Bbj 2412

SPECIAL REPORT:

Report 3Special centers ice rv se Shared ary at home in Hung

BBJ

Shared servic

e centers

Lóránt Varga, locations,” explainsof CBRE Hungary. managing directorquality buildings is not The need for high as a basic requirement in a trend so much operating in Hungary;“A” for most SSCs are located in grade of these fact, 90% of SSCs adds. Since most buildings, Varga a premium, companies at fixed buildings come for ways to keep are always looking remain competitive. thus costs down and use more do this is to One way to adds Varga. had condensed workstations, days when tenantscould Gone are the floor plates and access to huge conditions favorable rental explains negotiate very for expansion, and and options ANIKO FENYVESI leasing manager Gergely Koó, of IMMOFINANZ. central location, with marketing coordinator significantly and Thanks to Hungary’s down fresh graduates “With vacancies strong pool of skills and reasonable in the pipeline, few new developments relevant language many foreign-owned to expand can hardly sqm SSCs that are looking headline rents, to establish their space above 5,000 this find a contiguous And here in firms have chosen now,” he adds. centers (SSCs) in the city right employ the cost-saving shared service and office While workers per is where firms can to find, the last decade. reducing workspace getting harder is measures of a flexible space are both say the country also introducing employee while many in the business to locate an SSC. in which employees place workplace strategy or two days per week, still an attractive of Hungary location one home at from skills work “The geographical country manager provide technical of our says Viktor Nagy,Hungary. means we can zone as many in IMMOFINANZ in the same time Christopher Wilson, are particularly Technical features where big space customers,” says director of IT cases house important in CEO and managing Buildings that which has transformed saving is required.

Services Hungary, SSC into a full-fledged Hungary. be equipped with Recruiting in for of SSCs should ideally from a traditional director of HAYS for a number systems that allow effective HVAC air supply IT service provider “The infrastructure Tammy Nagy-Stellini, managing fresh more denser seating, firms in the region. working environment and including a state-of-the– is are in and a comfortable Koó. “We also have 90 companies in Hungary – ions network “Today, more thanon the services of “German and French at are as a result, explains art telecommunicat height than averagethus Hungarian employeeshave organizations rely with English service centers greater internal we excellent. Also, demand, active building, and 100 office highest more than than 40,000 our Haller Gardens of overcrowding in open to new technologies a must. jointly more employees.” feeling Y-generation no longer a plus but alleviating the very many talenteddoes face challenges employing most of them analytical highly qualified thing, people, open plan offices.” shortage of lettable But the sector professionals, growth. For one says Additionally, strong The dramatic in maintaining Budapest young college graduates,” also forces tenants office space in and multi-lingualpresident of the Hungarian space on the market agreements either the shortage of thinking is also key.” Ésik, up for some time, Agency. to sign pre-lease has been building of years before new Róbert or in future Investment Promotion for ongoing developments it may be a couple up with demand. by the Budapest projects, which can be built-to-suit,a collected data making development catchesare concerns about on by and Based services business Varga. Additionally, tenants can Forum, real estate Furthermore, there supply of capable, A place to do total of says the in the SSC Research firm CBRE identified a longer-term commitment, deals, Varga workers, shortages in investment substantial growth in the past five less-expensive more favorable an Although the coming one- 214,000 sqm of office space operates but relatively in negotiate Hungary such is expected in for example, which signed sector taken-up by SSCs Nokia, been property begin sector adds. has who helped make to office that recently the years of the total destination to-two years, SSC in Budapest, demand with represents 17% attractive SSC open-plan office is trying to help is slow to catch up to to CBRE. a large Budapest. This contiguous spaces take-up in that period, accordingseparating a deal for a modern, with. The government subsidies to encourage vacancy rates of large that will offer state-of-thephysically competition the sector, with a environment and collaborative The concept of to locate back-office at record lows and regional at an all from services within meeting facilities on the company’s more multinationals multinationals corporate functions premise of setting up art entirely based of in attracting response to the shortage of the Iszak, services here.

“Service design, company, as is In in the fields explains Patrícia say, time high. adopting flexible an SSC, has many advantages. cheaper requirements, Overall, experts Construction on human resources room space, companies are generally be government of FSS at Nokia. and of real estate and are not head strategies and locations should launched in 2015 sector has plenty a key role in in terms of workforce and they this project was Hungary’s SSC expect to workforce the sector can country. subsidies are playing to set up to specific geographical to grow, and international firms for the necessarily bound increase its importance a great deal to incentivizing their SSCs here.

SSCs already contribute

Despite a shortage and of office space, n increasing competitio for capable workers, for experts see room growth in the sector.

SHARED SERVICE CENTERS

BUSINESS JOURNAL VOL. 24. NUMBER 12

the local economy.

BUDAPEST

JUNE 17, 2016 – JUNE 30, 2016

HUNGARY’S PRACTICAL BUSINESS BI-WEEKLY SINCE 1992 | WWW.BBJ.HU

HUF 1,250 | €5 | $6 | £3.5

Lending a hand

NEWS

Construction puts a drag on the GDP The lack of EU funds for civil engineering projects means the building sector is performing at lower levels than in 2015, causing the OECD to cut Hungary’s growth projection to 1.6% for this year. 3

SPECIAL REPORT

SSC sector expected to continue growing Budapest is suffering a shortage of vacant office space, and the supply of capable multilingual workers is not what it once was, but experts say there is still more room for new SSCs here. 10

NEWS

Photo: Mátyás Pödőr

Weighing the costs of the Brexit vote The impact of a ‘leave’ vote in the U.K.’s June 23 referendum could include a 0.8% reduction in GDP growth for Hungary, experts say.

It could also send 100,000 Hungarian workers home. 3

Christopher Wilson, CEO of IT Services Hungary, explains why Budapest is a good place to host back-office services. 15

BUSINESS

BBJ_2412_news.indd 1

BUSINESS

SPECIAL REPORT

New taxi law shows sharing has its foes

HB Reavis goes big into office market

What do the best workers want?

While a CEU professor argues that the sharing economy is about to bring dramatic change, a vote by Parliament that would effectively halt Uber here seems aimed at delaying that change. 8

With a major refurbishment set to create 32,000 sqm of office space at the Bem Palace, and another project that would bring 136,500 sqm to the Váci Corridor, the firm has shown it is bullish on Budapest. 9

Given the stiff competition for talented employees at SSCs in Budapest, we interviewed young workers at the centers run by GE and KPMG to find out what it takes to attract good help. 16-17

2016. 06. 15. 20:14

www.bbj.hu

Budapest Business Journal | June 17 – June 30, 2016

SPECIAL REPORT:

Report 3Special Shared service centers at home in Hungary

SUBSCRIPTIONS

BBJ

Shared service

centers

Lóránt Varga, locations,” explainsof CBRE Hungary. managing directorquality buildings is not The need for high as a basic requirement in a trend so much operating in Hungary;“A” for most SSCs are located in grade of these fact, 90% of SSCs adds. Since most buildings, Varga a premium, companies at fixed buildings come for ways to keep are always looking remain competitive. thus costs down and use more do this is to One way to adds Varga. had condensed workstations, days when tenantscould Gone are the floor plates and access to huge conditions favorable rental explains negotiate very for expansion, and and options ANIKO FENYVESI leasing manager Gergely Koó, of IMMOFINANZ. central location, with marketing coordinator significantly and Thanks to Hungary’s down fresh graduates “With vacancies strong pool of skills and reasonable in the pipeline, few new developments relevant language many foreign-owned to expand can hardly sqm SSCs that are looking headline rents, to establish their space above 5,000 this find a contiguous And here in firms have chosen now,” he adds. centers (SSCs) in the city right employ the cost-saving shared service and office While workers per is where firms can to find, the last decade. reducing workspace getting harder is measures of a flexible space are both say the country also introducing employee while many in the business to locate an SSC. in which employees place workplace strategy or two days per week, still an attractive location of Hungary one at skills work from home “The geographical country manager provide technical of our says Viktor Nagy,Hungary. means we can zone as many in IMMOFINANZ in the same time Christopher Wilson, are particularly Technical features where big space customers,” says director of IT cases house important in CEO and managing Buildings that which has transformed saving is required.

Services Hungary, SSC into a full-fledged Hungary. be equipped with Recruiting in for of SSCs should ideally from a traditional director of HAYS for a number systems that allow supply effective HVAC IT service provider “The infrastructure Tammy Nagy-Stellini, managing more fresh air denser seating, firms in the region. working environment and including a state-of-theare in and a comfortable Koó. “We also have 90 companies in Hungary – network – is “Today, more thanon the services of “German and French at as a result, explains art telecommunications employees are rely height than averagethus Hungarian centers organizations greater internal excellent. Also, demand, with English active service and we have office building, more than 100 than 40,000 highest our Haller Gardens of overcrowding in open to new technologies a must. jointly more employees.” feeling Y-generation no longer a plus but alleviating the very many talenteddoes face challenges employing most of them analytical highly qualified thing, people, open plan offices.” shortage of lettable But the sector professionals, growth. For one says Additionally, strong The dramatic in maintaining Budapest young college graduates,” also forces tenants office space in and multi-lingualpresident of the Hungarian space on the market agreements either the shortage of thinking is also key.” Ésik, up for some time, Agency. to sign pre-lease has been building of years before new Róbert or in future Investment Promotion for ongoing developments it may be a couple up with demand. by the Budapest projects, which can be built-to-suit,a development catchesare concerns about by making Based on data collected services and business Varga. Additionally, tenants can Forum, real estate Furthermore, there supply of capable, A place to do total of says the in the SSC Research firm CBRE identified a longer-term commitment, deals, Varga workers, shortages in investment substantial growth in the past five less-expensive more favorable an Although the coming one- 214,000 sqm of office space but relatively in negotiate which operates Hungary such is expected in sector taken-up by SSCs Nokia, for example, signed begin sector who helped make the office property with years that has been of the total adds. SSC in Budapest, recently destination to to-two years, demand represents 17% attractive SSC open-plan office is trying to help is slow to catch up to to CBRE. a large Budapest. This contiguous spaces take-up in that period, accordingseparating a deal for a modern, with. The government subsidies to encourage vacancy rates of large that will offer state-of-thephysically competition the sector, with a environment The concept of and collaborative to locate back-office at record lows and regional at an all from services within meeting facilities on the company’s more multinationals multinationals corporate functions premise of setting up art entirely based of in attracting response to the shortage of the Iszak, services here.

“Service design, company, as is In in the fields explains Patrícia say, time high. adopting flexible an SSC, has many advantages. cheaper requirements, Overall, experts Construction on human resources room space, companies are generally be government of FSS at Nokia. and of real estate and are not head strategies and locations should launched in 2015 sector has plenty a key role in in terms of workforce and they this project was Hungary’s SSC expect to workforce the sector can country. subsidies are playing to set up to specific geographical to grow, and international firms for the necessarily bound increase its importance a great deal to incentivizing their SSCs here.

SSCs already contribute

Despite a shortage and of office space, increasing competition for capable workers, for experts see room growth in the sector.

SHARED SERVICE CENTERS

BUSINESS JOURNAL VOL. 24. NUMBER 12

the local economy.

BUDAPEST

JUNE 17, 2016 – JUNE 30, 2016

HUNGARY’S PRACTICAL BUSINESS BI-WEEKLY SINCE 1992 | WWW.BBJ.HU

HUF 1,250 | €5 | $6 | £3.5

Lending a hand

NEWS

Construction puts a drag on the GDP The lack of EU funds for civil engineering projects means the building sector is performing at lower levels than in 2015, causing the OECD to cut Hungary’s growth projection to 1.6% for this year. 3

SPECIAL REPORT

SSC sector expected to continue growing Budapest is suffering a shortage of vacant office space, and the supply of capable multilingual workers is not what it once was, but experts say there is still more room for new SSCs here. 10

NEWS

Photo: Mátyás Pödőr

Weighing the costs of the Brexit vote The impact of a ‘leave’ vote in the U.K.’s June 23 referendum could include a 0.8% reduction in GDP growth for Hungary, experts say.

It could also send 100,000 Hungarian workers home. 3

Christopher Wilson, CEO of IT Services Hungary, explains why Budapest is a good place to host back-office services. 15

BUSINESS

BUSINESS

SPECIAL REPORT

New taxi law shows sharing has its foes

HB Reavis goes big into office market

What do the best workers want?

While a CEU professor argues that the sharing economy is about to bring dramatic change, a vote by Parliament that would effectively halt Uber here seems aimed at delaying that change. 8

With a major refurbishment set to create 32,000 sqm of office space at the Bem Palace, and another project that would bring 136,500 sqm to the Váci Corridor, the firm has shown it is bullish on Budapest. 9

Given the stiff competition for talented employees at SSCs in Budapest, we interviewed young workers at the centers run by GE and KPMG to find out what it takes to attract good help. 16-17

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EDITOR-IN-CHIEF: Tom Popper DEPUTY EDITOR: Aniko Fenyvesi ASSOCIATE EDITOR: Robin Marshall NEWS EDITOR: Christian Keszthelyi EDITORIAL STAFF:

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THE EDITOR SAYS

Soros still the same, and still needed George Soros and Viktor Orbán used to agree on a lot of the problems that plagued communism, including government control of the media, the judiciary and certain markets.

