will be enrolled in BME’s IT engineering BSc program, you get a somewhat clearer picture of just how big the market demand for good professionals is. According to industry experts, these numbers also show that, although there might be a problem with quantity, the quality of IT higher education in Hungary is still top notch.

According to her, Hungarian companies not only have to face a relative shortage in the output of the country’s IT higher education but also the fact that fresh graduates are extremely popular with international employers. “Some go abroad, others decide to launch their own startups, which is great in itself, but it also means that Hungarian employers need to settle for a small portion of the market’s new professionals,” she says.

While Hungarian universities provide their students with really solid basics, the learning curve of an IT professional can never end with graduation. “A few years ago, when someone left university, he needed at least a year or

The program of the conference is organized around various forums – this way, participants can meet not only theoretic models but also practical solutions. Several case studies will be presented by SAP clients and partners and there will be plenty of opportunities to meet also with developers, consultants, and trainers from the SAP organization. The size of this page wouldn’t allow listing the full program of the conference, but here are a few attention-grabbing examples: how can mobility boost organizational efficiency?; the latest trends in business intelligence; new technologies in client management; how to increase supply chain efficiency.

Several applications will be made available for a trial during the conference and participants can also ask for personal consultations on the spot.

The forum also provides opportunities for networking and fun: participants who arrive from various areas of Hungarian business life will further deepen their relations at the evening parties and lovers of gastronomy will, once again, not be disappointed.

SAP’s training portfolio is also introducing new solutions, training manager Zoltán Korompay told the BBJ. For example, this is where the virtual classroom course, which has been further developed by SAP Hungary, will debut. Participants can join the live course from anywhere in the world thanks to video streaming, even using mobile devices. This concept was first tested in Hungary by the local unit of a multinational company, which stressed that it decreased the cost of training to a fraction of the original while improving interactivity compared to traditional e-courses. Another advantage of this form of training is that students can take part in courses that would not be launched in their country for lack of interest, and it can also be taken in chunks of four hours a day instead of eight. The panel discussion introducing the new method will also be characterized by modern technology: a video conference of experts from Singapore through London to Germany share their experiences on the new form of training. There will also be introduced four new Hungarian-language course materials for end-users, which enable students to manage finance, materials management, sales and distribution modules and gain basic skills in SAP ERP, all this under conditions available to private users and, if required, even in virtual classroom courses.

16 2 BusinessSpecialReport BBJ

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Budapest Business Journal | Sept 07 – Sept 20

Virtual reality - Hungarian innovation to

Q: WHEN YOU FIRST WENT PUBLIC IN THE MEDIA WITH LEO, YOU WERE A LONGHAIRED TEENAGE PROGRAMMER. NOW YOU LOOK MORE LIKE A BUSINESSMAN. HOW DID YOU TAKE TO YOUR INVENTION BECOMING A BUSINESS? A: Now I am OK with it.

When the company kicked off, of course, I had some trying times, but one of the goals all along were to get the business to this stage, where I can devote myself to R&D but already have a proper infrastructure behind me.

Q: AT LEONAR3DO’S INTERNATIONAL DEBUT IN 2005, YOU WON SIX AWARDS AT THE INTEL INTERNATIONAL SCIENCE AND ENGINEERING FAIR, THE INTERNATIONAL FINAL OF THE NATIONAL COMPETITIONS IN THE UNITED STATES. HOW WERE YOU ABLE TO TAKE ADVANTAGE OF THAT SPECTACULAR SUCCESS? A: Such acknowledgements helped me a lot, gaining prestige in the science profession despite my young age, and later I could feel that my personal reputation had a reflection on the company. And, of course, it is always very nice to be appreciated, but these things are not the most important to me. The biggest euphoria for me is not to stand in the spotlight with my hands full of awards but

to figure something out and see it working properly. For example, when our sensors could detect the position of the bird [Leonar3Do’s mouse, the tool used for drawing] for the first time, I was just standing and sweating with all my hair standing on end. Or when I created my first algorithm in 4D! It was amazing to come up with something and realize it by ordering a computer to make things that my brain could not graphically imagine.

Q: IN THE BEGINNING, WERE YOU TEMPTED TO SELL YOUR INNOVATION TO A BIG COMPANY AND FOR A LARGE SUM? A: Several multinationals contacted us, and I am not saying that an acquisition was absolutely impossible. But the interesting thing in Leo’s virtual reality is that it is the integrated innovation of several different inventions, and these technologies appear in different market segments. Some wanted to get our positioning technology, while others were interested in our modeling algorithm, etc. We believe that these technologies, if kept together in one product, are of an exponentially increased value on the market.

› IT’S DEFINITELY

AN AIM TO MAKE...

A HUNGARIAN SUCCESS STORY. BUT THE MOST IMPORTANT THING IS TO MAKE IT A STORY OF SUCCESS AT ALL IN THE FIRST PLACE. Photo: Péter Ákos / MarinArt

3D technology appears in most fields of everyday life, from film animations to medical solutions.

Now the market is on the verge of a big boom with virtual reality solutions expected to become present in the average household.

Leonar3Do, a cutting-edge 3D system developed for personal computers by Dániel Rátai and his team, might take a leading role in this boom. The young innovator, whose product attracted a HUF 400 million investment from PortfoLion in 2011, tells the BBJ how his childhood enthusiasm for technology turned into a promising business, and also shares his vision about how virtual reality will change the world.

Q: HOW COULD A TEENAGE BOY AND HIS FRIENDS DEVELOP THESE THINGS BEFORE COMPANIES WHO SPEND BILLIONS OF DOLLARS ON R&D? A: We were wacky enough, I suppose.

Q: WHAT DO YOU MEAN? A: When I started to develop Leo, I did not even know that there was a thing called virtual reality. I was a high school kid and wanted to draw cars in 3D. That was my motivation. I kept thinking and then I managed to implement a solution practically from peanuts. Later,

CURRICULUM VITAE Dániel Rátai, born in 1985 to a teacher mother and a journalist father, has been obsessed with the idea of drawing in 3D from his very early years. He had to wait until he turned 19 for his dream to come true: at that time, after graduating simultaneously from a high school in Poland and one in Hungary as a private student, he unveiled Leonar3Do, a 3D drawing system that first gained appreciation for the young innovator at Hungary’s 13th National Adolescent Science and Innovation Contest, and very soon after resulted in an international tour of success. Rátai starts every day by swimming in order to prepare for work that now alternates between business management and his all-time-passion, technology R&D.

for example, when we visited the Vienna University of Technology, the guys showed us their virtual reality solution and were very proud that it was built for

€1 million only instead of €2 million, or something like that. And then we put Leo onto the table. It was made of things like straws, Christmas lights and fence wires.

But back to the multinationals. As I see it, many companies fail to establish an environment that really supports creativity, although it is necessary for innovation. If you

2 BusinessSpecialReport 17

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Budapest Business Journal | Sept 07 – Sept 20

change the world? have the feeling that you are not allowed to make mistakes, your imagination cannot be free enough.

Q: LEONAR3DO IS MUCH CHEAPER THAN ANY SIMILAR PRODUCTS. WHAT ARE ITS BIGGEST INNOVATIONS, TECHNOLOGY-WISE? A: One of our competitors in Silicon Valley, for example, uses four cameras for the positioning of the drawing tool. We are able to solve this with three line sensors, which is a much simpler technology since it works with only one line of pixels whereas cameras have a network of pixels. Therefore we include far fewer electronics and, due to the lack of image processing, require much less memory. But these are just some of the reasons. The whole basic concept of the product differs from other virtual reality solutions.

Q: DOES ONE NEED TO HAVE GOOD DRAWING SKILLS TO CREATE COOL THINGS WITH LEO? A: As humans originally visualize things in 3D, I think Leo makes do with even less drawing skills since in this case you do not have to convert your ideas into 2D in order to put it onto a paper.

There was a survey at the University of Fine Arts that showed that following 20 minutes of practice with Leo, people could create sculptures in 3-12 minutes. Even we ourselves were amazed by this data! But what is even more interesting is that artists nowadays are divided into two groups: there are those who use computers for everything and those who follow the traditional path and insist on using real materials without involving any computer technology in the process.

Leo is able to create a bridge between the two groups, as those usually working with digital technologies can start

using their hands for traditional shaping, while those who previously refused to use computers can carry on shaping things with their hands but finally can also benefit from the digital environment, which enables them to modify and save the work as many times as they want or to symmetrically enlarge things, for example. Leo has several functions that exceed the human brain or skills.

Q: AT THE SAME TIME, USING SUCH TECHNOLOGY ALSO CONTRIBUTES TO THE DETERIORATION OF SOME HUMAN SKILLS. A: Of course, but this is happening anyway, and happens in both directions. If I had to light a fire in the forest with a piece of wood and stone, I would probably fail. But, at the same time, I have the skill to get any kind of information in a minute through my mobile phone. When it comes to 3D, a chimpanzee has much better spatial visu-

alization skills than a human, as it has to sense plenty of branches, otherwise it would fall off the tree. As they say, visualization played a major part in the development of the central nervous system. If it is really of that much significance, then the liberalization of our spatial visualization, which our culture has pushed into 2D through drawings and letters, could bring a development of as yet unforeseeable proportions.

Q: DO YOU AND THE COMPANY HAVE ANY ULTIMATE GOALS? A: We created this company to make 3D culture and its effective tool, virtual reality, available to the widest audience. As yet we are too small to reach this final goal, but we are already on the way to secure extra resources and build up a contact network that enables us to sell Leo to a wide range of professional fields.

Q: HOW BIG A BUSINESS POTENTIAL DO YOU SEE IN IT? A: As we are only at the beginning of a long road, and also because it was required by our investors to do it this way, our business plan is very consolidated at the moment, but it is quite promising, even so.

However, the real potential appears – and enormous business value might result – if 3D technology indeed does become as common as we plan. Luckily, it seems that we are quite popular in Silicon Valley and more and more doors open in front of us. So hopefully we can get anywhere.

Q: IS IT IMPORTANT FOR YOU TO KEEP THE COMPANY HUNGARIAN-OWNED IN THE LONG RUN? A: This is a tough question. If we insist on keeping it in Hungarian hands, the company might not be able to take advantage of

all of its potential. At the same time, it is definitely an aim to make Leo a Hungarian success story, not only in goodwill value but also financially. But the most important thing is to make it a story of success at all in the first place.