Now that Orbán is prime minister, he has decided that government control can be good, and that Soros is bad.

Orbán says Soros has changed his viewpoint, and suggests that Hungarians now oppose the philanthropist’s causes. But Soros has been pretty consistent. In fact it is Orbán who has shifted his politics.

Born in Hungary and a resident of Budapest’s Újlipótváros, Soros survived the Holocaust as a boy and fled the Soviet occupation here. He became a banker in London, made his way to America, and made billions in finance. Then he returned to Budapest, a city where many people once would have murdered him simply because he was born Jewish, and sought to help Hungarians by loosening the grip of communism and supporting prodemocratic activities.

Soros has said that an “open society”, with equality of rights, education, information and opportunity, will strengthen democracy and foster unity. The hundreds of millions of dollars he has poured into this country have produced benefits like Central European University, which provides an economic boost to Budapest’s downtown while producing graduates who are now among our leaders in business and government.

Soros was a student of Karl Popper, and he summarized that philosopher’s thoughts in an October 2009 lecture at CEU: “Since perfect knowledge is beyond the scope of the human intellect, a society characterized by the freedom of speech and thought and free elections is preferable to a society which imposes its ideology by force.” Soros then explained why he agreed with the philosopher: “Having been exposed to Nazi persecution and communist oppression, I found this argument very persuasive.”

While his goals are often considered liberal, the philanthropy that Soros supports has consistently favored free speech, thought and elections.

As a young liberal, Orbán also used to speak in favor of those ideals. Orbán once took Soros’s financial support, which was presumably meant to encourage development of a post-communist government. When Orbán was the head of Europe’s only youth party and a darling of the left, Orbán’s anti-communist views coincided with those of Soros.

Then Orbán steered his Fidesz party to the right in the early 1990s. According to those around him who left Fidesz at the time, the shift was a blatant effort to capture Hungary’s large centre-right voting block. Orbán continues to seek the support of the right by blasting liberal democracy and espousing isolationist views. He also embraces communist-style government control of key businesses and the media – concepts that are not really in keeping with right-wing ideals but are in keeping with Orbán’s desire to run an authoritarian government.

Recent complaints against Soros by Orbán and his government have included the frequent charge that, by seeking to assist refugees, the groups that Soros supports in Europe are somehow opposing the will of Hungarians. Then there is the “problem” of NGOs pushing for transparency: In late March, Cabinet Chief János Lázár demanded that the Soros Foundation and the groups it supports get out of the country. “It is time for those who get paid every day to prove that the Christian-conservative government is corrupt to leave Hungary,” Lázár explained.

Lázár was apparently suggesting that Hungary follow the lead of Russia, where President Vladimir Putin has banned Soros-backed NGOs and other groups working to promote democracy. Fortunately for Hungary, our current government’s war on democracy is nowhere near as advanced as that of Putin, but it is not for lack of trying by some members of Fidesz.

At a time when this country’s government seems intent on consolidating its control over various aspects of the economy, politics and society, we need the work supported by Soros – just as we needed it under communism. We hope that Soros and his foundation never change, and never leave Hungary.

Tamás Botka CIRCULATION AND SUBSCRIPTIONS: circulation@bbj.hu PRINTING:

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Then and now

What We Stand For: The Budapest Business Journal aspires to be the most trusted newspaper in Hungary. We believe that managers should work on behalf of their shareholders. We believe that among the most important contributions a government can make to society is improving the business and investment climate so that its citizens may realize their full potential.

At left, workers from the Orion factory landscape the banks of Bányató (miner’s lake) in 1977. The lake, shown recently above, and the park around it, are favored leisure places for those living in the concrete blocks in District Ten.

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2016. 06. 15. 20:14

1 News BBJ

macroscope

NEWS

Western elite’s ‘crisis of legitimacy’

NEWS

Parliament OKs 2017 budget  5

Construction sector lags Without EU funding for state projects, the construction sector’s contribution to the GDP is in negative territory.

In response to recent data, the OECD said it is cutting its growth projection for Hungary from 2.5% to 1.6%.

BBJ_2412_news.indd 3

Brexit expected to hurt here Analysts say a ‘leave’ vote in the U.K. may slow growth here by 0.8%.

MAXIM LEFLEUR

ZSÓFIA CZIFRA

Not surprisingly, the pale GDP growth figure in the first quarter of the year was mainly caused by a setback in industry and a massive contraction in construction – that’s what we learned from the detailed data published by the Central Statistical Office (KSH) on June 7.

The second estimate was basically the same as the first: The 0.9% year-on-year growth was confirmed. However, when looking at data adjusted seasonally and for calendar effects, the second reading of the yearly growth rate was put one percentage point lower than in the first estimate and came to 0.4%.

Getting into more detail, the value added by industry was down by 0.7% y.o.y. Of sub-sections with fairly significant weight, the manufacture of computer, electronic and optical products grew, while production of transport equipment dropped.

As for the value added by services, it produced a growth of 3%, with outstanding performance from the tourism and hospitality sector (6.4% growth), and household consumption also grew 4% from the same period of the past year.

The other drag in the figures was the construction sector, where performance fell by 28% on a year-on-year basis, with civil engineering decreasing most, due to a massive drop in state projects financed from EU funds.

Reacting to the data, the Organization for Economic Cooperation and Development (OECD) sharply cut its GDP growth projection for Hungary in its latest Economic Outlook: It now forecasts 1.6% growth for 2016, down from the 2.5% target it gave only a month ago.

At the same time, however, it did lift its projection for 2017, up to 3.1%.

In spite of the setback in the first three months of the year, Hungary’s government still expects the economy to pick up in the second half of the year, stating that the slowdown was only temporary. This seems to be justified by

4

Monthly consumer price index. Corresponding period of previous year equals 100.

(Source: Central Statistical Office)

April construction data shows that the sector contracted 29.8% from the same period of last year – March data revealed a 33.9% decrease on a yearly basis. the April industrial output figures: In a first reading, the volume of industrial output grew by 5.3% year-on-year, following a y.o.y. drop of 4.6% in March.

Output has gained 24% since 2010, and some 10% since January 2014.

Not such good news Not so good news came from the construction sector. Although the government noted in its reaction to the poor GDP figures that the soaring number of building permits also signals a positive trend, such trends are nowhere in sight yet, as April construction data shows that the sector contracted 29.8% from the same period of last year – March data revealed a 33.9% decrease on a yearly basis.

Another surprise hit analysts on June 8 when the May consumer price index was published by KSH. Inflation swung back to negative territory and came to -0.2% in May, while analysts asked by business site portfolio.hu had made a consensus prediction of 0.1% inflation for the period. Core inflation dropped to 1.3% on a yearly basis from 1.4% in April. KSH noted that motor fuel prices decreased significantly in May. In spite of the government’s positive

Things to watch in the coming weeks There will be a relatively calm period in the next two weeks when it comes to KSH releases. On June 21, earnings for the January-April period will be published. The Monetary Policy Council of the National Bank of Hungary will hold its rate-setting meeting on June 21, but as the rate-cutting cycle of the MNB came to an end at its latest meeting, this time no surprises are expected. The MNB will also issue its Inflation Report on June 23, and KSH will publish retail trade figures for April on the following day.

Unemployment figures for MarchMay will come out on June 28.

outlook for this year’s macro figures, Standard & Poor’s sees a less bright course for the country. S&Pʼs EMEA sovereign chief Moritz Kraemer said in a Reuters interview that S&P is unlikely to raise Hungary back to investment grade. The key factor holding back the rating now is the difficult predictability of policymaking, a weakened institutional framework and maybe also the dependence on transfers from the EU budget, which is very large.

Kraemer also said that large European countries are questioning whether Hungary, which has effectively closed its borders to avoid a flood of Syrian refugees, should get such large amounts of EU funding given its “lack of solidarity” on the migrant issue.

If, as appears increasingly likely, citizens of the U.K. decide in their country’s June 23 referendum to exit the European Union, it will have broad implications for Hungary’s economy, according to Economics Minister Mihály Varga and a host of other experts.

While Varga said at a June 13 press conference that this country could experience a 0.3-0.4% slowdown in GDP, others see even worse “Brexit” fallout.

Experts note that a Brexit would reduce the size of EU funding for Hungary, force many Hungarians to give up their jobs in the U.K., and also reduce the amount of trade between the two countries.

Citing an April report published by Citibank, analysts at Equilor said on June 14 that a Brexit could cost Hungary an estimated HUF 800 billion in EU funding and slow the country’s GDP as much as 0.8% in subsequent Brexit renegotiations.

The Citibank report notes that as much as 3% of Central Europe’s GDP from 2016-2020 is expected to come from EU funding, and this money as well as the revenue from foreign workers would decline significantly if there is a Brexit.

A “leave” vote would have direct consequences to standing HungarianBritish economic ties, and subtler effects based on budgetary and political changes in the EU according to Varga.

Last year, the utilization of EU funds amounted to 5-6% of Hungary’s GDP, according to a report from the Hungarian National Bank. Although the report predicted that this year EU funds would contribute only about 2.5% of the country’s GDP, any reduction in those funds would have an impact.

Hungarians working in the U.K. would, off course, feel a direct impact if they lose their jobs. Currently, there are approximately 60,000 registered Hungarians working in Britain, according to Edit Zgut, an analyst at the Political Capital Institute. She added that, as registration is not mandatory, the total number of Hungarian workers there could be as high as 150,000-200,000.

“Only a fraction of potential workers from the EU would be eligible to get visas in the case of Brexit,” Zgut explained, adding that experts at the British Embassy in Budapest have been unable to determine what will happen to Hungarians employed in the U.K. in the event of a “leave” vote.

2016. 06. 15. 20:14

www.bbj.hu

04 News

Budapest Business Journal | June 17 – June 30, 2016

NEWS IN BRIEF Constitution amended to create ‘state of terror emergency’ The government can suspend civil rights and property rights and assume other powers if two-thirds of Parliament agrees that a “state of terror emergency” exists, under a Constitutional amendment passed on June 7. The amendment allows the government to mobilize the army and public administration for up to 15 days, even without parliamentary approval.

The bill, initiated by the Interior Ministry and the governing Fidesz party, was passed with the support of far-right Jobbik. In case of an emergency related to a terrorist act or “significant and direct” threat, the government, with a two-thirds majority support of lawmakers, will be able to declare and to extend such an emergency situation.

Under the law, a state of emergency can justify suspension of the right to avoid illegal search and seizure, the right to public assembly, the right to free movement and also the right to property.

Even before the emergency is declared, the government can introduce measures mobilizing public administration, the army, police and national security forces, but such moves can last a maximum of 15 days, according to reports. A different but related bill proposed by the Interior Ministry was backed by even the opposition Socialists and LMP parties.

This anti-terrorism law package will give the army extended powers for the use of weapons in the event of a terrorist emergency. The government will be allowed to take measures like curtailing the use of vehicles, evacuating the public, ordering curfews and banning public

assembly. The government can also order tighter control of the border and step up surveillance of the Post Office and traffic on the internet, among other things. The law also calls for the creation of a new anti-terrorist organization, the Information and Criminal Analysis Center for Counter-Terrorism (TIBEK).

Orbán: Western elite causes ‘crisis of legitimacy’ Western democracy is in crisis, and European foreign policy has failed, Hungary’s Prime Minister Viktor Orbán said on June 8 at a forum entitled Prague European Summit organized by the V4 countries, according to reports. According to the prime minister, the Western elite is unable to validate its politics through successes in the economy, and therefore a crisis of legitimacy has arisen in Europe.

Because of the crisis, Europeans cannot identify with the political decisions of the elite, the prime minister said, according to Hungarian news portal hvg.hu.

Another problem is the gap between the opinions of the elite and the rest of the population, Orbán added. Furthermore, the prime minister said, attempts at exporting democracy, which is a basis for European foreign policy, have also failed. The real challenge Europe is facing is that the different states of the continent nurture different views about the future, which is well reflected in how different states handle and think about the migrant crisis, according to Orban.

He said there are currently two leading points of view in Europe with relation to migration: One says immigration to the continent needs to be managed, while the

other says migration to Europe must be stopped at the borders, hvg.hu reported.

“Europe is rich and strong enough to have enough power to say no matter what great migration starts in the world – let’s say to the south of us – no man can arrive to our continent and world without being controlled and granted the license to come in”, hvg.hu quoted Orbán as saying.