So I would rather say that this company will never go to someone who, after the acquisition, would send the technology to sleep because this is in their best business interest. This technology might, indeed, have a great impact on the world, so the most important thing is to make it work. Anyway, over the long-term it is also a question whether to divide the company or keep all the functions together. As I see it at the moment, there are plenty of possible scenarios, and the business angle of this story might become as much an innovation as its technological content. ÁV

18 2 BusinessPartnerWatch BBJ

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Budapest Business Journal | Sept 07 – Sept 20

ERP companies RANK

Ranked by total net revenue in 2011

COMPANY WEBSITE

1

ORACLE HUNGARY KFT

2

3

4

5

6

7

8

9

www.oracle.hu

SYNERGON SYSTEMS INTEGRATOR KFT www.sri.hu

HUMANSOFT ELEKTRONIKAI KFT www.humansoft.hu

S&T CONSULTING HUNGARY KFT www.snt.hu

XAPT HUNGARY KFT www.xapt.hu

GRIFFSOFT INFORMATIKAI ZRT www.griffsoft.hu

HOSTLOGIC KFT www.hostlogic.hu

R&R SOFTWARE ZRT www.rrsoftware.hu

ITELLIGENCE HUNGARY KFT www.itelligence.hu

LLP HUNGARY KFT 10 www.llpgroup.hu

LIBRA SOFTWARE ZRT 11 www.mve.hu

MULTISOFT KFT 12 www.multisoft.hu

13

14

EPICOR SOFTWARE HUNGARY KFT www.epicor.com/hungary

PROGEN MÉRNÖKI FEJLESZTŐ ÉS SZOLGÁLTATÓ KFT

MAIN CLIENTS IN 2011

YEAR ESTABLISHED NO. OF FULL-TIME EMPLOYEES ON MAY 1, 2012

OWNERSHIP (%) HUNGARIAN NONHUNGARIAN

TOP LOCAL EXECUTIVE CFO MARKETING DIRECTOR

ADDRESS PHONE FAX EMAIL

»

ERP, CRM, EPM, BI, HCM, industry solutions (retail, transportation, chemical industry, health care, telecommunications, real estate investment, discrete and continuous production)

Alcoa, OTP Group, Telenor, Vodafone, Magyar Telekom, Magyar Államkincstár, Hankook, MAL, FKF, Ibiden Hungary Kft, Rába, NAV, Raiffeisen, Budapest Bank, Unicredit, Aegon, MÁV, Mecsek Fűszért, Hilltop, Tokaj Kereskedőház, Fornetti

1993 220

– Oracle Netherlands B.V (99.40), Oracle Corporation Nominees Ltd (0.60)

Csaba Reményi Balázs Torbágyi –

1095 Budapest, Lechner Ödön fasor 7.

(1) 224-1700 (1) 214-0070 applications_hu@oracle.com

»

»

»

Synergon Informatika Nyrt (100) –

Zoltán Jutasi, Dávid Pap – –

1191 Budapest, Vak Bottyán utca 75/A-C / II. (1) 399-5500 (1) 399-5599 info@sri.hu

7,265

»

Abbyy FINEREADER PRO 10.0 HUN, Ablebits, Acronis Snap Deploy 4 for PC incl. AAP ALP EN I., Adobe, Altium, AutoCAD, Avira, AZP JBM, CA, Checkpoint, CITRIX, CorelDRAW, Crystal, DameWare

EGIS Gyógyszergyár Nyrt, IT Services Hungary Ltd, T-Systems Magyarország Zrt, Wizz Air Hungary Kft, MÁV Zrt, Beruházási és Szolgáltató Egység, Debreceni Egyetem Orvos- és Egészségtudományi Centruma

1989 216

FreeSoft Nyrt (87.5), HS Board Kft (7.5), Zsolt Béla Tóth (7.5) –

András Mezey, Béla Tóth Tamás Koppány Gábor Somlyai

1037 Budapest, Montevideo utca 8.

(1) 270-7600 (1) 270-7679 humansoft@humansoft.hu

5,113

1,483

SAP, INFOR, CAD/CAM

Kereskedelmi és Hitelbank, Deloitte, Magyar Telekom, MOL, UPC, Telenor, Erste Bank, Euronet, Chinoin, CompLex Kiadó, Cemelog, Central European University

1998 94

– Asset Verwaltungsgesellschaft m.b.H (100)

Kálmán Kelemen Sándor Kulcsár –

2040 Budaörs, Kinizsi utca 2/B (1) 371-8000 (1) 371 8001 snt@snt.hu

– New Frontier Internationa GmbH (51), Minorca Investment S.A (12.25), Rockton Investment S.A (36.75)

Zsolt Ambrus – –

1118 Budapest, Rétköz utca 7.

(1) 889-2900 (1) 889-2957 info@xapt.hu

Főnix IT Consulting (60.50), András Kohajda (30.35), Tamás Tóth (8.95) –

György Szajbély István Bokor Krisztián Walter

6723 Szeged, Felső–Tisza part 31–34.

(1) 450-2200 (1) 239-0056 info@griffsoft.hu

Individuals (72.01), Domestic company (20.38) Foreign company (7.61)

Péter Fárizs, Zoltán Görbics Csaba Angelmayer –

1134 Budapest, Váci út 49.

(1) 237-1730 (1) 350-4113 info@hostlogic.hu

NET REVENUE FROM ERP SOFTWARE SALES (HUF MLN) IN 2011

SOFTWARE TYPES DISTRIBUTED IN 2011

16,238

12,108

TOTAL NET REVENUE (HUF MLN) IN 2011

2,220

1,932

1,454

1,388

870

829

824

814

2,220

1,712

www.ifsworld.com

DISYS HUNGARY KFT 16 www.disys.com

17

LLP DYNAMICS HUNGARY KFT www.llpdynamics.hu

»

Microsoft Dynamics AX, NAV, CRM

»

2000 88

Forrás-SQL

Interior Ministry, Central Office for Administrative and Electronic Public Services, Lombard Lízing Zrt, Governmental Informational-Technology Development Agency, National Office for the Judiciary

» 106

»

»

» »

ERP, BSS, CRM, BI-EPM, ESB

Central-Drinks, GYŐR-SZOL, Heineken, Hétforrás, Invitel, GIRO, Pannon-Víz

1991 71

Individuals (100) –

Csaba Rozenberszki Ilona Rónyainé Rétai Zsolt Rozenberszki

1038 Budapest, Ráby Mátyás utca 7.

(1) 436-7850 (1) 436-7851 info@rrsoftware.hu

690

SAP, SAP Business one

Audi Hungaria Motor Kft, Kienle+Spiess Hungary Kft, Zwack Unicum Nyrt, Sanyo Hungary Kft, Poppe+Potthoff Hungaryi Kft, Sanatmetal Kft

1994 31

– ItelligenceInternational Business Service Holding GmbH (100)

Gábor Turner Zsuzsanna Éliás Attila Énekes

1138 Budapest, Váci út 141.

(1) 452-3800 (1) 452-3839 info@itelligence.hu

829

Infor10 SunSystems, Infor10 BI and CPM, Infor10 EAM, ION, systems@work, CRM

HBO, KPMG, GlaxoSmithKline

1996 16

– LLP Praha s.r.o (100)

Zita Holló Brigitta Paul –

1138 Budapest, Révész utca 27–29.

(1) 412-2400 (1) 412-2401 hucontact@llpgroup.com

Volán Elektronika Zrt (99), Carolinainvest Kft (1) –

Kálmán Faur – Ljiljana Filipovski

1113 Budapest, Karolina út 65.

(1) 372-3333 (1) 209-1477 info@mve.hu

Individuals (100) –

Gábor Kelemen Tamás Kelemen Kata Molnár

1112 Budapest, Kőérberki út 36.

(1) 310-1492 (1) 310-1497 sales@multisoft.hu

– Scala Ece Ltd, Cyprus (100)

László Czékmány László Czékmány Johanna Both

1133 Budapest, Váci út 76. VI. Tower / 2 (1) 452-7600 (1) 452-7610 info.hungary@epicor.com

»

1,360

»

»

»

366

Microsoft Dynamics NAV, MobileNAV, Microsoft Dynamics CRM, CAS, CRM, Incadea, AutoVHC

KA-VOSZ, Pannonia Ethanol, Sodexo, Ecomotive

2006

»

» 57

1993

670

»

»

»

659

495

sERPa ERP system, Nagy Machinátor management system, SAP Business One

Bankár Holding Zrt, Graphit Kft, Semilab Zrt, Miller Telecom Kft, Logmaster Kft, PR Telecom Zrt

1992 46

Progen Holding Zrt (100) –

Sándor Komáromi Gizella Koncz Szabó Éva Wernitzer

1118 Budapest, Homonna utca 8/A (1) 481-9000 (1) 481-9001 info@progen.hu

»

IFS applications

Állami Nyomda Nyrt, Szentkirályi Ásványvíz Kft, HAJDU Group, Budapest Airport Zrt, Nolato Magyarország Kft, Medikémia Zrt

2000 30

– IFS WORLD AB, IFS CEE (100)

Zsolt Weiszbart – Gábor Halász

1132 Budapest, Váci út 22–24.

(1) 236-3700 (1) 236-3701 info@ifshu.com

425

425

Enterprise Application Suite, SAP, OracleMS Dynamics, Peoplesoft, Siebel

Exxon, E.ON

2008 3

– Digital Intelligence Systems Corporation (100)

Ahmed Mahfuz Ahmed Mahfuz Ahmar Abbas

1054 Budapest, Szabadság tér 7.

Bank Center Citibank (1) 474-8128 (1) 474-8181 WashingtonDC@disys.com

366

366

Microsoft Dynamics NAV, AX, CRM

Process Solutions, Halton, TataSteel Hungary, Royal Canin, Snowfox, Amplifon, Gulliver, Schmitz Cargobull

– Dynamics Holdings s.r.o. (»)

Andrtás Czermák Alinka Várhegyi Attila Nagy

1138 Budapest, Révész utca 27–29.

(1) 412-2400 (1) 412-2401 hucontact@llpdynamics.hu

www.progen.hu

IFS HUNGARY KFT 15

1994

563

»

2011

»

2 BusinessPartnerWatch 19

BBJ

WWW.BBJ.HU

RANK

Budapest Business Journal | Sept 07 – Sept 20

TOTAL NET REVENUE (HUF MLN) IN 2011

COMPANY WEBSITE

E-BEST CONSULTING KFT 18

255

www.ebest.hu

MULTI INFORMATIKAI KFT 19 www.multi.hu

20

SZÁMADÓ KFT www.szamado.hu

BMS INFORMATIKAI SZOLGÁLTATÓ ÉS 21 TANÁCSADÓ KFT

OWNERSHIP (%) HUNGARIAN NONHUNGARIAN

TOP LOCAL EXECUTIVE CFO MARKETING DIRECTOR

ADDRESS PHONE FAX EMAIL

Oracle JD Edwards EnterpriseOne, Oracle Business Intelligence, Oracle Content Management