“We do not want to integrate migration in to our life, but we would prefer to slow it, get it under control, and as long as it is possible, to close it out of our lives,” Orbán reportedly said.

FHB investigations said to target publisher who leads bank The editor of index.hu on June 12 addressed the claims that the authorities are pursuing cases against FHB mortgage bank because the chairman of FHB’s board also owns several media outlets. HHB mortgage bank said on June 10 it is planning to appeal a HUF 105 million fine levied by the National Bank of Hungary (MNB) against the lender. The fine was levied on charges of violating rules prohibiting illegal market manipulation, and a police investigation of the bank has begun, according to reports. Gergely Dudás, editor-in-chief of index.hu, acknowledged in an opinion article posted on June 10 that there is speculation suggesting that the primary target of the FHB bank investigation is bank chairman Zoltán Spéder, who also owns index.hu and several other media outlets. Some of those outlets are currently facing tax investigations.

Dudás said it is possible that the case against FHB is meant to pressure Spéderʼs media company, or even make him give it up, hvg.hu reported. But, Dudás also said that index.hu is trying to avoid fighting the political battles that Spéder is facing. FHB said in a statement posted on the website of the Budapest Stock Exchange (BSE) on Friday, that in the past days, numerous attacks have targeted both FHB Group and the chairman of the board of directors of FHB Mortgage Bank, according to Hungarian news agency MTI. “FHB Group, as before, will not address articles and comments containing such speculation, accusations and rumours,” the statement said. “FHB Group has always operated legally, in accordance with regulations, prudently

and under the constant supervision of the MNB.”

Hungary: EU funding pre-finance limit increased to 100% The Hungarian government raised the pre-financing limit for European Union funding from 50% to 100%, according to a report published by daily business newspaper Világgazdaság on June 15. The new rules will allow anyone to request pre-financing over 50% if they can demonstrate a good supporting liquidity plan. Recipients of EU funding in Hungary are eligible for up to 50% refinancing of the total amount they have been designated, with a total cap of HUF 1 billion for individuals, civil organizations, churches, and small- and medium-sized enterprises. The prefinancing starts at 75% for R&D projects and increases to as much as 100% for funding below HUF 500 million or for local councils, organizations funded by the central budget, and state-owned companies separated from the State Treasury.

Foreign investor who partnered with Pécs faces liquidation A foreign businessman who partnered with the city of Pécs is apparently losing his business after losing the support of state and local officials. A liquidation proceeding was launched against Pécsʼs Zsolnay, a porcelain manufacturer whose majority owner expressed concerns of a “hostile takeover” by city representatives. The procedure was launched by an unnamed Hungarianowned construction company, who purchased a debt that Zsolnay had with the state-owned Hungarian Development Bank (MFB), local portal pecsma.hu reported. Bachar Najari, a Syrian-born businessman who acquired a 74.5% majority stake in the company from now minority owner Pécs local council in 2013, in a statement earlier aired concerns about what he believes could be an “intended hostile takeover” supported by “representatives of the minority owner”. The Municipal Court of Pécs has three days to appoint a bailiff to hear the case, Hungarian news agency MTI reported on Friday. Hungary’s Cabinet Chief János Lázár said on Thursday that

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Parliament OKs 2017 budget Hungary’s Prime Minister Viktor Orbán sits next to Zsolt Semjén, deputy prime minister responsible for national policy, (left) as Parliament on June 13 votes on the Budget Bill for 2017. Parliament voted that day to approve the budget bill for 2017 and to modify the budget act for this year. Next yearʼs budget separates EU funding for the first time. Amendments to the 2016 budget act raise both revenue and expenditures by HUF 421.7 billion. The 2017 budget targets revenue of HUF 17.431 trillion, expenditures of HUF 18.597 tln and a cashflow-based deficit of HUF 1.166 tln, Hungarian news agency MTI reported.

(Photo: MTI/Tamás Kovács)

the Hungarian government “backs the efforts by the municipal council of Pécs”, which is the minority owner of porcelain maker Zsolnay Porcelánmanufaktúra. He added that the Hungarian government has taken the side of the local council of Pécs in the “Zsolnay matter”. He said that the “apparent owner” of Zsolnay cannot count on further support from state-owned MFB or the government. At the end of May, MFB canceled the HUF 413 million loan provided to Zsolnay, and said if the company failed to comply with the repayment scheduled in 15 days, the lender would start liquidation of the company. Zsolnayʼs majority owner reportedly said it planned to sue the MFB for its decision to cancel the loan. The staff of Zsolnay resigned from their jobs on June 7 en masse, effective immediately, abandoning the company for the newly formed Ledina Kerámia, which was set up by the municipal council of Pécs.

Metropol publishes last issue The free daily newspaper Metropol, which used to be handed out at Budapest Metro stations free of charge, canceled its publication and put out its last issue on June 14, according to reports. The paper stopped publishing half a year after reports at the end of November suggested that it could lose the contract that secured its distribution at metro stations. The move was seen as favoring a governmentfriendly newspaper over its competition, Metropol, according to reports. According

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to an unnamed editorial staff member, the editorial staff gathered in a meeting room at the paperʼs office yesterday and were informed that the paper would not be published the following day, Hungarian daily Népszabadság reported on June 15. Metropol has been in circulation in Budapest for the past 18 years. Another free daily Lokál has been distributed for the past few days at the very location where Metropol was distributed for a number of years. Lokál is allegedly owned by Árpád Habony – a close associate of government leaders, according to reports.

Metropol was published by MTG Metro Gratis Kft., which is owned by Károly Fonyó, a close business associate of Lajos Simicska. Simicska has openly opposed the government since he had a falling out with Hungary’s Prime Minister Viktor Orbán last February. Earlier this year, Reuters reported that since Simicska’s split with Orbán, a series of government measures were taken that apparently harmed Simicskaʼs media empire. Reuters added that the prime minister could be looking for ways to increase his influence in the media before the 2018 elections.

Majority of Hungarians planning summer vacations As many as two-thirds of Hungarians surveyed said they will take a summer vacation this year, up from 48% a year ago, according to a survey conducted by Budapest Bank, Hungarian News Agency MTI reported on June 15. Average

households will spend the same budget as last year for travel – approximately HUF 150,000 in total or HUF 8,000 per person per night. Approximately 88% of respondents said they would use cash to pay for travel expenses, while 54% said they would pay with credit and debit cards, 27% with vouchers, and 18% through online transactions. About 21% of respondents said they would be traveling abroad, and slightly less than two thirds will remain in Hungary.

ÁKK has HUF 300 bln buffer against Brexit risk Hungary’s Government Debt Management Agency (ÁKK) has a financing buffer of approximately HUF 300 billion, or 1% of GDP, against market turbulence that could result from Britain’s exit from the EU, ÁKK chief György Barcza told Reuters in an interview on June 15, according to Hungarian news agency MTI. “Yields have been fairly stable so far, and we saw strong demand at last week’s auction,” he told Reuters, when asked about possible Brexit risks. “The forint’s exchange rate has been fairly stable as well, so we think the Hungarian market has been resilient to global market turbulence and ... this is expected to remain the case,” he added. Barcza said ÁKK had built up a financing buffer of around HUF 300 bln from forint-denominated issuances this year. He said another foreign issue this year was “a possibility but not a priority”,

according to MTI. Hungary issued a CNY 1 bln dim sum bond in April, covering a little more than one-tenth of the €1 bln in international FX bond issues it tentatively plans for the full year. Barcza said Hungary planned to slowly build up its presence in Chinese debt markets over the next five to ten years, so it could issue there on a regular basis, and that another yuan-denominated bond this year was possible. This could be a “Panda” bond, issued on the onshore Chinese market, he said. “I would not rule out this possibility, but a lot will depend on regulatory authorities as the onshore bond market in China is a strongly regulated market,” he reportedly told Reuters.

Clients of failed brokerages to receive additional HUF 1.4 bln The clients of failed Hungarian brokerages, including Quaestor, may receive an additional HUF 1.4 billion in compensation for financial losses, following the Hungarian Parliament’s decision today to alter the definition of ‘yield’, the Hungarian Compensation Fund said, according to Hungarian news agency MTI. Roughly 6,000 clients are set to benefit from greater compensation payouts in light of the changes. The altered legislation will be beneficial to clients, as only real achieved income will be deducted from compensation payouts, while interest credited to security accounts will not, according to the Compensation Fund.

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Turk Telekom International names new CTO Dr. Cebrail Taşkın was appointed Chief Technology Officer (CTO) of Turk Telekom International (TTI), taking effect on June 1.

Taşkın has been with the TT Group for several years and was most recently employed as TT Technology Group PMO Director. “I am sure that his vast experience in the telecoms sector will contribute immensely to TTI’s technology team,” said Cengiz Oztelcan CEO of Turk Telekom International. Taşkın was born in Kırıkkale and graduated from Istanbul Technical University, Sakarya Engineering Faculty, ElectricalElectronics Engineering Department.

He received an MSc and PhD degree in the field of Telecommunications at the Department of Electronic Engineering and his MBA from the Department of Economics and Business Administration, Middle East Technical University (METU) in 2013. His professional experience includes working in the Informatics and Telecommunication sector since 1995 and with Turk Telekom Group since 1999. He has worked in the network planning department, the strategy and

business development department and the R&D department as a group manager and as Business Development Director at Argela – part of the Turk telecom Group Company.

Mitsubishi Electric Factory Automation appoints leader Péter Balán, who has been the direct representative of Mitsubishi Electric in the Hungarian market since 2009, was appointed team leader at the recently opened Mitsubishi Electric Factory Automation’s Hungarian office. The new office will serve customers through sales and technical support providing all services for both before and after sales. This step shows Mitsubishi Electricʼs significant involvement in the development of industry in the CEE region and Hungary specifically. As the leading producer of industrial automation products such as drives, control systems and industrial robots, Mitsubishi Electric would like to bring innovation to its customers, helping them develop their business and become more competitive. Apart from a wide range of automation products, Mitsubishi Electric also offers ready to

use solutions, especially for automotive, printing, food & beverages, life science and water markets.

Computacenter hires new recruitment manager Yoel Zubizarreta was appointed head of recruitment and talent acquisition at Computacenter, reporting directly to HR Manager Renáta Szabó.

Zubizarreta will devise and implement a recruitment and retention strategy for the center and will work closely with delivery groups at the center. “I am extremely pleased to welcome Yoel, who is a highly experienced human resources professional. His specialist knowledge will add a valuable perspective to the issues that our company has identified as essential to address so that Computacenter can achieve its ambitions to grow and develop further,” Szabó said in connection with the promotion.

Zubizarreta will join Computacenter in August after almost six years with TATA Consultancy Services (TCS), where he served as head of talent acquisition, responsible for the recruitment targets achieved by TCS in the last three years.

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UPC Hungary names customer insight director Annamária Nagy was appointed customer insight director at UPC Hungary, filling a newly created position. In her new position, Nagy will be responsible for driving and improving customer experience by building crossfunctional alignment and supporting management decisions by delivering in-depth insights from the market.

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With more than 18 year experience in the field of customer insight and understanding, her main competences include exploring customers’ needs and behavior, and turning them into actionable insights. She began her carreer at Unilever as a customer insight manager, and prior to joining UPC, was the head of analysis, insight and commercial BI reporting at Telenor Hungary, where she took an active role in several successful branding activities and service launches.

“Nagy’s appointment demonstrates our commitment to understand every aspect of our customers’ behavior. She will play a lead role in the management and execution of operational brand and customer experience programs to bring ‘Customer First’ philosophy to life in a tough competitive environment,” said Anita Carra, CMO of UPC. “I am pleased to join UPC and I truly believe that my appointment reflects UPC’s commitment to putting the customer at the center of every decision,” Nagy said in connection with her appointment.

“My task is to ensure that customer experience becomes an even stronger pillar of the company’s strategy,” she added.

Kinstellar’s Budapest office welcomes new partner Anthony O’Connor joined the Budapest office of Kinstellar as a partner, becoming head of the Hungarian corporate and M&A practice and co-head of the firm-wide private equity sector. Prior to joining Kinstellar, O’Connor, who has domestic and cross-border M&A and private equity experience, was a partner at White & Case and later Dentons in Budapest and has over ten years of experience in the region, having worked on scores of transactions in Czech Republic, Hungary, Romania, Serbia, and Turkey. O’Connor has experience advising private equity and venture capital investors in all aspects of highprofile investments in Central and Eastern Europe, including identifying and managing key business risks, principal areas of sensitivity and motivating factors. His expertise

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Budapest Business Journal | June 17 – June 30, 2016

includes advising on and negotiating share purchase agreements, investment and shareholder agreements, management warranty deeds and warranty and indemnity insurance, as well as management incentive plans, equity roll-overs and earn-outs.

O’Connor graduated from the University of Queensland in 2002. He is a member of the Budapest Bar Association and a solicitor at the Supreme Court of England and Wales.