Mecsek Fűszért Zrt, Lafarge IT Services Sp. z o.o, Fornetti Kft, Gyermelyi Zrt

2002 9

Individuals (100) –

Attila Neumer János Szűcs Imre Kereki

1149 Budapest, Nagy Lajos király útja 117.

(1) 460-9520 (1) 460-9519 ebest@ebest.hu

»

György Marosi (50), Györgyné Marosi (50) –

György Maros Györgyné Maros –

1196 Budapest, Fő utca 116.

(1) 209-5558 (1) 209-5558 info@multi.hu

1996 14

Enaco Kft (95), Tax EBR Kft (5) –

György Kornis András Csiba –

1091 Budapest, Üllői út 119.

(1) 215-0256 (1) 215-9840 mail@szamado.hu

Istvánné Schwarczenberger – –

1086 Budapest, Dankó utca 4–8.

(1) 476-3150 (1) 476-3155 bms@bmsinformatika.hu

SOFTWARE TYPES DISTRIBUTED IN 2011

109

199

144

Visual Apollo system

Budapest Főváros XIII. Kerületi Önkormányzat, Fotex Nyrt, HajdúBihari Önkormányzatok, Mentavill Kft, Ökonet Kft, Vízmű Zrt, Zöld Híd Régió Környezetvédelmi és Hulladékgazdálkodási Kft

120

120

SZÁMADÓ SzámRendszer product line

Materiál lsz., Szamos Marcipán, Unix, TTL Áruházak, Chemark, Devecseri Agrokémia

BMS (ERP system), Biblon v.2 (bookstore software)

Budapest Józsefvárosi Önkormányzat, Líra Group (12 companies), Pilis Parkerdő Zrt, Szintézis Informatikai Zrt

2003 11

Líra Book Zrt (66.78), Magic (Onyx) Kft (19.89), B&IT 2000 Consulting Kft (13.33) –

»

» »

Individuals (») (»)

Ferenc Kustos – –

1133 Budapest, Váci út 76.

(1) 461-8030 (1) 352-1553 revol@revolution.hu

» »

Lajos Beck, István Kucsera – –

1134 Budapest, Tüzér utca 39–41.

(1) 452-1300 (1) 452-1301 info@isys-on.hu

– SAP AG (100)

Balázs Ablonczy György Simon Gergely Karkiss

1031 Budapest, Záhony utca 7.

(1) 885-7575 (1) 885-7300 info.hungary@sap.com

87

80

www.bmsinformatika.hu

REVOLUTION SOFTWARE 22 KERESKEDELMI KFT

MAIN CLIENTS IN 2011

YEAR ESTABLISHED NO. OF FULL-TIME EMPLOYEES ON MAY 1, 2012

NET REVENUE FROM ERP SOFTWARE SALES (HUF MLN) IN 2011

7

25

»

»

»

»

QAD Enterprise Applications

»

» »

»

»

SAP

Magyar Posta Zrt, Richter Gedeon Nyrt, Bonafarm

1997 450[1]

www.revolution.hu

ISYS-ON INFORMATIKAI TANÁCSADÓ KFT www.isys-on.hu NR

SAP HUNGARY KFT www.sap.hu NR

NOTES: [1] No. of full time employees on Sept 1, 2012

»= would not disclose, NR = not ranked, NA = not applicable

This list was compiled from responses to questionnaires received by Sept. 5, 2012 and publicly available data. To the best of the Budapest Business Journal’s knowledge, the information is accurate as of press time. While every effort is made to ensure accuracy and thoroughness, omissions and typographical errors may occur. Additions or corrections to the list should be sent on letterhead to the research department, Budapest Business Journal, 1075 Budapest, Madách Imre út 13–14., or faxed to (1) 398-0345. The research department can be contacted at research@bbj.hu

[ EXPERT OPINION ]

NOTE: ALL ARTICLES MARKED EXPERT OPINIONS ARE PAID PROMOTIONAL CONTENT FOR WHICH THE BUDAPEST BUSINESS JOURNAL DOES NOT TAKE RESPONSIBILITY

Borderlands and practicalities of IT localization MIKLÓS BÁN ceo espell translation and localization

The relationship of IT and translation has always been close, language being at the heart of both, and continues to evolve.

The IT boom not only brought along tools for the language experts to play with, but also fundamental changes in approach, and gave rise to new markets, previously either non-existent or out-of-reach. Computer-aided translation environments facilitated productivity; in addition, automation and smart quality assurance practices have become widespread.

But it is not a one-way path. As the localisation industry has matured, the IT sector started to employ the techniques of internationalisation as a means to expand the consumer base. Developers use localisation-aware tools, and certain interoperability formats and encodings have grown into de facto standards. Machine translation, being a branch of AI research, has been progressing as a joint effort, and recent advances allow successful application.

On the borderlands between IT and translation other cutting-edge technologies have also emerged, including exploration of the deep web

and real-time business intelligence solutions. On top of the conservative b2b and b2c targets, such technologies will eventually render c2b and c2c content fit for globalisation. Mining unstructured, yet interconnected corpora will prove not only fascinating, but also relevant to business.

When it comes down to practicalities, localisation can offer solutions to certain distinctive features of IT content while taking the sensitive time-to-market factor into consideration. There are established methods to manage non-linear text with high-frequency updates, while ensuring consistency and version control, and preventing scope creep and discrepancies. First, clearly defined project paths streamline management; second, a comprehensive term base and context information ensures consistency and proper output; third, a server-based collaborative translation approach improves productivity without compromising quality; and finally, applying meta-data eliminates versioning issues and incorrect reuse of translations and reduce costs.

The future of IT and localisation may not be shaped as we would have imagined it, with universal translators and the Babel fish. But localisation 2.0 is now on our doorstep, and we do not have to wait long to see these technologies to be introduced into everyday production.

www.espell.com

20 2 BusinessSpecialReport BBJ

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Budapest Business Journal | Sept 07 – Sept 20

Mobile apps: do you have one?

As smartphones have come to dominate the sales of all communication devices around the world, the number of smartphone apps in various online stores has skyrocketed over the last few years.

BBJ KRISZTIÁN KUMMER

While existing online and web-based services are being developed for mobile devices, small independent developers are trying to carve a valuable slice from the ever-growing application sales cake.

SMARTPHONES TAKE OVER According to technology research firm IDC, 144.9 million smartphones were sold worldwide in Q1 2012, while total sales of smartphones topped 491 million units in 2011. Gartner estimates total sales of smartphones in 2011 to have reached 472 million, or 31% of mobile communication devices. This compares with figures for 2010 from the same company of 297 million smartphones, 19% of the 1.6 billion mobile phones sold that year.

Regarding current operating systems, the global market was dominated by Google’s Android in Q4 2011 with a 59% share, followed

by Apple’s iOS with 23%. No surprise, then, that the focus of app developers has turned

GOLD DIGGERS To make huge earnings out of a simple idea is every developer’s secret dream, at least at the beginning. That’s why the developers scene is filled with “gold diggers” who want to make the big shot and earn millions with a single app raised high by the community, which is always looking for something new and fancy.

A fine example of how to turn a simple idea into huge money is Draw Something, which was downloaded 50 million times in the 50 days following its release and was bought by the Facebook game giant Zynga for $180 million. At the top of the app lists, Angry Birds still reigns supreme: the castle-crusher game has generated more than 1 billion downloads on all platforms combined since its release in December 2009, and has became a cultural reference all around the globe.

Trends change from season to season, just as on the catwalks of Milan. “As far as I can see, location-based apps are quite popular now and everybody wants to share something through social media platforms. The phones still have a bigger user base than tablets, and of course the two most popular operating systems in the mobile world are iOS and Android, although Windows Phone 7 and 8 might soon become popular,” said Gergely Cziva, managing director of a small independent business, Artanis.

Various video and photo manipulation services are popular too, probably due to the enormous success of Instagram, an image manipulator and sharing app that was acquired by Facebook for $300 million in cash and 23 million common Facebook shares, now worth roughly another $400 million.

But having a great idea and some spare time to develop an app is not enough for success – or at least that is what the harsh facts show. “The biggest problem for individual developers is that you also have to provide design and must work for at least two platforms on a professional level,” Hungarian app developer Canecom’s Márk Kubatov said. “Because of this, development teams and agencies are doing better since they can provide all the necessary knowledge and services for clients,” he added.

And revenues are not in favor of individual developers.

CLOSED MARKETS So developers with more foresight are looking for opportunities that provide a more

Year

Month

Applications available

Downloads to date

2009

March

2,300

-

2010

December March

16,000 30,000

-

April

38,000

-

August October May July October December January February May June

80,000 100,000 200,000 250,000 319,000 380,297 400,000 450,000 500,000 600,000

1 billion 3 billion 6 billion 10 billion 15 billion 20 billion

2011

Source: Wikipedia

towards these two giant markets, as can be seen very clearly from the numbers.

Apple’s App Store opened in July 2008, aligned with the release of the iPhone 3G, and took over the duties of the iTunes Store opened five years earlier. According to the latest figures from June 2012, more than 650,000 applications were available in the store with more than 30 million total downloads. Google started its service relatively late. In March 2009, about 2,300 applications were available in the Android Market. However, supply expanded fast and,

by June 2012, the number of available apps exceeded 600,000 with more than 20 billion downloads.

2012

apps like ERP, BI or CRM for mobile devices,” Cziva says.

There is also a particularly interesting and fast-growing area: apps that never go public. “There is growing interest in internal apps for companies, ones that only employees or partners will use, like tablet apps for sales and service personnel to name just a few examples,” Kubatov added.

predictable source of revenue, such as existing services that need professional assistance to be ported to various mobile operating systems. “We see businesses finally starting to realize the potential in mobile and now thinking about ways to enter the mobile market, providing their services through apps and mobile web. But they lack the concept of mobile presence, so we help them design their apps and mobile websites to provide the best user experience for their customers,” Kubatov said. And he knows a lot about the phenomenon as Canecom developed the official apps for Hungary’s best known festivals, including the Sziget, Volt and Balaton Sound events, and also the mobile version of Vatera, the “Hungarian eBay”.

While a recent study by App Promo showed that 59% of iOS apps in the App Store did not even generate enough revenue to cover development costs, the development of apps based on the specific orders of clients could make a decent earning.

“I do not think the market is full, especially not in Hungary. There are already three or four famous app development teams, several agencies and a pack of independent developers. But mobile app development is quite new in Hungary, and the first mobile development course just started one year ago at universities,” Cziva said.