“We are pleased to welcome Anthony to the firm, and we are delighted that such an internationally experienced practitioner is joining our Budapest office. His experience and business acumen will expand our private equity capabilities and are complementary to our strategic goals. Anthony is a wellrespected professional with a standout reputation on the CEE market, and we are confident that he will make a significant contribution to the firm,” Csilla Andrékó, managing partner of the Budapest office, said.

Wizz Air names communications chief Tamara Vallois was appointed the communications chief of Hungary’s lowfare airline Wizz Air. She will be working in the Budapest office of Wizz Air, reporting to Owain Jones, director responsible for corporate connections.

Vallois, who has experience in the FMCG and automotive sectors, has spent the last three years on the communications team of Wizz Air, Jones said. “As the director responsible for external and internal communications … she will be leading a communications team that has a good reputation in the industry,” Jones added. She joined the company in 2013 as a communications manager. Prior to that she worked for Colgate-Palmolive, General Motors and Agoda.com in the field of communications and marketing.

Bakamo.Social recruits new head of global operations and research Mahmoud Ghazal was hired as global head of operations and delivery and leader of the newly established Geneva office at social media research startup Bakamo.Social.

Founded and based in Hungary, Bakamo.Social conducts in-depth research into how a company, topic, individual or any other entity is perceived online. Their customers have included a host of major multinationals, like Nestle and

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MasterCard, as well as organizations like the United Nations. Ghazal has more than 17 years of experience at P&G, and worked in the innovation process with brands such as Dolce & Gabana, Gucci, and Boss. He has acted as an insight function leader for brands including Olay, Oral B, and Crest. “It’s so exciting to see how our approach to social media has been exciting major global brands and agencies. I very much look forward to having Mahmoud be part of our team,” Dániel Fazekas, CEO of Bakamo.Social, said of the the new hire. “Bakamo is a great business,” Ghazal commented. “This type of new social insight can revolutionize how business is done and is exactly the kind of business I have been looking for.”

OMV Hungary hires new CEO Tibor Balogh was appointed CEO of OMV Hungary, as of the beginning of June, with the responsibility of leading the company on the Hungarian market. Balogh, who has 25 years’ experience in the sector, joined OMV 17 years ago. His responsibilities in his new role will include the operations of OMV’s 172 stations in Hungary, out of which 58 are home to Spar express food retail stores. Since 2013, Balogh assumed the role of director of sales and vehicle gas pricing at the company. He is also the vice-president of the Hungarian Petroleum Association. “OMV’s development in Hungary is a success story, and I am planning to continue this legacy with new improvements,” Balogh said in connection with his promotion. “My aim is to further strengthen the firm’s position in Hungary and respond to the challenges in the sector,” he said.

BDO Hungary appoints new tax expert Gergely Demetrovics joined BDO Hungary’s tax consulting branch as an accentuated expert, following the firmʼs decision to strengthen its tax consulting activities. Prior to joining the firm, Demetrovics spent a few years at BBD Enterprise in leadership positions.

Before that, he spent 11 years at KPMG, but began his career at PricewaterhouseCoopers. He graduated from the legal predecessor of the Corvinus University of Budapest in 1997 as an economist, gained a tax expert certificate in 1999 and completed his postgraduate legal studies at Eötvös Lóránd University in 2001.

07

COMPANY NEWS

CRH Group opens service center in Budapest International construction firm CRH Group opened its new business service center in Budapest on June 8, offering financial and commercial administration services for the Northern Duna Region of CRH, including Austria, Hungary and Slovakia, according to a press release issued on June 10. The new center was opened in the Váci Corner Offices building during a ceremony attended

by Ireland’s Ambassador to Hungary Patrick Kelly. Budapest was chosen as the location for the center as the capital is internationally recognized in the services sector and is an attractive location, the press release said. “CRH is one of the biggest business successes in Ireland”, the ambassador said at the opening during which he welcomed the investment. The ambassador noted that the opening of the center is expected to further contribute to the development of economic relations between the two countries. The new center is expected to create 54 new jobs in the country.

Wizz Air to launch Budapest- Porto route

Hungary’s low-cost airline Wizz Air is launching a new Budapest-Porto route as of September 4, operating two flights a week on Wednesdays and Sundays, according to a press release issued on June 10. After Wizz Air launched flights between Budapest and Lisbon last March, Portugal became popular among Hungarians traveling to the country for business or leisure purposes, the company noted in the press release. This March, Wizz Air also launched flights to Porto from Warsaw, the company added. With the newly announced flight, Wizz Air will be operating 51 routes to 23 countries from Budapest. This year Wizz Air announced the launch of ten new routes.

With 1 million passengers, BP Airport sets record for May One million passengers travelled through Budapest Airport last month, making it the busiest May on record for the airport, which hit the milestone two months earlier than last year, according to a press release posted on the airportʼs official website bud.hu on June 8. The growth was driven primarily by the launch of a number of new routes in the first half of 2016. Additionally, eight of Budapestʼs largest carriers registered their highest number of passengers in May and over 25% year-on-year growth including: Wizz Air, British Airways, Norwegian and airberlin, the press release noted. The May figures were also boosted by the success of long-haul routes and figures could improve further with new routes from Air Canada Rouge

and Asiana Airlines, according to bud. hu. “Reaching yet another momentous threshold, and so early in the year, is a tremendous achievement for us and a direct result of our commitment to increase our choice of passenger connectivity,” said Jost Lammers, CEO of Budapest Airport, adding that with such milestones reached earlier than usual, 2016 is expected to be a record breaking year, according to the press release.

Krono Group launches production at HUF 30 bln particle board plant in Hungary

Production has started at a HUF 30 billion particle board plant recently built by the Swiss Krono Group in Vásárosnamény, the managing director of the groupʼs local unit told Hungarian news agency MTI on June 9. The plant will turn out an annual 300,000 sqm of oriented strand board (OSB) from next year, said Interspan Faipari managing director Barnabás Seregi. He said that 108 people will be employed at the plant. Krono Group made one of its first investments outside of Switzerland in Vásárosnamény in 1989, but closed the base in 2011 due to economic challenges.

TMF Group acquires Hungaryʼs UCMS Group

Professional services firm TMF Group, has acquired Hungary-based UCMS Group, one of Central Eastern Europe’s most established independent payroll, HR and accounting providers, according to a press release issued on June 9. The acquisition is in line with TMF Group’s strategic focus to provide multi-country corporate services and through the acquisition the firm will enhance its existing operations in CEE, particularly in Hungary, which is UCMS Group’s strongest market, the press release said. UCMS Group’s CEO Béla Kakuk, will remain with the company once the acquisition is complete. UCMS currently has offices in Hungary, Poland and Romania and was founded in Budapest in 2006, the press release added.

LLP Hungaryʼs revenue reaches €1.8 mln in 2015 The Hungarian subsidiary of software consultancy LLP had revenue of €1.8 million last year, level with the previous year’s revenue, the parent company told Hungarian news agency MTI on June 9.

Parent LLP Group’s revenue was up 3% last year reaching €9 mln, compared to the previous year, the company said. The parent company employs approximately 100 people in ten countries: Hungary, Czech Republic, Slovakia, Bulgaria, Romania, Belgium, Luxembourg, Russia, Mexico and the United States, MTI added.

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Budapest Business Journal | June 17 – June 30, 2016

CEU BUSINESS SCHOOL

The sharing economy could change everything Dr. Yusaf H. Akbar

INNOVATION

Associate Professor of Strategy CEU BUSINESS SCHOOL

Economies are being localized, our concepts of monetization are changing, and so are patterns of empoyment.

You read the newspapers, blogs and magazines and you are constantly reminded of the emergence of a new form of economic exchange: The Sharing Economy. In an era of late capitalism, itʼs redefining what we buy and produce; how we pay and what we learn. What’s going on is that people want to own less and less but desire access to more and more. Today, people stream movies rather than owning DVDs. Society shares travel experiences for free online through the use of social media.

Through increasingly transnational and digitized business models, “prosumers” (consumers who produce at the same time) are revolutionizing the creation and exchange of monetized and non-monetized value. Airbnb, Etsy, Uber, Zipcar, Kickstarter, Shapeways and TaskRabbit are all eliminating traditional barriers to entry in their respective fields and disrupting entire industries. In particular, in the sharing economy, goods and services can be produced and delivered in sufficient quantity without the need for scale – undermining the benefits of being a large integrated company. In the same way, commercialization of new ideas, which traditionally requires massive investments in sunk cost related to R&D and new product development, can now be achieved at a fraction of the cost with 3D printing and collaborative online sharing of knowledge. Now individuals can develop and configure unique goods, services and experiences that are more authentic than mass-produced, scaled consumption.

These developments beg several fundamental questions: Are we witnessing the fundamental transformation from scaled economies to de-scaled, localized economies?

Does the concept of economic sharing inherently bring to an end the notion of monetization? Are traditional patterns of employment being replaced by an increasing role for freelancing?

First, de-scaling: Digitization has transformed services that previously required face-to-face interaction between supplier and user. Perhaps the most evident example is in educational services. The arrival of free Massive

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As part of a May 17 demonstration by taxi drivers opposed to Uber, cabs take over a lane of Budapestʼs Elizabeth Bridge. (Photo: MTI/Zsolt Szigetváry)

Uber: Blocking technology ‘not good direction’

In a statement sent to the Budapest Business Journal on June 13, ride-sharing service Uber said that preventing companies from doing business simply because they do not fit in the traditional business framework is “not a good direction”.

The statement came just hours after the Hungarian Parliament approved amendments that allow authorities to temporarily block websites or apps running “illegal taxi services”. It appears the law might lead to the operations of Uber being blocked.

The law says that, if authorities find that websites and applications offer “illegal taxi services” in Hungary, this site or application can be blocked for a period of up to 365 days, according to Hungarian news agency MTI. The blocking of a site or an application can be ordered if the taxi service provider is fined for not having the requisite dispatcher service but still continues to operate, according to Hungarian online daily hvg.hu.

“Uber continues to seek dialogue with decision-makers and all other stakeholders to initiate the change of current regulations and make it more suitable for new technologies,” Uber Hungary said in the statement. “Uber has been committed to 21st century, innovation-oriented regulation that puts the consumer first. Such regulation would benefit everyone: It would provide riders with a reliable and cashless service, create economic opportunities for thousands and increase tax revenues for the state.”

– Christian Keszthelyi

Now individuals can develop and configure unique goods, services and experiences that are more authentic than massproduced, scaled consumption.

Open Online Courses (MOOCs) offered by both players new (Coursera) and old (Massachusetts Institute of Technology (MIT)). Now, with sophisticated interactive platforms, students may no longer need to be physically present to attend classes and actually may have a

of “smart devices” are enabling users of energy to more efficiently consume electricity.

Second, monetization: With the sharing economy comes the harsh reality that hitherto salable goods and services can be offered for free in a form of neo-barter. For several years now, we can get videos for free on YouTube through friends’ YouTube channels and social media platforms. We can read newspaper articles for free on Google.

This revolution is spreading to goods too. 3D printers are rapidly becoming mainstream technology.

These printers now allow users to produce perfect facsimiles of 3D objects that we may have paid for in the past such as clothing, shoes or jewelry. It may happen in the future that we will no longer need to buy goods from factories but instead print them at home... for free.

Third, freelancing: It is now widely believed that the millennial generation has fundamentally different values about career and professional development opportunities compared to the past. They appear to be less interested in accumulating wealth and material possessions and climbing the corporate ladder than their parents were. The fact that they own less stuff means they are more footloose and able to try numerous professional endeavors – sometimes simultaneously.

Freelancing provides the chance to try out several opportunities while earning enough money to do the things they want. They are looking for experiences as much as accolades. They also have less disposable income. This means that in order for them to meet their consumption needs, they need to share what they have in order to get things they don’t.

With the emergence of freely shared services, energy and recycled goods produced on 3D printers, society is increasingly turning to shared “prosumption” and self-sufficiency. Thus, while industries such as agriculture and food, healthcare and hospitality may still remain dependent on the separation of production and consumption, industries where production can be shared at near zero incremental cost could form part of a new economic era.

better learning experience since they can study at their own pace from home rather than hurriedly taking notes in class.

A similar phenomenon is unfolding in energy production and distribution. The impact of climate change is increasingly forcing societies to shift towards the generation, distribution and use of renewable energies such as solar and Dr. Yusaf H. Akbar is an Associate wind. Rather than relying on large Professor of Strategy at Central scale and expensive energy networks, European University Business School. individuals can now generate their This column is part of a continuing own energy using enough for their own series of opinion columns from experts needs and selling it on through existing at the CEU Business School in Budapest. energy grids – much to the chagrin The opinions stated here do not of traditional energy generators and necessarily reflect those of the Budapest distributors. Moreover, manufacturers Business Journal.

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Budapest Business Journal | June 17 – June 30, 2016

REAL ESTATE NEWS

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09

HB Reavis undertakes two new office projects

A reconstruction in Buda and a series of towers on the Váci Corridor show that the firm is feeling good about the Budapest market.

GARY J. MORRELL

Apparently feeling bullish about the positive parameters in the Budapest office market, HB Reavis is pursuing a dual office development strategy, with one refurbishment and one new build.

The firm is reconstructing the classic Bem Palace into 32,000 sqm of office space in Buda’s Second District, while at the time securing a large land plot that has permission for a large office project close to Árpád híd in the ever-popular Váci business corridor. The Slovak-based developer has already successfully leased and sold its first Budapest office project, the 21,000 sqm Váci Corner, to Zeus Capital Management.

The latest project, designed by Finta Studio, will deliver 136,500 sqm of leasable space in a series of towers up to a possible height of 90 meters located in a green environment, with an additional 10,000 sqm of service space. Construction of the first part of the phased speculative development is due to start this summer with a proposed completion date of 2018.

The size of the scheme is an indication of confidence on the demand side of the Budapest office market and the continued

A sketch of the plans for Bem Palace. popularity of the Váci Corridor with developers. The project provides the possibility for companies to establish offices in stand alone buildings in a green environment. With such a large-scale project, HB Reavis is able to pursue a phased development schedule based on pre-leases with flexible delivery dates.

The developer has also purchased the classic Bem Palace office building from Europa Property Fund, and plans to redevelop the listed building into a 32,000 sqm office complex. A building permit has been granted for the protected building following negotiations between the Office for Culture and Heritage and the designers of the project, T2.a Architects studio. A former military barracks built in 1897, and the site of fighting in the 1956 uprising, the

renovation will include public areas and the design aims to reflect a combination of the old and new, maintaining elements of the original facades and fittings, as agreed with the heritage authorities. The project is located on the Buda bank of the Danube facing the central Fifth District, and Zoltán Radnóty, CEO of HB Reavis Hungary, anticipates that similar tenants to those located in the central business district of Pest will be attracted to a project within an urban environment and in close proximity to a metro station. The redevelopment is due to be completed by the end of 2018.

Growing confidence “The growing confidence in the Budapest office market and in our projects is

reflected in the fact that financing is now more available, with a number of banks offering to provide financing for these projects,” Radnóty said.

HB Reavis is regarded as one of the leading developers in the region and has office, logistics and retail projects in Czech Republic, Slovakia, Poland and Turkey, in addition to two office projects in London. The company entered Hungary at a time when it was generally considered to be a very difficult development market, and is aiming to become a market leader with the delivery of office projects in 2018-19.

Global real estate services firm Cushman & Wakefield is forecasting that around 150,000 sqm of office space will be delivered in Hungary in 2018, with 70-80,000 sqm expected in 2016 and 2017. “The large volume will be delivered in 2018; a lot of this is pre-let, although a significant part is speculative. But we also anticipate that take-up will continue to be high and the most important issue is that we see new companies entering the market and therefore we predict that net absorption will be around 150-180,000 sqm with the result that vacancy will slightly decrease or remain around the 10% mark up to 2018,” the company says.

In addition to multinationals, he sees a number of Hungarian occupiers coming into the market, such as start-ups that no longer want to be based in apartments or in older buildings and want to be in modern offices for the benefit of both their workforce and their image. Additionally, a number of government agencies are moving into the letting market.

GTC to launch office investment Real estate developer GTC will, in the coming weeks, launch a 21,500 sqm office building investment, referred to as White House, on Budapest’s Váci út, GTC Commercial Director Bori Gedai announced at a June 9 conference.

The investment volume was not disclosed. Cushman and Wakefield and CBRE have been granted exclusive rights to lease the offices of the planned property.

Construction of the “A” category office building is expected to be launched within the next few weeks and be wound up by December 2017, raising the Hungarian portfolio of GTC International Group to 140,000 sqm, the developer announced.

“The greenfield investment is looking to receive a LEED Gold Certificate, and this was a consideration throughout the entire planning and designing process,” Gedai said. “We are happy that after so many years we can finally create something,” Gedai added, commenting on the difficulties of the past few years following the crisis in 2008. “The old elevator factory, which was built in 1910, will be preserved and built into the new building,” she added.

“The new building will fit the expectations of tenants looking for office buildings on the Váci Corridor,” according to Gedai.

The office market appears to be on the mend after a number of slow years

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A sketch of the planned White House. following the crisis. “The vacancy rate has reached 11% to date; it has never been so low,” C&W Hungary CEO Gergely Pados said at the event. “The market is expected to pick up through an increase in leasing activities,” Pados explained in his summary of market conditions.

“Take up has grown significantly, and pre-leases are becoming a trend,” Judit Varga of CBRE said at the event. “In the past few years new office buildings were either fully rented through pre-leases or by the first year after opening, at the latest,” Varga commented.

GTC Hungary manages a total of 120,000 sqm of office space in the country with five buildings and 58 tenants. GTC Hungary owns four of the buildings and manages an additional building.

Europa Capital sells Eiffel Square office, retail, park complex Europa Capital and its local partner, ConvergenCE, announced on June 14 that they have completed the sale of the 23,000 sqm Eiffel square to the Germany-based asset and investment manager, KGAL for an undisclosed fee.

Eiffel Square (pictured) is located next to the Western Railway Station and consists of office space and street front retail and services, in addition to a park area. “The sale is completed at a time when the Budapest market, having recovered from the global financial crisis, is entering a period of strong growth,” commented Robert Martin, head of CE at Europa Capital.

– Christian Kesythelyi

2016. 06. 15. 20:14

3Special Report Shared service centers at home in Hungary BBJ

Shared service centers

Despite a shortage of office space, and increasing competition for capable workers, experts see room for growth in the sector.

ANIKO FENYVESI

Thanks to Hungary’s central location, strong pool of fresh graduates with relevant language skills and reasonable headline rents, many foreign-owned firms have chosen to establish their shared service centers (SSCs) here in the last decade. While workers and office space are both getting harder to find, many in the business say the country is still an attractive place to locate an SSC. “The geographical location of Hungary means we can provide technical skills in the same time zone as many of our customers,” says Christopher Wilson, CEO and managing director of IT Services Hungary, which has transformed from a traditional SSC into a full-fledged IT service provider for a number of firms in the region. “The infrastructure in Hungary – including a state-of-theart telecommunications network – is excellent. Also, Hungarian employees are open to new technologies and we have very many talented employees.”

But the sector does face challenges in maintaining growth. For one thing, the shortage of office space in Budapest has been building up for some time, and it may be a couple of years before new development catches up with demand.

Furthermore, there are concerns about shortages in the supply of capable, but relatively less-expensive workers, who helped make Hungary such an attractive SSC destination to begin with. The government is trying to help the sector, with subsidies to encourage more multinationals to locate back-office services here.

Overall, experts in the fields of real estate and human resources say, Hungary’s SSC sector has plenty of room to grow, and the sector can expect to increase its importance for the country.

SSCs already contribute a great deal to the local economy.

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Tammy Nagy-Stellini, managing director of HAYS Recruiting in Hungary.

“Today, more than 90 companies and organizations rely on the services of more than 100 active service centers employing jointly more than 40,000 people, most of them Y-generation young professionals, highly qualified multi-lingual college graduates,” says Róbert Ésik, president of the Hungarian Investment Promotion Agency.

A place to do business Although substantial growth in the SSC sector is expected in the coming oneto-two years, the office property sector is slow to catch up to demand with vacancy rates of large contiguous spaces at record lows and regional competition in attracting multinationals at an all time high. In response to the shortage of space, companies are adopting flexible workforce strategies and government subsidies are playing a key role in incentivizing international firms to set up their SSCs here.

“German and French are in highest demand, with English no longer a plus but a must.

Additionally, strong analytical thinking is also key.”

Based on data collected by the Budapest Research Forum, real estate services and investment firm CBRE identified a total of 214,000 sqm of office space in the past five years that has been taken-up by SSCs in Budapest. This represents 17% of the total take-up in that period, according to CBRE. The concept of physically separating corporate functions from services within a company, as is the premise of setting up an SSC, has many advantages. “Service locations should generally be cheaper in terms of workforce and they are not necessarily bound to specific geographical

locations,” explains Lóránt Varga, managing director of CBRE Hungary.

The need for high quality buildings is not a trend so much as a basic requirement for most SSCs operating in Hungary; in fact, 90% of SSCs are located in grade “A” buildings, Varga adds. Since most of these buildings come at a premium, companies are always looking for ways to keep fixed costs down and thus remain competitive.

One way to do this is to use more condensed workstations, adds Varga.

Gone are the days when tenants had access to huge floor plates and could negotiate very favorable rental conditions and options for expansion, explains Gergely Koó, leasing manager and marketing coordinator of IMMOFINANZ. “With vacancies down significantly and few new developments in the pipeline, SSCs that are looking to expand can hardly find a contiguous space above 5,000 sqm in the city right now,” he adds. And this is where firms can employ the cost-saving measures of reducing workspace per employee while also introducing a flexible workplace strategy in which employees work from home one or two days per week, says Viktor Nagy, country manager at IMMOFINANZ in Hungary.

Technical features are particularly important in cases where big space saving is required. Buildings that house SSCs should ideally be equipped with effective HVAC systems that allow for denser seating, more fresh air supply and a comfortable working environment as a result, explains Koó. “We also have greater internal height than average at our Haller Gardens office building, thus alleviating the feeling of overcrowding in open plan offices.”

The dramatic shortage of lettable space on the market also forces tenants to sign pre-lease agreements either for ongoing developments or in future projects, which can be built-to-suit, says Varga. Additionally, by making a longer-term commitment, tenants can negotiate more favorable deals, Varga adds. Nokia, for example, which operates a large SSC in Budapest, recently signed a deal for a modern, open-plan office environment that will offer state-of-theart meeting facilities and collaborative design, entirely based on the company’s requirements, explains Patrícia Iszak, head of FSS at Nokia. Construction on this project was launched in 2015 and

2016. 06. 15. 20:19

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EXPERT OPINION

NOKIA ENJOYS SSC SUCCESS IN BUDAPEST Head of FSS Record to Report

NOKIA

Lóránt Varga, managing director of CBRE Hungary. is due to be completed in early 2017, according to Iszak.

“Although instant availability is largely limited due to the remarkably low vacancy rate, pipeline availability is sufficient as most of the major developers have at least one largescale project which could be launched upon a pre-lease agreement,” says Varga who anticipates a steep increase in the volume of new speculative developments from 2018 due to the favorable market fundamentals and better financing terms.

Just as in other CEE capitals, SSCs are undoubtedly the key drivers of the overall office demand in Budapest, says Varga. “Pioneer companies, such as Hewlett Packard or Procter & Gamble, entered the Budapest market in the early 1990s, but that first large wave peaked in 2006-2007. Since then, we have seen a sustained high demand on the back of further new entrants and the expansion of existing occupiers,” adds Varga.

Retaining quality staff According to Tammy Nagy-Stellini, managing director of HAYS Recruiting in Hungary, the number of SSC workers in Hungary has remained essentially the same, despite growth in the sector.

“The reason behind this is that some of the more transactional processes were moved further east, while new and more complex processes were transferred into these centers. Reporting, controlling, project coordination, upselling and business analyst type roles are the newest and most attractive positions available, sometimes for even talented fresh grads.” By providing employees with new career opportunities, SSCs are better able to retain their staff, adds Nagy-Stellini, and that’s a key consideration in an increasingly competitive SSC market.

The fear of qualified graduates leaving Hungary for greener pastures is only temporary, Nagy-Stellini says, as most return to Hungary after about two years, largely due to homesickness. Additionally, nonHungarian candidates are coming from abroad to work in Hungary, so the needs of firms here are usually fulfilled. Companies such as Nokia employ a rotation program that

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circumvents the mass exodus by enabling employees to work and live in other European countries, or even in China, explains Iszak. “We also provide the opportunity to take crossfunctional positions and participate in job rotation. Creation and adoption of a continuous improvement mindset and programs in which employees are invited to own and manage their own improvement ideas are widely welcome by all working in the Nokia SSC,” she adds.

Nagy-Stellini stresses the importance of planning for the future by attracting students early and training them at local universities with practical skills such as SAP, Oracle and strong Excel skills. Additionally, languages are a top priority for employers in the SSC sector. “German and French are in highest demand with English no longer a plus but a must. Additionally, strong analytical thinking is also key, especially because new, more complex functions are coming into these centers, such as business analysis, reporting, and project coordination roles that require a good understanding of business needs and to oversee processes and whole operations in matrix organizations,” adds Nagy-Stellini.