And the market is full of opportunities as it turns towards more serious fields beyond the never-to-be-tiredof games, weather forecast and social media apps. “As far as I can see, the next step will be the development of business

FOR THE BRAVE As the market is expanding and is full of new ideas and business orders, independent developers can make quite a nice living out of app development. However, most realize that management of their work and communication with clients is taking ever more time as they expand their portfolio. “If developers can score a few long-term customers who provide work continuously, they can survive for a long time,” Kubatov said. Actually only very few large companies hire mobile developers as employees, as it is more cost-effective to outsource the mobile development work to professional teams who design and create lots of apps and are constantly up to date on this particular field. In Hungary, there are only a few mobile development teams that have already acquired vast experience and an international portfolio that the client can pick from. In the future there might be some acquisitions from larger agencies, or maybe some smaller teams will merge to expand faster.

But there is still quite a lot of “terra incognita” for mobile app developers, where the brave and the well prepared can make their fortune. ■

Date

Applications available

Downloads to date

17/03/2009

25,000

800,000,000

04/11/2009

100,000

2,000,000,000+

20/03/2010

150,000+

3,000,000,000+

29/04/2010

200,000+

4,500,000,000+

20/10/2010

300,000+

7,000,000,000+

22/01/2011

350,000+

10,000,000,000+

07/07/2011

425,000+

15,000,000,000+

04/10/2011

500,000+

18,000,000,000+

28/02/2012

500,000+

24,000,000,000+

07/03/2012

585000

25,000,000,000+

11/06/2012

650000

30,000,000,000+

2 BusinessSpecialReport 21

BBJ

WWW.BBJ.HU

Budapest Business Journal | Sept 07 – Sept 20

Venture capital: nothing to be afraid of Hungary’s software development sector has seen some success stories in the recent years. But for all startups that have made enough publicity, fame and revenue to succeed, 100 more could be found that failed for one reason or another.

BBJ KRISZTIÁN KUMMER

It would be a gross overestimation to describe the role of venture capital as important in Hungarian financing. However, its importance can be positively influenced in the near future as country risk deteriorates, the number of investments backed by the EU-funded Jeremie program grows, and banks’ lending activity does not show any significant improvement.

Under the framework of Hungary’s Új Széchenyi Terv development plan, HUF 36 billion was earmarked to spur small- and medium-sized Hungarian businesses. The eight venture capital funds created under the program had invested HUF 8.2 billion into 39 separate projects by the end of March. The funds started their investment activities in the second half of 2010 and will have to invest the available funds by the end of 2013.

Some 70% of the resources these venture capital funds use come from the Jeremie program of the European Union. (The joint initiative of the European Commission with the EIF and the European Investment Bank helps SMEs access finance and financial engineering products.) According to the existing rules, funds can only invest in SMEs no

older than five years and with revenue of less than HUF 1.5 billion, and at least 30% of funds have to be invested into startup and innovation businesses.

As with all these venture capital sources, the fund behind the investments of PortfoLion, OTP Kockázati Tőke Alap I, is closedend and has a maturity of eight years. The existing rules allow firms to allocate investments funds for three years (until the end of 2013) and then recollect them in five years. Therefore the fund emphasizes five-year investments into the potential cooperators.

“Our existing portfolio was selected from about 200 business plans,” András Molnár, investment director of OTP Bank’s venture capital firm PortfoLion said. The company’s portfolio is built up of ten different investments, all with a share bought between HUF 200-400 million. It includes Leonar3Do, the world’s first three-dimensional virtual reality desktop utility and Cellum, one of Hungary’s leading mobile payment solutions developers.

“Based on our experiences, we can pinpoint the most common mistakes companies make while looking for venture capital. One of these is that small enterprises want to involve venture capital to start up their company instead of using it to speed up growth.

However, funds do not invest money into ideas, only into already working businesses.

The other is that small businesses – sometimes only a sole programmer or a couple of developers – do not have the necessary management framework that could successfully control a fast-growing company,” Molnár added.

Owners of startup businesses are often technically minded and not too familiar with the financial aspects of successfully conducting a business. But the rules of thumb are eas-

Date

Target Company

Field of activity

Raised amount

Investor

07/2012

Real5D

Interactiv 3D visualization

$1.2 mln

DoubleRock Venture Capital

07/2012

MixGar

Interactive social jukebox

$80,000

Phoenix Investment

04/2012

Netlock

Electronic authentication

n/a (51.02% share)

Docler Investments

01/2012

THX Games

Games developing

HUF 400 mln

Sándor Andó and Euroventures VC Fund Manager

ier to grasp than it may at first seem. “There are two main criteria a startup has to meet in order to attract our attention,” said Molnár.

“First of all, we need a business model that is viable on the international market as well. And second, the business model has to outline a product cycle that promises fast growth and fast return in exchange for the higher risks taken by the joint venture capital business.”

Prezi, the cloud-based zoomable presentation software, is one of the bestknown success stories among Hungarian software startups, along with

remote access software LogMeIn and NNG, the makers of navigation software iGo. The company raised $1.5 million in 2009 and another $14 million at the end of 2011 from Accel Partners and previous Danish investors Sunstone Capital.

“We had positive cash flow from the very beginning, and users just loved Prezi,” Péter Árvai, co-founder and CEO of the company said about the keys to successfully involving VC. Venture capital firms are often badmouthed on the grounds that they only want to invest into sure-fire businesses. In fact, they just want

to avoid all the unnecessary and unforeseeable risks they can. To successfully work together, both parties involved must make efforts to take care of uncomfortable issues. “The relationship between startups and VCs is like a marriage,” Árvai pointed out.

A great deal of startup owners are unwilling to involve venture capital simply because they fear losing control and ownership of their business. But this is a common mistake.

After the fixed-term investment period, the VC fund could exit successfully in three different ways. “One

is that the original owners buy back their share. However, this is highly unlikely, as – to spur on the growth of the company – paying a dividend is not allowed. And earning enough money just from salaries over five years to buy back the share originally sold is not an option in most cases. The second option is having an IPO, but stock exchanges in Central Europe are not too attractive these days. And the third and most likely exit is the involvement of another professional investor, either a bigger rival acquiring the company or another venture capital firm,” Molnár said. ■

22 2 BusinessSpecialReport BBJ

WWW.BBJ.HU

Budapest Business Journal | Sept 07 – Sept 20

Your opinion matters to us Neticle, an innovative piece of software created by a Hungarian startup, could take the burden off the human workforce who carry out opinion polls.

ground themselves. “We were different from others as we arrived with a complete plan and a group to support us,” explained Csikós.

BBJ ZSÓFIA VÉGH

In a small room that resembles a movie set, people are sitting in front of a screen, holding a remote control with a scrolling wheel and buttons.

They are watching a televised debate between politicians and, every now and then, push the buttons. Outside, a group of analysts watch the bottom of the screen, where colored lines change constantly, moving up and down to reflect the viewers’ opinion of each sentence or word.

Opinion polling is a tried and tested method to monitor how public opinion changes.

Strategists working for politicians, keen to know how their candidates fare, use it regularly. In the upcoming U.S. elections, they will rely on it so heavily that they probably would not be able to make any assessment without it.

Public opinion matters, and not only to politicos; it is equally important for private companies, which will hire entire agencies to monitor, say, the customer satisfaction rates of certain products. Agencies will monitor the media, assemble the published content and, based on that, write their monthly reports.

What if all the above steps could be completed with a simple click? If a program could do all the dirty work of collecting, ranking, and even assessing? Would your company be interested? Many firms apparently are. The product they are after is Neticle, software that takes care of all the above and also decides how to classify materials into three categories (positive, neutral, or negative) based on their content.

SELECTION SKILLS Were Apple interested in finding out how Hungarians’ opinion of the iPhone compared to that of Samsung’s Galaxy in terms of

screen resolution, for example, they could resort to Neticle.

Neticle summarizes opinion on the Hungarian web on a given topic or keyword in numbers. To achieve that, it uses a web opinion index (WOI), a universal indicator that, similar to stock exchange rates, collects polarity in one dynamic number.

The WOI calculated based on positive or negative web content clearly shows the assessment of a firm, product, or topic. If an article praising the subject appears on the web, the WOI is raised, while a negative comment on a forum will lower

the rate. The best thing about WOI is that it can be compared to the exchange rates of competitors, thus showing who ranks higher.

To achieve the above, Neticle uses a so-called crawler, a tool that crawls over links and first decides what category the text belongs to. It then sends the URLs it has collected for a more thorough screening.

Collecting and categorizing information is no great accomplishment in itself; taking human decisions is more so. Sentiment analysis – Neticle’s ability to express opinion in numbers – was made possible using algorithms

that assess information with 80.48% accuracy, compared to humans or other programs working at 70-75%.

Neticle’s practicality lies in its selection skills. It is able to differentiate between pages that are updated frequently and those that are not. If it is possible to comment on an article, it will visit the pages more often.

If nothing is refreshed for a while, it avoids the page and saves itself extra work.

The creator of the program is Zoltán Csikós, a member of Generation Y. With two degrees in his pocket (in business and IT, a lucky combina-

tion), he started working on the program with three of his peers less than a year ago. “We attended a meeting for startups that originated comes from Vienna.” In Hungary, Prezi.hu, a Hungarian software firm known worldwide for its zoomable presentation software, hosted the event.

These gatherings are useful as young talents are mentored by a group of three to six businessmen, financial experts and marketing managers.

These professionals provide theoretical support for startups, although the budding entrepreneurs still have to secure their financial back-

SAVING TIME AND MONEY He and his three associates had spent three months brainstorming and devising a business plan before actually starting to build the program. Their initial calculations called for a HUF 20 million investment, which they subsequently managed to reduce to HUF 500,000.

“We tried to be as cost-efficient as possible. We only included links refreshed no more than six months earlier, so the database is more manageable and less server space is needed,” the architect said. Even so, their crawler checks more than 200 million URLs, and that number is on the rise.

Once the system has the necessary content, it begins assessing the polarity of keywords in it. This language tool is now said to be the best in the country. Not only does it watch roots and suffixes, it is able to recognize metaphors, idioms and, to a certain extent, irony as well.

To demonstrate how Neticle works, the creators used a piece of breaking news headlined “Leader blames IMF for crisis” from Index.hu. Words colored in red and deep red (crisis, blames, collapse) are negative, those in blue are neutral, while the greens are positive. The article’s WOI is -25.5, a fairly negative result.

The entire assessment process took just a few seconds.