State subsidies The Hungarian state currently offers subsidies to multinationals looking to set up SSCs in Hungary, at least for the first few years of operation, in the hopes of boosting employment and fueling the economy. According to Nagy-Stellini, an increasing number of subsidies are also being made available to companies looking to set up SSCs outside of the capital, in more rural areas, as a way of boosting employment in the regions. “Many subsidies are given for training in order to develop and retain people in these centers,” Nagy-Stellini adds.

Deciding whether to move operations to an SSC also entails the political and economic stability of the host country and as Koó of IMMOFINANZ explains, companies coming to Hungary need to consider the cost of employing an educated work force, the political or economic risks in a given country, and the location.

How many people work at the Nokia SSC here in Budapest?

Nokia has a diverse team in Hungary with more than 1,900 employees. More than 350 work in the shared services areas, and more than 1,400 work in our research and development center.

What are the advantages for Nokia in locating its SSC here in Hungary?

Do you feel this is a good place for an SSC, and if so why?

More than a decade ago Nokia decided to center its financial team in Budapest.

At that time, we were looking for welleducated people speaking foreign languages, a central location in Europe and excellent infrastructure. These requirements are the same nowadays: We seek speakers of English, and other European and MEA languages, who are professonals in accounting and tax compliance, preferably with the relevant ERP background. We have an increased demand for workers with controlling, reporting or analytical knowledge.

The investor friendly environment has made Hungary a favorable target country.

The regulation and tax system, openness of educational institutions, professional assistance for investors were strong reasons for Nokia to select Budapest as hub for other areas.

What kinds of functions do you handle at the Nokia SSC in Budapest? Do you have any interesting or unusual strategies for handling your work here? Are you using any innovative approaches?

Our procurement and human resources teams have a couple of dozen employees, and the marketing team has just opened some positions in Budapest.

I work in the financial shared services organization. and we have the largest team in Budapest focusing on end-toend accounting activities.

Nokia encourages an environment where everyone can grow through constant learning and development.

Sharing knowledge and skills allows the company to inspire innovation across businesses. For instance, our extensive rotation program provided opportunities for several employees to work and live in other European countries, or even in China. In our area, we also provide the opportunity to take cross-functional

positions and participate in job rotation.

Creation and adoption of a continuous improvement mindset and programs in which employees are invited to own and manage their own improvement ideas is widely welcome by all working in the Nokia SSC. What are the special attractions that Nokia’s SSC has for workers? Why would people want to work with you?

While Nokia is considered attractive in the Hungarian labor market, our management is dedicated to retaining employees through a competitive benefit package, flexible working hours, general medical services, preventive programs to support health & safety, a weight loss program, vaccinations, medical tests required for licenses and psychological consultations. All employees have access to a recreation center or can become a member of the 38 Nokia Sport and Hobby Clubs. The company has group insurance contracts that provide insurance coverage to employees, their family members and temporarily employed students. We have launched a “Foundation for Nokia Employees”, with the aim of developing programs for the preservation and improvement of our employee’s health, and we also organize community and social responsibility projects. In the near future, the Foundation will offer recreational discounts for our employees and their families.

Overall, Nokia provides employees the opportunities to develop a career in a large multinational, learn and develop as a true professional in many areas of business in an engaging corporate environment.

You will soon be moving into a new facility in the “Corvin Quarter”. Why is that?

The move reflects the company growth over the past years and its continued commitment to the Hungarian telecom sector and economy. Nokia will move to a new, eight-story office building located in Corvin Promenade – part of the largest city center revitalisation program in Budapest, called Corvin Quarter.

Together with a modern, open-plan office environment, the new location will offer state-of-the-art meeting facilities and collaborative design, entirely based on our requirements. Construction started in 2015 and employees are expected to move in early 2017.

All employees are provided an ergonomic working environment including a friendlier, more casual work setting, and team spaces that promote more interaction with co-workers, team members and visiting guests.

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

Patrícia Iszak

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SSCs drive big demand for o The growing number of companies seeking to locate back office services in the capital is one of the main reasons why the city is currently suffering from a lack of office vacancies.

GARY J. MORRELL

One of the main causes behind Budapest’s current shortage of vacant office space is the success of shared services centers (SSCs) and business process outsourcing (BPO) in the city.

Along with the information communication technology industry, the SSC and BPO sector is regarded as driving office demand and take-up in the capital.

Through these operations, multinational companies and organizations are seeking to off-shore the operational elements of companies to countries such as Hungary that are able to provide quality office accommodation, a skilled labor force and good business infrastructure at a price significantly lower than Western Europe.

In recent years, Hungary and other Central and Eastern European countries have successfully promoted themselves as advanced but cost-effective business destinations for SSCs. From a real estate perspective the basic requirement is that there is a stock of well-located class “A” office space, with a premium on public transport links.

“This should be regarded as a completely new industry that is specific to CEE, as SSCs/BPOs require a skilled labor force direct from universities,” said Tim Hulzebos, managing director of Colliers International Hungary. “The number of corporations establishing SSCs make this the main driver of the office development market in Budapest. This is as central to the real estate industry as production facilities are to the industrial sector.”

In 2014-15, close to 6,000 new jobs were created and there are now more than 90 companies operating in the sector, employing approximately 40,000 people according to SSC Heroes, an online service that seeks to promote and publish data on the SSC industry in Hungary.

“SSC firms employ a large number of people, already around 37,000 in Hungary, out of which approximately 80% are employed in the capital,” commented Kata Mazsaroff, director of occupier services at Colliers International. “The overwhelming majority of these people are young and educated, who require a modern and comfortable working environment. The significance of these companies is highlighted by the fact that in the Budapest office market they currently occupy approximately onequarter of the total “A” class office stock.

Additionally, more than one-fifth of all lease transactions in the class “A” segment were closed by SSC firms in 2015.”

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The Green House, home of Avis Budget Group.

“Companies look for the best buildings available as landmark and visibility both matter for them. Central locations are preferred, and easy public transport (metro access) is key and more important than parking ratio. Air quality is crucial, due to a relatively high number of employees per sqm, and proximity to an education center with the need for an educated labor force.”

Definitions of SSCs and BPOs

Definitions of what constitutes an SSC vary. It is, however, widely defined as the entity in an organization responsible for the handling of specific operational tasks such as accounting, human resources, IT, legal, compliance, purchasing and security. Essentially it is the spin-off of corporate services in order to separate operational tasks from the corporate headquarters.

This process is seen as cost sensitive in terms of head count, labor costs and local selection criteria. And locating these services in CEE offers a substantial discount on core Western European business centers.

According to SSC Heroes, the difference between BPOs and SSCs is mainly the question of for whom the services are provided. In business process outsourcing, a third party provides specific services to a company on a contract basis. However, the spread of the internet and global communication has led to the creation of aggregated back-office functions in the

form of shared services centers. SSCs are not third party service providers but service providers to their mother companies. In the CEE region, these companies have started to become more than a back-office division providing standard activities; they have become strategic centers that have extended their portfolios to include more complex customer-facing roles and remote sales, as well as the core activities of the mother companies.

“Comparing the two, BPOs involve contracting an outside vendor, with the appropriate skills and resources to carry out the work, while shared services is a single, autonomous business unit within the company – both are usually built in a low-cost location,” said Zsolt Kelliar, managing director of SSC Heroes. “In general, BPOs is credited as generating greater productivity due to more advanced technology, systems and processes thanks to higher volumes and specialization.

However, if you have the skills, resources and time to carry out the work in-house,

you will get more control and save transition and supplier’s margin costs.”

Gábor Borbély, head of research and consultancy at CBRE Hungary, argues that SSCs/BPOs tend to move to multi-tenanted buildings rather than establishing headquarters. “Companies look for the best buildings available as landmark and visibility both matter for them. Central locations are preferred, and easy public transport (metro access) is key and more important than parking ratio.

Air quality is crucial, due to a relatively high number of employees per sqm, and proximity to an education center with the need for an educated labor force,” he said.

What kind of space do they need?

The largest current Budapest office project is Váci Greens by the Atenor Group, a phased project that will deliver 135,000 sqm of office space on completion. GE Healthcare has established a sales and service center for CEE and a software hub in addition to a laboratory area at the center.

The complex has BREEAM accreditation, easy access to green areas and large floor plates in addition to two restaurants, a gym, a medical center and a conference center. Developers are increasingly designing projects with a view to securing SSC tenants with a dense person per sqm ratio and the need for amenities such as bike racks and changing room facilities, cafe and restaurant facilities, and green spaces that also act as informal meeting areas.

2016. 06. 15. 20:20

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EXPERT OPINION

IMMOFINANZ HAS FIRM GRIP ON LOCAL SSC MARKET Country Manager Operations HU, Viktor Nagy and Leasing Manager and Marketing Coordinator, Gergely Koó of IMMOFINANZ spoke about Budapest’s shifting SSC market and how the firm has managed to catch and hold on to its valuable clients.

The Group’s properties in Hungary represent nearly 8% of the company’s total portfolio. IMMOFINANZ has a relatively large chunk of the local SSC market and has managed to retain their SSC clients at Haller Gardens by continuing to address their needs in an evolving marketplace.

Top: Váci Greens, home of GE Healthcare. Above: V17, home of E-On. The concept is that staff will be happy to spend time at the complex, often working irregular hours and taking the opportunity to utilize the leisure facilities.

Although the initial image of SSCs as essentially call centers was less than glamorous, SSCs/BPOs are now promoting more dynamic life-styles and ways of working. “Companies need to create an environment where people are motivated to work,” added Hulzebos of Colliers International. “This can be a challenge where 1,000+ staff could be doing a similar job. Companies need to retain staff and therefore an interesting environment needs to be created.”

According to Mazsaroff, SSCs usually have an office requirement of 6-10 sqm per employee, which is less than the average requirement by tenants from other industries. Efficient floor plates, supported by adequate systems allowing dense seating requirements, are therefore key.

On the other hand, more space is provided for social and informal activities like larger kitchens, phone booths and social areas to compensate for the direct dense working environment. This eventually increases office space requirements, but shows that the wellbeing and productivity of the employees is a higher priority for these companies, even at the expense of real estate cost saving. So the aim is to achieve real savings in overall costs by increasing the productivity and engagement of employees, with companies prepared to invest in a better working environment and implement an active design and layout that could increase employee productivity.

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The Váci Corridor is generally regarded as an excellent SSC location. Wing will deliver its 12,000 sqm V17 office center this summer, with an 8,500 sqm pre-lease with E-On already concluded. The Avis Budget Group has established a 7,200 sqm SSC on three levels for around 600 employees at the 17,800 sqm Green House by Skanska.

The office is responsible for finance and accounting, debt management, IT, database management, fleet administration and customer services. According to Avis, the center was chosen due to a combination of its location adjacent to a metro station and other public transport links, and what it defines as a “modern and healthy work environment”.

One brake on increased SSC market activity is that office developers are reluctant to develop outside of the capital in secondary cities with large universities such as Debrecen without pre-leases. In contrast, regional cities in both Poland and Czech Republic have attracted developers such as Skanska who have leased buildings to SSCs. “The tendency of these shared service centers is to move towards more valueadded activities,” according to SSC Heroes.

“Thus the complexity of the service grows and a so-called center of excellence emerges. These centers continuously attract reinvestments and more and more companies start to operate in the countryside as well. Outside of Budapest, cities with a strong university background are valued as possible locations for such investments thanks to the availability of young and skilled workforces.”

Following the financial crisis, the local property market experienced a bit of a slump. How has the SSC market helped improve this situation?

Gergely Koó: Based on the SSCs in our portfolio we can see which direction the market is going. We have two buildings in our portfolio which exceed 30,000 sqm and which, based on floor plate, can be used by SSCs. This includes Atrium Park and Haller Gardens, which is by now the only building in our portfolio that accommodates SSCs. We have one multinational tenant that has been in the building since its handover in 2009, occupying a space of 13,000 sqm and we have a new entrant on the Hungarian market that’s been in the building for two years.

What sort of trends are you seeing in Hungary?

GK: Some SSC’s entered the Hungarian market in the last two to three years and while everyone is optimistic about the real estate market as a whole, those that arrived here during the financial crisis had access to huge floor plates and could negotiate very favorable rental conditions and options for expansion. Now with vacancies down significantly and few new developments in the pipeline, SSCs that are looking to expand can hardly find a contiguous space above 5,000 sqm in the city right now.

VN: We are encouraging our tenants to make long-term commitments, which end up being to their advantage. Last year was our most successful in the past few years. We have increased the occupancy of our portfolio by more than 10% which is quite significant. Our growth pattern continues in 2016 and within the last few months, IMMOFINANZ has signed several lease agreements.

This underlines the quality, flexibility and security that we offer our new and existing tenants, as a major real estate company. It’s noticeable that tenants are looking for sustainable solutions that optimize costs and energy consumption,

and we are increasingly able to meet these expectations. We can see signs of recovery on the market and we are very positive about the future.