With time and costefficiency being high on most companies’ post-crisis agenda, Neticle’s success seems guaranteed. The software can replace (or “support”, as the creators prefer to put it) a human workforce that would have work for several days to conduct similar research. Although it has not been launched as yet, potential customers are queuing up already, although Csikós will not name any until the deals are closed.

In terms of funding, they used the F(F)F model (friends-fools-family) but skipped the second – they did not want to fool anyone.

They would only need to sell a single package to break even in Hungary, and the market is even bigger outside the borders. ■

2 BusinessSpecialReport 23

BBJ

WWW.BBJ.HU

Budapest Business Journal | Sept 07 – Sept 20

Software developers: does demand meet supply?

The leaders on the domestic software market are still those who provide business management software solutions.

While the global economic crisis has had a much smaller impact on this sector than on many others, supply and demand don’t always meet each other due to financing.

BBJ KRISZTIÁN KUMMER

The world’s attention has turned towards cloud solutions in recent years. It is easy and affordable for smaller businesses, as they don’t need to buy all the expensive hardware necessary for the successful operation and, in most of the cases, it’s easy to install and use, as only a web browser is required.

While in the United States and Western Europe the idea is becoming ever more popular, Hungarian business executives are still, on the whole, distrustful of cloud solutions. “Let’s bring the hardware in here, I don’t want to depend on others, they say,” said Péter Szekrényi, the owner of Hungarian business management software developer Amtech.

Part of this behavior can be attributed to the loose payment discipline of Central European businesses,

as solution providers could easily disconnect their nonpaying clients and thus cut them off from their precious business data.

While some sectors were hit hard by the global economic crisis, the software market felt less of the impact. “If the target market is well defined, demands have not changed significantly. In our case, businesses with an annual revenue of HUF 1-2 billion and an intention of growing, need software to operate successful,” Szekrényi said. “What even mediumsized enterprises can easily forget is to support decision making. They think an ERP (enterprise resource plan-

ning) system is enough, but they’re wrong. Without a good business control panel, it is like driving a car without seeing the gauges. It’s going for a while but it could be dangerous (and expensive) in the end.

However, financial questions emerge more often for software purchases, like the availability of EU-backed non-refundable funds for the projects,” he added.

But the deteriorating opportunities in the financial sector, suffering from extra levies imposed by the government, have affected the IT sector as well, but not terminally. “The overall reduction in IT-budget is clearly visible but the sys-

tem, the services and the functionality of the service provider is indispensable in many cases, so IT-spending have been subjected to a certain limit, under which banks can not go,” said a spokesperson for capital markets software designer, Dorsum Zrt. “The market operation is bound to a certain cost level. Bargaining takes place, of course, so banks often win a little bit of a discount or extra services for themselves.”

Talking about back office banking software or business management solutions, the demand and supply of new solutions are existing on the market at the same time. The question is: do

they meet each other? “The existing solutions for savings management implicate more and more new needs in this field as banks turns towards savings products from lending products.

An interesting example of this change is private banking, for which we developed our last product. But even if there’s a great interest towards new IT solutions, tight IT budgets do not allow the implementation of some of these,” the Dorsum spokesperson said.

Public procurements and state orders could help speed up the industry, although the municipalities’ huge budget deficits, funding difficulties, accumulated debt,

and the lack of resources for new projects is a limiting factor. What is more, given the lack of transparency, the huge number of annulled results and oneparticipant procedures, this area is considered vaguely corrupt. According to a survey made by the Budapest Corvinus University of 100 business leaders, the preparation, judgment and monitoring of compliance phases are all infected alike. “Public procurement processes are still characterized by extreme lengthy procedures, the continuous pushing back of decisions and deadlines, and, above all, deals already ‘arranged’,” said Szekrényi ■

24 2 BusinessPartnerWatch BBJ

WWW.BBJ.HU

Budapest Business Journal | Sept 07 – Sept 20

Software developers

3

SIEMENS PSE KFT www.pse.siemens.hu

EVOPRO INFORMATION AND AUTOMATION KFT

–

3,191

Germany, Austria

Siemens-developments

Germany

Industrial applications, embedded systems, mobile applications

Siemens, Daimler, Budapest Airport

Syslog-ng Premium Edition, syslog-ng Store Box, Shell Control Box, Zorp Gateway

Credigen Bank, Boeing Csoport, NASA, Svenska Handelsbanken, Európai Légvédelmi és Űrtechnikai Társaság, Dubai Islamic Bank, Svenska National Dept. Office, Raiffeisen, Telenor...etc.

3,191

2,700

5,500

www.evopro.hu

4

5

6

7

8

9

BALABIT IT KFT www.balabit.hu

NEXON KFT www.nexon.hu

R&R SOFTWARE ZRT www.rrsoftware.hu

MULTISOFT KFT www.multisoft.hu

ITWARE KFT www.itware.hu

IFS HUNGARY KFT www.ifsworld.com

TERC KFT 10

www.terc.hu

NR

ALERANT ZRT www.alerant.hu

DORSUM SOFTWARE DEVELOPMENT AND NR SERVICES ZRT

2,058

2,058

DACH, Italy, Russia, France, USA

NR

GAMAX KFT www.gamax.hu

GEOMETRIA KFT www.geometria.hu

Nokia Siemens Networks, Siemens AG

»

»

»

»

–

–

–

–

–

–

NO. OF FULL-TIME EMPLOYEES ON MAY 1, 2012 OF THESE, FULL TIME SOFTWARE DEVELOPERS

OWNERSHIP (%) HUNGARIAN NON-HUNGARIAN

TOP LOCAL EXECUTIVE CFO MARKETING DIRECTOR

ADDRESS PHONE FAX EMAIL

1995

460 400

Péter Zimány (4.500) Péter Nagy (3) evosoft GmbH (92.500)

Péter Várady Tibor Nagy Zoltán Gönye

1117 Budapest, Kaposvár utca 14–18.

(1) 372-7400 (1) 372-7402 sales@evosoft.com

1993

212 183

– Siemens AG Österreich (100)

Ákos Szekendy Attila Balázs –

1143 Budapest, Gizella út 51–57.

(1) 471-3000 (1) 471-3009 pse.hun@siemens.com

309 218

Individuals (10) Institutional investors (90)

Balázs Bodnár Mariann Bokor József Helmich

1117 Budapest, Hauszmann Alajos utca 2.

(1) 279-3970 (1) 279-3971 sales@evopro.hu

»

112 45

Lajos Varga (24.52), András Illés (24.47), Balázs Scheidler (19.87), Zoltán Györkő (17.18), Árpád Magosányi (7.24), Endre Wagner (6.71) –

Balázs Scheidler Attila Rácz Attila Kiss

1117 Budapest, Alíz utca 2.

(1) 398-6700 (1) 208-0875 info@balabit.hu

Individuals (100) –

Szilárd Ocskay, Katalin Sass – Katalin Héray

1138 Budapest, Váci út 186.

(1) 465-5100 (1) 465-5101 nexon@nexon.hu

2001

1,506

3,146

»

nexONHRM

»

–

1989

250 35

1,360

1,388

Great Britain, Romania, Germany

FusionR ERP, FusionR BSS, FusionR Utility, FusionR SFA, VERK/400, cDMS

Central-Drinks, GYŐR-SZOL, Heineken, Hétforrás, Invitel, GIRO, Pannon-Víz

–

–

1991

71 35

Individuals (100) –

Csaba Rozenberszki Ilona Rónyainé Rétai Zsolt Rozenberszki

1038 Budapest, Ráby Mátyás utca 7.

(1) 436-7850 (1) 436-7851 info@rrsoftware.hu

Philips

–

»

57 15

Individuals (100) –

Gábor Kelemen Tamás Kelemen Kata Molnár

1112 Budapest, Kőérberki út 36.

(1) 310-1492 (1) 310-1497 sales@multisoft.hu

»

» »

» »

Sándor Dankó – –

1117 Budapest, Budafoki út 209.

(1) 463-0620 (1) 463-0621 sales@itware.hu

2000

30 6

– IFS WORLD AB, IFS CEE (100)

Zsolt Weiszbart – Gábor Halász

1132 Budapest, Váci út 22–24.

(1) 236-3700 (1) 236-3701 info@ifshu.com

Miklós Konrád Molnár (80), Jnr. Miklós Molnár (10), Magdolna Demeter (10) –

Miklós Konrád Molnár Judit Horváth –

1149 Budapest, Pillangó park 9.

(1) 222-2402 (1) 222-2405 terc@terc.hu

795

814

Austria

Dictation workflow system, advertising management software, highway section controll system, conference booking software, Microsoft Dynamcsi NAV, MobileNAV, Speedcam warning system, Company lunch

570

570

Japan, India, UAE

FLEETware, MOTIware, SMSware, Web Self Care, Kojimori, AGENTware

»

»

IFS applications

Állami Nyomda Nyrt, Szentkirályi Ásványvíz Kft, HAJDU Group, Budapest Airport Zrt, Nolato Magyarország Kft, Medikémia Zrt

–

TERC V.I.P. Consolidated Construction Budgetmaking Program System (GOLD, SILVER, BRONZ), TERC-ETALON Construction Budget announcer Program System, ÖNKÖLTSÉG Online Construction Budget-making Program System

Ministries, municipalities, administrative organizations, investors, designers, contractors, construction contractors, businesses

1990

34 3

»

Alerant NGN platform, ASCE service maker enviroment, ALEXA virtuális PBX, ALINA service, ALDEA DUAL SIM services, ALIM IM and prescence platform, ALDO application development system, Alerant Flexible Electronic Banking, Alecash, Web-Forms

»

–

2003

» »

AMCS Kft (100) –

Tamás Szabó – –

1117 Budapest, Infopark sétány 1.

(1) 205-0055 (1) 205-0056 info@alerant.hu

»

ClavisAsset, ClavisBank, ClavisBroker, Clavis Custody, ClavisFactoring, ClavisFinance, ClavisFront, ClavisHome, ClavisRealEstate, ClavisRisk, ClavisPension

»

1996

» »

Individuals (9) Individuals (91)

Róbert Kő Miklós Benkő Tamás Farkas

1012 Budapest, Logodi utca 5–7.

(1) 487-3030 (1) 487-3031 dorsum@dorsum.hu

–

1990

» »

Grosvenor Kft (45.50), Márton Gáll (17.50), Péter Surján (13), other (24) –

Géza Homonnay – –

1114 Budapest, Bartók Béla út 15/D (1) 372-0692 (1) 372-0693 gamax@gamax.hu

–

–

1986

» »

Individuals (100) –

Tibor Tenke – –

1037 Budapest, Montevideo utca 6.

(1) 240-7014 (1) 240-7019 info@geometria.hu

400

239

»