What are some of the key factors multinationals look for when setting up an SSC in Hungary?

GK: The large floor plate at our Haller Gardens property, upwards of 3,000 sqm, is a real incentive. Equally important is that the building shall be well equipped with effective HVAC systems, that allow for denser seating, more fresh air supply thus a comfortable working environment.

We also have greater internal height than average which alleviates the feeling of overcrowding in open plan offices. Good public transport is also a must as is the security of operations. At Haller we have two independent power feeds to the building, which supply two separate transformers that ensure continuous operation for the tenants.

Viktor Nagy: One of our clients currently holds the title for the largest SSC in Europe. They understand that the cost of operating such a large leased property is significant, so rather than grow that space, they are trying to better utilize what they already have. Having shared desks that allow colleagues to work from home a day or two per week definitely helps make better use of the space.

Why are SSC coming to Hungary instead of going further east?

VN: It’s not necessarily just the cheapness of labor. It’s more the ratio of a workforce’s level of education to the cost of labor and in this regard Hungary is still quite competitive. In order to keep employees, however, SSCs need to provide good working conditions and plenty of incentives.

GK: Company’s coming here need to consider the cost of employing an educated work force, the political or economic risks in a given country and the location – Hungary is quite a hub.

The fact that SSCs receive a huge tax subsidy in the first few years to motivate them to come here and employ Hungarians also helps matters.

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

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Budapest works well for SSCs involved in IT

A large computer firm from the United Kingdom finds that the Hungarian capital fits in nicely with its strategy of ‘nearshoringʼ.

LEVENTE HÖRÖMPÖLI-TÓTH

Among the many industries that have discovered the advantages of deploying shared service centers (SSCs) in Hungary, those in the IT sector are particularly well represented. Big firms like T-Systems, IBM, SAP and HP have taken advantage of Hungary’s technically savvy workforce and lower costs for labor and infrastructure.

But it is not only the behemoths that are moving into Budapest. Other brands with lesser-known names, yet similarly global outreach, have also decided in favor of Budapest. Computacenter is one such firm. Established in 1981, it was the largest privately owned British IT firm in the United Kingdom by the mid-1990s and it started its global expansion at around the same time. It opened its international

service center in the Hungarian capital in January 2014, adding Budapest to an extensive network of offices stretching from Western Europe to the United States and South Africa. Computacenter currently reports global annual revenues of more than €3 billion.

While it is only a mid-sized SSC in Hungary, Computacenter faces the same challenges as the largest actors in the field, and its approach to those challenges is informative for others in the field.

Describing itself as “Europeʼs leading independent provider of IT infrastructure services”, Computacenter bets on “nearshoring”. The practice of transferring IT processes to lower-cost European destinations that are geographically and culturally less remote than Asian countries has become ever more popular since the model first popped up just before the millennium. Picking Budapest fits right into this strategy.

“Budapest was chosen for its cultural proximity, the availability of a wide range of language skills and some good technical affinity in an intellectual work force, not to mention price advantage over other Western European locations,” Mark Badi, international service director told the Budapest Business Journal. The idea

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EXPERT OPINION

HOW TO ACQUIRE THE BEST CANDIDATES? Noémi FerencziMolnár Business Services Team Leader

HAYS HUNGARY While there are many advantages of economic growth in Europe, the pressure of skill shortages is also increasing in the labor market in general, and especially in the SSC market. In most cases, the problem arises from the fact that the level of qualifications – and in many cases the self-motivation – available on the market, doesn’t meet the requirements of the employers. The gap between employers and candidates has become ever-more crucial.

Since 2010, more than 10 SSCs have set up their operations in Hungary, joining existing outsourcing companies who were and are still expanding their businesses.

The competition has increased, and SSCs have to come up with various means for differentiating themselves from the others. Even though the sector is growing, the number of SSC workers in Hungary remains the same. The reason behind this is that some of the more transactional processes were moved to the East, while new and more complex processes were transferred into these centres.

In this “candidate-driven” market, where job seekers can select between 2-3 offers at the same time, the importance of the

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support from recruitment companies has increased significantly, alongside employer branding, development and training opportunities and non-financial benefits. Attracting candidates in this sector has become extremely important, while selecting the right ones is even more difficult. The “post and pray” advertising method does not work anymore. SSCs cannot simply rely on their old selection processes. Hiring managers need to accept the fact that, in order to get a new talented team member, they need to impress the candidate during the interviews as well. Selection processes have become even shorter than before, in order to get the right candidate on board, and this is where Hays can help the most.

We can help by providing a higher number of candidates, faster processes and creative recruitment methods.

Hays Hungary offers permanent and temporary recruitment services nationwide. We’re proud of the longlasting relationships we’ve built with all of our clients since first launching in Hungary in 2007. Specialising exclusively in their sector, our experts can cater for all your requirements, ensuring job seekers and employers find a perfect fit across a range of industries.

www.hays.hu

Mark Badi, international service director of Computacenter. was to complement the native language support carried out by Computacenter’s international services hub in Barcelona.

The talent hunt goes on Staff in the Budapest SSC has now grown to some 300, but the plan is to hit the 500-mark in the not-too-distant future.

Hiring those extra employees alone would require an investment of €1.2 million. The question remains, though, how easy it will be to recruit. According to a 2014 Gartner study, Hungary’s labor pool is saturated, as many leave the country for better conditions abroad. SSCs are particularly exposed, since they need highly qualified personnel with great language skills. IT services providers like Computacenter face an even bigger obstacle in terms of the talent hunt, because finding IT specialists in big numbers is nearly impossible. And yet, that is what SSCs actually need given their hunger for hundreds of qualified professionals per location.

As Badi explained, training is a key component of attracting talent, but there are other tools that can sweeten the package. “We provide a rigorous fiveto-six week training program before our staff begin providing basic services.

With a clear career path, and talent and development programs, we are able to offer opportunities to take joiners right from being a first line analyst on the service desk to becoming an operations manager or technical expert, both inside Hungary and out,” he said.

Permanent stand-by mode rewarded You may wonder to what extent such IT-focused SSCs are different from any other shared service centers. As Badi noted, excellent language skills are key, but working for an IT-specialized SSC requires more. “Aside from our clear requirement for excellent language skills, we look to hire staff who either have or are able to be taught IT technical skills. Our operations typically stretch to 24/7, 365 days a year, so one key difference is that our operations are working around the clock, and that gives us an opportunity to employ staff who specifically want to work nonstandard office hours,” he said.

The company does its best, though, to compensate for such extraordinary availability obligations. “Our Hungary operation, as part of our Global Service Desk, also gives the opportunity for our team to travel and work in other locations around the globe, as we look to leverage

Edina Drabik of IBMʼs ISSC in Budapest.

IBM’s local service team Edina Drabik, managing director of the Client Innovation Center at IBMʼs International Shared Service Center in Budapest, discusses her center’s work in a brief interview with the Budapest Business Journal: “IBMʼs International Shared Service Center (ISSC) in Budapest was founded in 2004. With its highly qualified and multilingual staff, the center provides back-office and call-center services for IBMʼs own operations and global customer set. Some of the services that ISSC provides include: process support for human resources, customer services, accounting and financing, procurement and sales support in 25 languages in over 50 countries.

“IBM ISSC offers services to businesses and organizations to help them transform the way they operate enabling them to be more efficient, effective and responsive to market demands. IBM offers businesses the option of outsourcing non-core activities, bringing benefits in both cost and quality. Many business processes that have traditionally been managed in isolation and repeated across an organization, such as HR, payroll, customer support, order processing can be standardized and centralized. ...

“IBM runs specific trainings from early hire stage, through subject matter experts, up to leadership positions. Our program New2Blue is targeting newcomers to enable quick integration and submersion into the corporate culture of IBM. ...

“Our key assets are our people, we are focused on education, skill improvements also we are organizing different social events and activities.”

our teams skills and cultural background,” the director said.

“There is a demand for multilingual service desk skills, and few cities in Europe can provide the same wide range of language skills as Budapest, which over the past decade has proven that it is able to sustain the supply of an intellectual, language-skilled workforce into the market each year, whilst at the same time remaining competitive within that labor market,” Badi added.

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IT Services: A back office for the world

The countryʼs largest ICT service provider, IT Services Hungary transcends the SSC genre by handling a range of challenges for clients around the world.

The companyʼs CEO explains more in this exclusive interview.

blueprints. The subtle nuances in each country can mean great success if understood and adapted to – or else cause a lot of pain if not acknowledged.

Q

What changes have you made at IT Services? What changes would you like to see and how are you working on those?

Will the competencies of the company expand?

A: As the world of IT changes with great speed, ITSH has to adapt accordingly.

Providing services such as mainframe at one end and the latest Digitalization and Cloud technologies at the other, means that we have to adapt robustly to this changing market. Since the start of this year, IT Services has operated within a new organizational structure, establishing four business divisions to support four different business needs.

This enables us to react in different ways to different customer needs and expectations. However, we still maintain the overarching principles and governance of ITSH. We are constantly expanding our ICT competencies, we train our colleagues in the fields of new technologies in preparation for the future, and as a result of our constant expansion we take on experts whose knowledge enhances the range of our services.

BBJ STAFF

IT Services Hungary Kft. has grown beyond the bounds of a simple shared service center, as they now offer full IT services to a broad range of firms who choose to contract them. With 4,500 employees and offices in Budapest, Pécs, Debrecen and Szeged, the local subsidiary of T-Systems International is currently the largest back-office-type operation in the country.

We spoke to Christopher Wilson, CEO and Managing Director of IT Services Hungary, about his company and the SSC sector in Hungary.

Q

How is IT Services different from a typical SSC? A: ITSH has developed from a traditional SSC into an IT Service provider. As our skill levels have developed, we have been able to take more and more responsibility for delivery of end-to-end services. Our staff not only provide technical services but also business services, like international sales support, delivery management and IT development. An example of our progress in this regard is our involvement in the companiesʼ latest cloud-based service and the daily operation and management of Open Telekom Cloud. This is also an area where our team is using the latest technologies and skills to deliver this service.

Q

How is IT Services uniquely structured to serve businesses?

A: T-Systems has a USP in the global market called Zero Outage. This is what the team strives for in delivering our services. We are proud of our quality record and ITSH has played a major part in a significant reduction in the number of critical, major and minor outages in the last five years. At the same time, we also have to focus on our cost. There is little point moving services to places such as Hungary if they are delivered at the same price as high cost countries. So our managers balance the need for high quality at the best price. This becomes a bigger challenge in a more competitive market, as salaries and benefits play a major part in our overall costs. As competitors benefit from growing their business in countries such as Hungary, so the competition means more companies fighting for staff in a relatively small

BBJ_2412_spec_report.indd 15

‘We are proud of our quality recordʼ: Christopher Wilson, CEO and managing director of IT Services Hungary.

“Our staff not only provide technical services but also business services, like international sales support, delivery management and IT development.” market. Hence the need for strong engagement with universities and schools to grow the next generation of staff with the right skills.

Q

Why is Hungary a good place for your SSC? Why are there so many SSCs in this market?

A: The geographical location of Hungary means we can provide technical skills in the same time zone as many of our customers. Coupled with that, the infrastructure in Hungary – including a state-of-the-art telecommunications network – is excellent. Also, Hungarian employees are open to new technologies and we have very many talented employees. The challenge for universities and educational establishments is in keeping pace with the increasing demands of SSCs and providing the right skills.

Q

What are some of the special challenges of running an SSC with nearly 4,500 workers?

A: The greatest value in a company such as this is the highly skilled,

loyal workforce with valuable skills.

Therefore, one of the biggest challenges is employee retention. We have to devote particular attention to providing appropriate working conditions, an advanced infrastructure, the right salary and performance structure, as well as continuous skill development opportunities.

Another serious challenge is finding experienced professionals in the IT industry to compliment the staff who we train internally. Hungary is becoming increasingly popular among international corporations, a positive position for sure but also one leading to competition in the labor market. On the basis of this yearʼs Randstad survey, ITSH is the eighth most attractive workplace in Hungary; whilst this is a good position, we aim to ensure we can improve on that position in the coming years.

Q

As head of T-Systems Malaysia, you helped expand that company. What lessons did you bring from Malaysia, and any other past positions, that have proven relevant here?

A: As an expat leader of large organizations, it is important to quickly understand and embrace the local culture.

You cannot join an organisation as mature and complex as ITSH and make decisions based solely on your “home” understanding; you must understand that businesses and people operate in subtly different ways in each country. This is even the case for global organisations that are set up using the same governance

Q

How does the supply of workers and office space impact the business? Do you see changes in the HR and property situations that may affect the market?

A: At the moment it appears that it is increasingly difficult to find IT experts that speak foreign languages, and the recruitment of those with specialist IT expertise presents a serious challenge.