563

533

1,678

»

1,826

»

9,168

»

»

Hungexpo, Keler, MNB, Motorola, Siebel

»

821

»

DMS/OMS, Mirtusz, Mobil Szerelő

»

www.dorsum.hu

NR

Siemens

DISTRIBUTION OF OWN PRODUCTS

Germany

RESALE

9,051

CONSULTING

8,956

YEAR ESTABLISHED

2

www.evosoft.com

SOFTWARE PRODUCTS

MAIN CLIENTS IN 2011

INSTALLATION

EVOSOFT HUNGARY KFT

MAIN EXPORT DESTINATIONS

1

TOTAL NET REVENUE (HUF MLN) 2011

COMPANY WEBSITE

SOFTWARE-RELATED ACTITVITIES

NET REVENUE FROM SOFTWARE DEVELOPMENT (HUF MLN) 2011

RANK

Ranked by net revenue from software development

–

2 BusinessPartnerWatch 25

BBJ

WWW.BBJ.HU

www.graphisoft.hu

GREPTON ZRT NR

www.grepton.hu

NR

NR

IBM HUNGARY KFT www.ibm.com/hu

IDOM 2000 KONZULENS ZRT www.idom.hu

JET-SOL KFT NR

www.jet-sol.hu

NR

NR

KULCS-SOFT NYRT www.kulcs-soft.hu

LIBRA SOFTWARE ZRT www.mve.hu

LOGMEIN KFT NR

www.logmein.com

»

6,481

MÁV INFORMATIKA ZRT NR www.mavinformatika.hu

NNG KFT NR

igomyway.com/hu

NR

NUANCE-RECOGNITA ZRT www.nuance.com

P92 IT SOLUTIONS KFT NR www.p92.hu

QUALYSOFT ZRT NR

www.qualysoft.com

ArchiCAD

»

–

DISTRIBUTION OF OWN PRODUCTS

RESALE

CONSULTING

–

NO. OF FULL-TIME EMPLOYEES ON MAY 1, 2012 OF THESE, FULL TIME SOFTWARE DEVELOPERS

OWNERSHIP (%) HUNGARIAN NON-HUNGARIAN

TOP LOCAL EXECUTIVE CFO MARKETING DIRECTOR

ADDRESS PHONE FAX EMAIL

1982

» »

– Nemetschek AG (100)

Gábor Bojár Attila Seres –

1031 Budapest, Záhony utca 7.

(1) 437-3000 (1) 437-3099 mail@graphisoft.hu

Protomix Zrt (30.10), Index Immo Kft (8.37), István Novák (5.51), Grepton Zrt (5) New Frontier International Holding GmbH (51.02)

Gábor Magyar Lilla Horcsin –

1116 Budapest, Kondorfa utca 10.

(1) 204-7730 (1) 204-7731 mail@grepton.hu

»

1,368

»

»

»

–

–

2001

» »

»

13,681

»

DB2, Cognos, FileNet, Guardium, ILOG, infoSphere, Lotus, Maximo, Rational, SPSS, Tivoli, WebSphere

»

–

1936

» »

– IBM Ireland Product Distribution Limited (99.93), IBM Wold Trade Corp (0.07)

Zsolt Veres – –

1117 Budapest, Neumann János utca 1.

(1) 382-5500 (1) 382-5501 info@hu.ibm.com

»

60

»

»

»

»

»

1999

» »

István Schaffer (80), Kovács Zoltán (15.20), Krisztina Deményné Kertész (4.80) –

Krisztina Deményné Kertész – –

1119 Budapest, Mérnök utca 12–14.

(1) 481-6800 (1) 481-6801 kapcsolat@idom.hu

Magyar Posta, OTP Bank

»

»

2003

» »

HO-ME 2000 Ingatlanforgalmazási Kft (25), JET Investment Kft (75) –

Zoltán Csapó – –

1138 Budapest, Madarász Viktor utca 47-49.

(1) 453-0432 (1) 430-1976 info@jet-sol.hu

»

» »

Tibor Kulcsár – –

1022 Budapest, Törökvész út 30/A (1) 336-5300 – info@kulcs-soft.hu

»

5,069

»

Bank software development and operation

»

842

»

»

»

»

1989

»

824

»

Libra6i, Libra Open, Libra3S, Corso

»

»

»

»

»

2006

» »

VOLÁN ELEKTRONIKA Zrt (99), Carolinainvest Kft (1) –

Faur Kálmán – –

1113 Budapest, Karolina út 65.

(1) 372-3333 (1) 372-3189 –

»

–

–

–

2001

» »

– Logmein Inc (100)

Tamás Kovács Jim Kelliher Michael Ewing

1061 Budapest, Andrássy út 9.

(1) 413-3780 (1) 413-6996 csatlakozz@ logmein.com

»

2009

106

»

– YES Investment SA (100)

Pál Vadász Csaba Orosz –

1118 Budapest, Rétköz utca 5.

(1) 327-9800 (1) 327-9801 info@montana.hu

1996

» »

MÁV Zrt (99.50)Other (0.50) –

Gábor Katus Lajos Csenkey –

1012 Budapest, Krisztina körút 37/A (1) 457-9393 (1) 457-9510 helpdesk@ mavinformatika.hu

Icehorn Kft (16) COM3 Consulting S.A (32), D&K Fortescue Limited (52)0

David Wiernik, Péter Balogh,Yacov Halperin – –

1016 Budapest, Bérc utca 23.

(1) 872-0000 (1) 872-0100 –

»

3,292

»

Applications for implemented systems, business and other platforms for mobil

»

1,300

»

MonDoc, MonFlow, Infovadász, Naprakész

MONTANA KNOWLEDGE NR MANAGEMENT KFT www.montana.hu

SOFTWARE PRODUCTS

MAIN CLIENTS IN 2011

INSTALLATION

MAIN EXPORT DESTINATIONS

»

SOFTWARE-RELATED ACTITVITIES YEAR ESTABLISHED

GRAPHISOFT SE ZRT NR

TOTAL NET REVENUE (HUF MLN) 2011

COMPANY WEBSITE

NET REVENUE FROM SOFTWARE DEVELOPMENT (HUF MLN) 2011

RANK

Budapest Business Journal | Sept 07 – Sept 20

»

5,097

»

»

»

»

»

»

94

»

7,614

»

iGo My way

»

–

–

2004

» »

»

3,357

»

OmniPage

»

»

»

»

»

1989

» »

– Caere Corp (100)

Ákos Reszler – –

1138 Budapest, Váci út 141.

(1) 412-8700 (1) 412-8710 –

1995

» »

p92 IT Solutions (51), József Molnár (25), Beáta Molnárné Tóth (24) –

József Molnár Júlia Király –

1038 Budapest, Fürdő utca 2.

(1) 453-4100 (1) 453-4101 info@p92.hu

2000

» »

Individuals (7) Qualysoft Holding GmbH (93)

András Czifra Tamás Zimányi –

1118 Budapest, Rétköz utca 5.

(1) 889-9800 (1) 889-9810 office@qualysoft.com

1997

478 250

– SAP AG (100)

Balázs Ablonczy György Simon Gergely Karkiss

1031 Budapest, Záhony utca 7.

(1) 885-7300 (1) 885-7575 info.hungary@sap.com

» »

» (58.31), Cashline Investment Holding Zrt (15.02), Pannergy Nyrt and subsidiaries (12.19), Individulas (7.95) Erste Group Bank AG (6.53)

Zoltán Jutasi Levente Sipos –

1047 Budapest, Baross utca 91–95.

(1) 399-5500 (1) 399-5599 info@synergon.hu

Magyar Takarékszövetkezeti Bank Zrt (52.38), Országos Takarékszövetkezeti Intézményvédelmi Alap (47.62) –

Barnabás Pál Endre Megyeri –

1125 Budapest, Fogaskerekű utca 4–6.

(1) 458-6600 (1) 458-6601 titkarsag@takinfo.hu

Videoton Holding Zrt (14), Unit4 Teta S.A (86) –

Juliusz Zukowski – Katalin Sáfár

1031 Budapest, Záhony utca 7.

(1) 436-0540 (1) 388-2178 vtsoft@vtsoft.hu

»

»

1,096

1,984

»

Sofia

»

DocFlow, Docfinito, Hiper kalkulátor, Infinica Content Cruiser

»

»

–

SAP HUNGARY KFT www.sap.hu

»

NR

SYNERGON INFORMATION NR SYSTEMS NYRT

»

»

16,623

Germany, USA

»

SAP

»

»

»

–

1995

www.synergon.hu

TAKINFO KFT NR

www.takinfo.hu

NR

VT-SOFT SOFTWARE KFT www.vtsoft.hu

»

3,038

»

»

»

»

»

»

»

1994

» »

»

869

»

OPUS, Unit4 Coda, VT-Constellation

»

–

1989

» »

3 Socialite

BBJ

READERS' CORNER

Publishers in need of innovation Getting to Yes updated and revised

27 31

Storytelling – Tell your story The summer is over. I hope you had a good holiday, gathered fresh experience, gained new insights, and after all that, I am sure you have a story to tell.

Storytelling is not limited to fairy tales or traditional folktales. Telling a good story is like presenting a mini-documentary of what you have seen so that others can see it too.

So if you have no stories from this summer, search your brain for memories of the summer before, a book that you read, an event that caught your attention and to which you can relate, or an anecdote from your previous workplace – something funny, entertaining and something that carries a lesson. Rely on your memory and trust what you know.

You will find that your best stories are about things that happened to you.

These stories show your personal side, at times your vulnerability – something silly, exciting or courageous that you did fits well in here, too – and that makes you human. You also struggle, work hard, try out new things – with more or less success – and try to improve. A great way to relate to people is through our personal stories.

Often openly talking about our shortcomings brings us closer to people. Personal stories allow you to reveal an aspect of yourself that is otherwise invisible.

Stories have a profound effect on humans. We retain stories longer and more completely than facts and figures. Our minds understand stories on a deeper level.

STORYTELLING IS PART OF OUR BUSINESS LIFE As part of the all-business culture, we often believe that it is inappropriate to bring so much of our personal lives into the office. Many people assume no one else would care about their stories. Yet stories are the most

direct way for people to show themselves, to present who they are and what they stand for, to gain followers and supporters. Great leaders use stories for motivating, persuading and gaining eager cooperation.

People do not always want information. They want faith – faith in you, your goals, your success in the story you tell. People will only have faith in a story that has become real for them personally. Once people make your story their story, you have tapped into the powerful force of faith.

Faith builds trust, which is the first step in influencing and thus leading.

THE BASICS TO STORYTELLING A story can only be told at a particular place and time, with someone telling it and at least one person listening.

You have to be present in a physical sense of course, but it also calls for your intellectual, emotional and imaginative presence.

As you tell your story, you continue to receive new information about the audience and even new realizations about them, and you integrate both into your telling. You continue to think: to notice, to integrate, and to change your responses to the situation.

Great performance does not necessarily require great effort. The important thing is that you maintain the presence and respond to whatever surrounds you.

We tell a story for inspiration, influence, or persuasion.

The element of entertainment is the vehicle that carries our message. Telling a mean-

ingful story means inspiring your listeners – coworkers, leaders, subordinates – to reach the same conclusions you have reached and to decide for themselves to believe what you say and do and want them to do.

Stories serve multiple purposes: they motivate co-workers, show shared commonalities, deliver difficult news, and show empathy.

The type of stories we tell relate to the following topics: who I am, why I am here, my vision, my values in action, my teaching stories, and “I know what is on your mind”.

Some considerations on selecting the right story for your audience:

- it should have a clear moral or purpose; - it should have a personal connection to the storyteller and/or the audience; - it should present conflicts, vulnerabilities or achievements others can relate to; - it should serve to strategically underscore your intention.

But it is important that your storytelling does not cross the line into bragging when you only talk about your successes; nor should you ramble on for too long because that could bore your audience. If you cannot focus your storytelling, then you could also easily lose your audience because you stray so far from

the point that your listeners may find your story irrelevant. Stories should be simple so that everyone in the audience can get your point and nobody feels uncomfortable or somehow left out by what is being conveyed with the story.

The importance of storytelling lies in branding and marketing, and it constitutes an important part of leadership presence.

The best way to communicate with the people you are trying to lead is often through a story.

HOW STORIES AFFECT YOUR AUDIENCE Stories also affect the way we listen. When we hear a story, faces soften, shoul-

ders relax, people sit back in their chairs, and often even a smiles will appear. Stories make meetings more human and more enjoyable.

Storytelling is personal. I hope that when you hear a story, you start thinking of your own.

The most moving story comes from your soul. It is a way to mine deep down and touch the tender heart of your audience. Everyone has a heart. Deep down, everyone wants to be proud of his or her life and feel like they are important – this is the root of power and influence that you can access through storytelling. So go out there and tell your story. ■

Judit Ábri von Bartheld ACC, International Coach Federation accredited executive coach, organiser “Coaching Without Borders” www.coachinghataroknelkul.hu, and “Leadership Excellence Forum” abri.judit@executivecoach.co.hu www.executivecoach.co.hu

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BBJ

WWW.BBJ.HU

Budapest Business Journal | Sept 07 – Sept 20s

Publishers in need of innovation Reduced marketing expenditure by advertisers, coupled with falling newspaper sales, are giving publishing companies a hard time. New ideas are needed to get out of the downward spiral..

BBJ ÁGNES VINKOVITS

Newspaper publishers in Hungary have been cutting expenditures and hoping for an end to the crisis since it first hit. By now, it has become obvious that innovations are needed in the sector, with the reduced marketing budgets of advertisers compounded by the increasing circulation losses among Hungarian printed media.

As the latest data of press circulation association

MATESz showed, political newspapers have had to contend with a roughly 10% loss in circulation in a year-onyear comparison. Government-friendly daily Magyar Hírlap was most affected: it lost almost 1,500 daily buyers in a year and now sells only 9,678 copies. Its competitor, the daily Népszabadság (still majority-owned by Ringier, which has offered its stock to minority owner and opposition party MszP, for HUF 1.5 bln) cannot be happy either: the left-leaning daily’s circulation of 57,003 in Q2 was 11% lower than a year earlier. At the same time, rightwing daily Magyar Nemzet also lost 9.9% and now sells 36,805, while the left-wing Népszava lost 7.6%, selling17,565 copies a day in Q2.

However, the dailies may still consider themselves lucky when compared to economic and political weeklies. In the space of a year, Figyelő lost

23.4% of its buyers and sold 9,040 copies a week in Q2. Its largest competitor, HVG, lost 16.2% and sold 52,110 covers in the April-June period.

At the same time, conservative weekly Heti Válasz noted a 8.3% drop and sold 15,689 copies on average in Q2.

The hunger for printed tabloids is not the same either: daily Blikk lost 11.9% year-on-year, but still sold 164,243 copies, while competitor Bors also lost 10.8%.

The only publication on the up was women’s weekly magazine Kiskegyed, which recorded a 3% increase in the 12 months to June. At the same time, its competitor, Nők Lapja, which has had a new editor-in-chief since November 2011, lost 3.6% over the year and 2.1% in the last quarter.

TOOTHPASTE FOR A BRIGHTER FUTURE It is not only the decreasing income from newspaper

ADVERTISING SPEND IN 2011 (HUF MLN)

Source: MRSz (Hungarian Advertising Association)

sales that is hitting Hungarian publishers, but reduced advertising revenue too.

According to publishing association MLE, total advertising revenue was HUF 41.6 billion in 2011, down from HUF 43.7 bln a year earlier.

And even if all the former readers of printed newspapers simply preferred getting the

information online, their passion for news would still not be enough to save publishers with exposure to both onand off-line markets. International studies clearly show that for every $10 that the printed media loses, the digital market picks up only $1.

As József Bayer, head of the Hungarian branch of Axel-

Springer, pointed out at the 17th Media Hungary conference in May, the internet has narrowed the opportunities to such a great degree that consolidation and cutting costs are no longer sufficient: publishers have to innovate.

Looking at the possible direction innovation may take, a Ringier –sponsored event at Media Hungary gave some ideas that were certainly colorful, if not that likely. Tabloid toothpaste or washing powder were just a few of the daring suggestions that came up at the publisher’s playful brainstorming session about how to boost the sales data of Blikk. But the event only managed to prove that, even if publishers are aware of the necessity for innovation, it might not be so easy to find products that are at least relatively close to the original goods and also have a market that is not already saturated. ■

28 3 Socialite BBJ

WWW.BBJ.HU

Budapest Business Journal | Sept 07 – Sept 20

Touching up the city – good for Some civic initiatives prove that the creation of a nicer city environment does not necessarily require huge financial investments, but calls on the efforts of participants instead. As a result, it is not only the surroundings that get a facelift, but stronger communities might also evolve.

Walking in Kispest, Budapest’s 19th district, a small piece of land full of life appears among the huge blocks of houses. Első KisPesti Kert, the Hungarian capital’s first local authority-owned community garden, opened in April to provide people with the opportunity to grow fruit and vegetables.

In the garden, 26 families work their own parcels of land, each 4.5 sqm. This might not sound much and even Gábor Rosta, communication expert, col-

lege teacher and creator of the garden, admits that next time he would not go under 7 sqm; but even so this little parcel of land, if taken good care of, is enough for a family to fulfill their fruit and vegetable needs in the summer without going to the grocery store a single time.

The quality of the soil is very good here, Rosta says, explaining the good harvest. At least three or four quintals of tomato were harvested this year, along with a wide range of plants

from pumpkin, through corn and herbs to eggplant.

Rosta has another, more extensive purpose with the garden, namely to reawaken in people their capability for self-sufficiency. As he says, development nowadays means that the townies need a van to go to a nearby Tesco store to buy stuff that they could otherwise harvest in their own gardens. “They are losing any connection with the land, losing their capability to be sufficient unto themselves.” Első Kis-Pesti

Photos: Judit Wild (vadjutka.hu)

GUERILLAS FOR A COLORFUL CITY

Another spectacular attempt to brighten up the city is so-called guerilla knitting.

“Out walking on a grey, fall day in the sixth district, I saw a colorful piece of knitting on the bars of a shop,” Judit Wild, jewelry maker and organizer of Budapest’s first guerilla knitting actions tells the Budapest Business Journal about her personal experiences with

this underground initative.

The idea of covering public properties with knitting has been loved – or hated – in Wester European cities since 2004, but the first Hungarian followers appeared only around two years ago.About 20 people went to the first knitting meeting that Wild convened at Blaha Lujza tér last summer. The following two

events, at Deák tér and at Széll Kálmán tér, were of similar popularity but some of those works are still on display in the streets.

Wild, who plans to organize further knitting rallies, would like to bring guerilla knitting into fashion as these little pieces of street art “give people two minutes of joy”.

Still, those few sitting and knitting at Moszkva tér in

May heard some quips of passers-by. “Some asked why we do not help the poor or do something instead of sitting here and knitting,” Wild recalls without any obvious bitterness. “I’ll admit that it does not have such a direct benefit as giving food to the homeless, but it might still have some positive social effect,” she says, adding that the initiative might also be

a good tool to show people that, with some extra effort, they can do something nice for themselves.

As Wild points out, previous generations were more focused on decorating things inside the fences around their gardens and did not have such a strong affinity for lighting up their wider environment. As such, she sees even the Budapest

establishment and the interest that people on Facebook or in the media have started to have in this topic as promising in itself, adding that if civil initiatives and the need for a nice city were an elementary school with grades from one to eight, local society would be at around the third grade. “Still close to the start, but we already know our ABC!” ÁV

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BBJ

WWW.BBJ.HU

Budapest Business Journal | Sept 07 – Sept 20

the eyes, good for society Kert, like any community garden, can be a tool of education. “Kids can learn here that tomatoes are not born in a plastic bag.” According to Rosta, people will soon need such knowledge. In line with several experts, he forecasts even more serious problems with food supply in the very near future. But if people have the chance for self-sufficiency, they have a life instinct strong enough to make them start gardening.

JOINT FORCES And the garden has much more to offer than simply high-quality food. “It is 10% gardening and 90% community,” Rosta says.

“This is the harmonized cooperation of 26 families. These people, living in blocks of houses, have

heard one another flushing the toilet for years, but did not even know each other’s names. Now they have started to talk to each other and to be real neighbors.”

For the success of the community, and thus of the garden, everyone had to find a function in this micro-society, becoming, for example, treasurer or the person responsible for the compost. “We have great gardeners with a reserved personality and also some good organizers with a big mouth but weaker gardening skills.

Everyone finds a role here,” Rosta explains.

As such, the garden gives new perspectives. This area is not home to the wealthiest people in the country, Rosta points out. “These people, for example, do not go on holiday in the sum-

mer but they can perfectly escape their everyday problems when they meet here at six in the afternoon.”

People get new goals here, he says. “You can live your life sitting in front of the television, but it is not worth it,” he adds.

The garden gives a focus to the time spent together, and the work the people do there together makes the community strong. “Here in Hungary we have a very weak society,” Rosta says, noting that people have to realize their common interests and learn how to cooperate. “Weak societies fall the fastest as the very first problem makes them attack one another,” he points out.

At the same time, the benefits of the garden spread beyond the fences. People sitting outside and watching

their gardening neighbors work and harvest tend to better appreciate their own environment as well.

MORE TO COME Although originally it was hard to find a local government willing to support the idea by putting a piece of land at Rosta’s disposal, by now even the decision makers seem to realize the benefits of community gardens.

“This HUF 3 million amount has been our best investment,” Kispest major Péter Gajda says, adding that investments worth HUF 150 million sometimes receive much less press coverage than this garden has, not to mention the long-term social benefits. The sight of abandoned properties full of litter gives people the feeling of being unsupported and increases the impression of

insecurity. No surprise then that several German surveys prove that crime statistics show positive tendencies around community gardens, property prices increase and people live longer.

As the success of Első Kis-Pesti Kert – and a few others run by foundations – suggests, a boom in the number of community gardens is likely next spring in Budapest.

However, Rosta has some doubts. “I strongly hope that decision-makers realize that this is about much more that making the land available.” No community is born by itself, and no garden blooms without a community.

This is why the community consciousness here is built through frequent gatherings and common activities, Rosta says. ■

30 3 SocailiteReadingCorner BBJ

WWW.BBJ.HU

Budapest Business Journal | Sept 07 – Sept 20

WHO'S NEWS

Do you know someone on the move?

Send information to research@bbj.hu

Before taking up his position at Indotek Group, Petrik was property management and business development director at ESTON. He started his career in the real estate sector at Strabag Kft as sales manager and later worked as managing director of Akron Management Hungary Kft and Development Associates Kft. He has a degree in foreign trade and also holds a RICS (Royal Institute of Chartered Surveyors) certificate.

Kádár has been with CIG Pannónia since 2009. She was appointed as deputy CEO responsible for sales in January 2012. Previously, she worked with ING group.

Between 1994 and 2003, she was managing director in charge of the company’s pension fund and head of the employee benefit division. She joined Deloitte Magyarország in 2003 and worked there as marketing and business development director until 2009.

She graduated from the legal faculty of Eötvös Loránd University.

Name Zoltán Petrik Current company/position Indotek Group/senior asset manager

Name Balázs Birkás Current company/position CIG Pannónia Életbiztosító/ board member

Name Irén Márta Current company/position European Association of Communications Directors/regional coordinator in Hungary

Birkás was named as deputy COO in October 2011 and has worked as head of CIG Pannónia’s service center since May 2012. He started his professional career at insurance company OTPGarancia as sales representative in 1994; later he had held executive positions until 2010.

Márta, who is the director of corporate relations and communication at Holcim Hungária Zrt, has been named as regional coordinator for Hungary at the European Association of Communications Directors. Márta has been with Holcim since 2005. Before that, she worked on marketing and communications areas, after graduating from the University of Szeged in 1994.

Name Gabriella Kádár Current company/position CIG Pannónia Életbiztosító/ board member

Name János Bartók Current company/position MefLife Biztosító; Ahico Biztosító/CEO

MetLife, Inc. has announced the appointment of Bartók as CEO of the company’s operations in Hungary, MetLife Biztosító és Ahico Biztosító. Bartók was president-CEO of Aviva Életbiztosító before his current assignment, and took a regional position at the company in 2007. Between 1999 and 2007, he was deputy CEO of Aegon Magyarország.

Name Miklós Barta Current company/position CIG Pannónia Életbiztosító/ board member

Name Zinaida Vojnár Current company/position Orco Property Group/ leasing and marketing manager

Walker has taken over as managing director for vehicle production at German carmaker Audi's unit in Hungary. Walker, an engineer who has moved from the company base in Ingolstadt, will replace Ulrich Minke, who is retiring.

Name Gerd Walker Current company/position Audi Hungaria Motor Kft/ CEO

Name Péter Ádám Current company/position Ringier/head of online sales

SEPT 11

SEPT 15

SEPT 17

AmCham Career School with Andrea Juhos, Managing Partner, Lee Hecht Harrison, Hungary LOCATION AmCham Conference Room, 1051 Bp, Szent István tér 11 TIME 6:30 – 8 PM FEE AmCham members in good standing: HUF 30,000 + VAT/person; non-members: HUF 45,000 + VAT/person ORGANIZER American Chamber of Commerce in Hungary CONTACT László Metzing, laszlo.metzing@amcham.hu; +36 1 428-2082

September 15 AmCham Family Sports Day and Annual Soccer Tournament LOCATION GLOBALL Football Park and Sporthotel, 2089 Telki, Szajkó u. 39 FEE Registration required ORGANIZER American Chamber of Commerce in Hungary CONTACT ildiko.takacs-berka@amcham.hu

AmCham Communications School with Gergely Mikola, Director of Corporate and Regulatory Affairs, British American Tobacco LOCATION AmCham Conference Room, 1051 Bp, Szent István tér 11 TIME 6:30 – 8 PM FEE AmCham members in good standing: HUF 30,000 + VAT/person; non-members: HUF 45,000 + VAT/person ORGANIZER American Chamber of Commerce in Hungary CONTACT László Metzing;: laszlo.metzing@amcham.hu; +36 1 428-2082

SEPT 20

SEPT 25

OCT 1

Friends of Canada – Wine tasting LOCATION L’Enoteca Wine Bar – Trattoria Toscana, 1056 Bp, Belgrád rakpart 13 TIME 7 PM FEE HUF 2,990 ORGANIZER Canadian Chamber of Commerce in Hungary CONTACT www.ccch.hu

Breakfast at my company series – Nestlé LOCATION Nestlé Hungary, 1095 Bp, Lechner Ödön fasor 7, 3rd floor TIME 8:30 – 10 AM FEE HUF 3,000 + VAT ORGANIZER Netherlands-Hungarian Chamber of Commerce CONTACT www.dutcham.hu

Canadian Thanksgiving Celebration LOCATION Le Meridien Budapest, 1051 Budapest, Erzsébet tér 9-10.

FEE HUF 10,000 + VAT/person, 50% discount for children 6-12 years of age, free for children up to 6 years of age ORGANIZER Canadian Chamber of Commerce in Hungary CONTACT info@ccch.hu

Barta joined CIG Pannónia Életbiztosító as controlling director in January 2011 and was promoted to controlling and finance director in 2012.

He started his career at KPMG Hungária as auditor assistant and was named auditor manager in 2007. He obtained his ACCA (Association of Chartered Certified Accountants) degree in 2008.

Vojnár has been appointed as leasing and marketing manager to support the Hungarian activities of Orco Property Group.

Vojnár brings over 10 years of real estate and business experience from several multinational companies, having worked regionally and internationally.

Vojnár returned from AXA Real Estate in Paris, where she worked as expertise and marketing product manager on new funds under development.

Ádám joined Ringier to head the publisher’s online sales team on September 3. Previously, he was with Est Media where he worked as sales director. Earlier, he was with HVG and Sláger Rádió. He graduated from the Budapest University of Technology and Economics.

SEPT 18 EuCham Conference – Business challenges in Hungary LOCATION Barabás Villa, 1122 Bp, Városmajor utca 44

Time 5 – 7 PM ORGANIZER British Chamber of Commerce in Hungary on behalf of the Permanent Commission of the European Bilateral Chambers in Hungary CONTACT www.bcch.com

OCT 8 AmCham Communications School with József Végh, Criminal Psychologist, Hostage Negotiator, European Mentaltactical Institute LOCATION AmCham Conference Room, 1051 Bp, Szent István tér 11 TIME 6:30 – 8 PM FEE AmCham members: HUF 30,000 + VAT/person for the entire series; non-members: HUF 45,000 + VAT/person for the entire series ORGANIZER American Chamber of Commerce in Hungary CONTACT László Metzing, laszlo.metzing@amcham.hu; +36 1 428-2082

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BBJ

WWW.BBJ.HU

Budapest Business Journal | Sept 07 – Sept 20

Getting to Yes Negotiation is a way of life for the majority of us. Whether we’re at work or at home, shopping or socializing, we want to participate in the decisions that affect us. Getting to Yes offers a highly effective framework to help us secure winwin agreements both at work and in our private lives.

BBJ BBJ

Getting to Yes has been in print for more than 30 years, and is recognized worldwide as the most effective and practical guide to negotiation.

The American National Institute for Dispute Resolution Forum says that “no other

by Roger Fisher, William Ury and Bruce Patton

book in the field comes close to its impact on the way practitioners, teachers, researchers, and the public approach negotiation”, and that it has “an unrivaled place in the literature of dispute resolution”.

However, there have been many shifts in the way people think about negotiation over the last three decades, and Getting to Yes has been revised and updated to take those changes into account.

The authors explain that, a generation ago, most people thought decision-making was hierarchical: those at the top made the decisions while those at the bottom followed orders. In reality the situation was somewhat more complex. Now, with changes that have occurred to organizational structure, as well as the increasing pace of innovation and the role of the internet, many people understand that to accomplish our goals we have to rely on a huge number of people, most of whom we exercise

no direct control over. So we cannot simply give orders.

“More slowly in some places, more rapidly in others,” say the authors, “the pyramids of power are shifting into networks of negotiation.”

The goal is not to eliminate conflict but to transform it. The authors explain that conflict is both inevitable and useful, often addressing imbalances, generating insight and leading to positive change. The challenge is to adjust the way we deal with our differences, so that rather than treating each other as adversaries, we become engaged in side-byside problem solving.

One of the most important principles in Getting to Yes is about separating the people from the problem. This is not about ignoring emotional issues. Instead, this approach allows us to be “soft on the people” while remaining “hard on the problem”. Other key strategies involve focusing on interests not posi-

tions, and insisting on the use of objective criteria. Getting to Yes also has an appropriately titled ‘Yes, but…’ section, which answers the commonly asked questions, What if they are more powerful? What if they won’t play? and What if they use dirty tricks? The result is a book that cuts through the jargon to present easily remembered principles that will guide us to success, no matter what the other side does. ‘”We are each participants in a pioneering generation of negotiators,” the authors conclude. “While negotiation as a decision-making process has been around since the beginning of the human story, never has it been so central to human life and the survival of our species. As the negotiation revolution unfolds, our aspiration is that the principles in this book continue to help people – individually and collectively – negotiate the myriad dilemmas in their lives.”

Getting to Yes: Negotiating an agreement without giving in by Roger Fisher, William Ury and Bruce Patton Random House Business Books ISBN 9781847940933 Available to order through www.hungaropress.hu