As I mentioned earlier, there is strong competition on the labor market and unfortunately we also have to face the fact that many young people accept work abroad. ITSH promotes the industry among young people through campaigns and programs organized for secondary school students, in the process revealing the many opportunities in this sector. It would be useful to rethink the teaching strategy, making teaching more practice-oriented and strengthening both IT and language teaching. We need to work with the establishment to grow a pool of young well-educated people, educated with the right skills to support our growing and more demanding roles.

Q

Is there anything else you would like to add?

A: On a personal note, I have lived in Hungary with my wife for nearly a year now. We have come to know a beautiful country with a great culture, an interesting history and a potential for the future. Every day, I work with young people – the average age at our company is 32 years – and represent this country through talent, creativity and hard work.

Perhaps their self-confidence could be stronger since they have every right to be proud of what they have achieved and created within their country.

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What it takes to attract shared services staff

Workers at GE Global “We don’t do average! I’m part of Operations Center describe why they chose an outstanding team, we meet new challenges every day and their jobs. that’s what keeps my interest BBJ STAFF going forward for more than a Young workers at the fifth-largest SSC year now.” in Hungary, the GE Global Operations Center in Budapest, spoke to the Budapest Business Journal about what attracts them to their current employer.

The interview subjects are Marc El-Hawa and Enikő Domján, who specialize in supply chain work, and Béla Lajos, who works in the commercial area.

Q

What made you decide to work at an SSC? Marc El-Hawa: I have always worked in a SSC environment in the past and working with people is one of the aspects I like about working in a SSC. Enikő Domján: As a freshly graduated student, it is an excellent opportunity to expand my view, develop myself both personally and career-wise and get in touch with people from all over the world.

Béla Lajos: I decided to work in an SSC mainly because of the international spirit, and the multiple possibilities to develop myself.

“I decided to work in an SSC mainly because of the international spirit, and the multiple possibilities to develop myself.”

Domján: I feel cherished, and I can see a clear career path for myself, both horizontally and vertically. I get insights that I’m doing my job well and where there is room for improvement, I have several opportunities for training, and even learning a new language.

Lajos: I am loyal because I can rely on GE’s culture and spirit. I was also amazed by the big variety of functions, which gives me a 360-degree view on complex processes.

Q

What kind of benefits, challenges, etc. do/did you look for in such a job?

El-Hawa: Benefits: Working in a multicultural environment, with people from several nationalities and origins.

Being able to utilize my language skills.

Challenges: Adapting to a rapidly changing environment.

Domján: The most important things for me are that I can use my creativity, I can be proactive and be part of a constantly growing and evolving environment. I found all of these values at GE. Lajos: On the benefit side, I see so many opportunities to test myself in various professional roles. The challenge that I am looking for is to be able to contribute proactively to the growth of the organization by delivering value to it.

Q

GE Global Operations Center in Budapest.

Q

Why are you loyal to your current employer?

El-Hawa: I am thankful for GE having given me an opportunity even though I didn’t have the right experience in the first place and I would like to give back to GE in return. On top of that, I like the company values and the people working there.

What’s an average day at work like?

Domján: We don’t do average!

I’m part of an outstanding team, we meet new challenges every day and that’s what keeps my interest going forward for more than a year now.

Lajos: There is no average day and this is something that makes my work very exciting. I drive processes, contribute to projects and have the chance as a direct manager of a team to motivate and inspire people.

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Young SSC workers like challenges, colleagues

To better understand what SSCs can do to attract and keep talent, we spoke to two employees of KPMG Global Services Hungary about what they look for in an employer.

FRAN ELSNER

Given the tough competition for capable and well-educated shared service center workers in Hungary, it is important to know what these workers are looking for.

In an effort to find out more, we spoke to two young workers at KPMG Global Services Hungary (KGSH), which is an SSC run by KPMG, the auditing and consulting multinational. The interview subjects are assistant manager Gabriel Mero Santucci and a senior assistant who asked that their name be withheld.

KPMG Global Services Hungary is located in Vision Towers on Váci út.

Q

What made you decide to work at an SSC? Gabriel Mero Santucci: After graduating from the Eötvös Loránd University in English philology with a specialization in American journalism, I worked as a contributor and column editor at the English magazine Time Out Budapest. My time at the magazine was very pleasant and fruitful. Nevertheless, corporate life always attracted me. In 2011, a position called “corporate risk investigation specialist”, advertised

by KPMG, caught my attention. The team itself is the Corporate Intelligence department of KPMG Global Services Hungary (“KGSH”), a Center of Excellence within KPMG’s global network. To be involved in a job that is almost like doing internal investigative journalism and that aids several KPMG offices around the world, were the main factors why I chose to work for KGSH. Senior assistant: When I joined KGSH last September, I was new to Budapest. I don’t speak Hungarian so I was looking to leverage my language skills in English and Spanish. Also, KGSH was able to sponsor my work visa.

Q

What kind of benefits, challenges, etc. do/did you look for in such a job?

GMS: As part of Corporate Intelligence, our team specializes in corporate investigations related to reputational risks, anti-bribery, corruption, etc. Such topics are very appealing to me and the job itself is very exciting. In my opinion, a corporate job must be diversified, challenging and make people think outside the box on a daily basis. Our team holds such features and even more.

SA: The challenge with this job is that we cover many jurisdictions. We have to know what sources to use in each country and constantly be aware of new developments. Each report we do is a new company or individual, each with

BBJ_2412_spec_report.indd 17

“The best part about this job is the team. It is a very international group. ...

It is great to sit down to lunch with people from all over the world. I always end up learning something new about culture.” with some 30 colleagues. We are really well taken care of. Our group also does fun things like breakfast at our Mondaymorning meetings.

Also, since all of the work that we do is office-based, it is very nice to have a new building to work at, recently built and full of plants.

Gabriel Mero Santucci: ‘A job that is almost like doing internal investigative journalism and that aids several KPMG offices around the world’. its own story and profile. So you end up learning a lot about companies, people, business activity and current events in many countries. Sometimes you uncover very surprising and interesting topics.

This job has a fantastic benefits program. They provide a whole package of benefits that you can chose from, including meal vouchers, culture vouchers and health care options, among others. They give us a cell phone and monthly public transport passes.

The company also sponsors sporting events. For example, KPMG was the title sponsor of the Kékes Peak Running race (KPMG Kékes Csúcsfutás) – where I ran up the highest peak in Hungary along

Q

What do you especially like about your current employer?

GMS: KPMG in general is a very prestigious and fair company. It treats its employees with respect and professionalism. It provides vertical opportunities and career possibilities.

When your employer takes care of you and treats you as a professional, providing continuous and tailored training as well as a clear, challenging and promising future, this makes you a loyal employee.

SA: I think my answers above cover this. I will also add that the best part about this job is the team. It is a very international group. My co-workers come from Hungary, Russia, United Kingdom, Croatia, Slovakia, Ukraine, Canada, Brazil, Colombia, France, Turkey, Israel, Jordan, Australia and the United States, among others. It is a very qualified group of people. Many of them have master’s degrees in international relations, law, economics, etc. It is

great to sit down to lunch with people from all over the world. I always end up learning something new about culture (for example, Brazilian telenovelas that were popular in Russia and Ukraine), history or current events (Eurovision, for example, which I never knew about before this year).

Q

What’s an average day at work like?

GMS: Our team basically gathers critical information online on individuals and entities and puts together an English-language report for the client. The vision of this service is to be the tip of the iceberg for any KPMG Corporate Intelligence assignment globally. We have a multicultural team of experts who write these reports on different countries. Each report subject has a different story and requires creativity, curiosity and intellect from the specialist.

SA: We mostly work individually at our computers all day. We research online sources.

Q

What sorts of jobs exist within the SSC? What different areas can people

work in?

GMS: KGSH is KPMG’s international compliance services center. Apart from corporate intelligence, KGSH offers indirect tax, personal income tax and corporate tax outsourcing to multinational groups covering more than 35 countries.

SA: Our corporate intelligence team specializes in investigations related to reputational risks, anti-bribery and corruption by gathering critical information on individuals and entities.

Budapest is host to KGSH, which offers indirect tax, personal income tax and corporate tax outsourcing, as well as corporate intelligence services (where I work) to multinational groups.

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Interview: HIPA assistance for SSCs

Róbert Ésik, president of the Hungarian Investment Promotion Agency (HIPA), discusses the importance of the sector and explains how his agency supports it.

are nearly 200 bilingual primary and secondary schools in Hungary. Beyond that, 33 foreign languages taught in our institutions of higher education producing ideal job applicants for our sector.

In the last academic year, more than 52,000 students learnt 33 different foreign languages in 67 universities and colleges.

The most common foreign languages taught in schools of higher education are English, German, French, Russian, Spanish and Italian, but more exotic languages such as Swedish, Norwegian, Finnish, Dutch, Japanese, Chinese, Portuguese, and Arabic are also available in the curricula. All tertiary education degrees require a proficiency test of a foreign language and a certificate in computer skills.

BBJ STAFF

Q

In 2014, Hungary hosted about 80 shared service centers and these SSCs employed an estimated 30,000 people, according to one industry group. Could you tell us how big the market is now?

A: The SSC sector is currently one of the fastest growing and most rapidly developing sectors of our economy. With over two decades of experience, Hungary is now widely considered as a wellestablished and, well-tested target region of this industry, where most projects come from Western Europe and the USA. Today, more than 90 companies and organizations rely on the active services of more than 100 active service centers employing jointly more than 40 thousand people, most of them Y-generation young professionals, highly qualified multi-lingual college graduates. These professionals usually work for higher than average salaries and quite frequently their contribution represents exceptional intellectual added values. They play a significant role in the increase of domestic economic output, have a role in boosting domestic consumption and augment tax revenues. I wish to emphasize that not only the current performance but also the future prospects of the SSC sector must be viewed as certainly encouraging. Surveys suggest that, for this year, the SSC companies project an average headcount increase of 10%.

Q

Do you think there is room for more growth in the Budapest SSC market? Do you see a trend of setting up SSCs outside the capital? If so, is that a trend you want to encourage, and why?

A: I believe that the Budapest SSC market still holds a substantial potential for growth and development.

In terms of offices, there is over 3.28 million sqm of modern office space in the Hungarian capital, Budapest, making it the second largest office market in Europe.

Until very recently, the city was dotted with construction sites; some 172,100 sqm office space was built in the last four years.

Consequently, compared to many Western European cities, the capital’s office stock is relatively new. In terms of quality, Budapest does not differ greatly from its Western European peers as most buildings were constructed to internationally accepted standards.

Potential tenants have considerable opportunities, with 395,800 sqm – 12.1% (2015 Q4) of the total office space – currently available. Assuming a requirement of 1,000 sqm (for a business of 100-120 people), there are

BBJ_2412_spec_report.indd 18

HIPA President Róbert Ésik. over 100 buildings meeting the assessed requirements. Solutions reflecting costawareness, as well as inventive floor plans and close-to-city locations are particularly popular with SSCs. Nonetheless, it is viewed as a welcome development that new projects are implemented in increasing numbers countryside, based on the workforce of young and highly motivated college graduates.

In the future, it is expected that a recent regional economic support program called Individual Government Decision (IGD – Hun: EKD) Scheme will function as a significant engine of growth and local development since, in the framework of this scheme, increasing financial support may be granted to new projects in proportion to their distance from Budapest.

Q

How many SSC projects has HIPA assisted? Is HIPA experiencing growing

interest?

A: HIPA was instrumental in completing 11 SSC projects in Budapest and in the countryside in 2015, resulting in a combined investment of €4.5 million of working capital in Hungary. The service centers (SSC) sector ranks second in Hungary for the year 2015 in terms of new jobs created.

Q

According to the standard wisdom, lower salaries and the large pool of welleducated young professionals, make Hungary a logical place for the creation of new SSCs. Do you believe this description is still valid? Have you encountered concerns about an emerging shortage of well-trained labor?

A: There are some very important arguments in favor of our country, for instance the availability of a welltrained labor force as referred to in your question. The service centers primarily rely on human resources, which may provide for a competitive edge even for a relatively small country like Hungary. As for a well-trained labor force, command of foreign languages carries an exceptional significance, this again is one of our strengths in a regional comparison. There

Q

Apart from the availability of a pool of well trained and affordable labor, are there some further significant reasons for selecting Hungary as an attractive SSC location?

A: Our geographic location offers easy access to both Western and Eastern markets as a strategic central site in the continent. Hungary is within two hours by air from most major European capitals, and provides a key link between Europe and the rapidly expanding markets of the East. The six hour time difference from New York and the seven hour time difference from Tokyo enable SSCs to provide services to the East and the West simultaneously.

Beyond the named advantages, Hungary offers an exceptional quality of life. Budapest is a city full of surprises and wonders, with its lively center, pretty parks, majestic river, tall church spires, and lavish spas. According to TripAdvisor, Budapest is offering the best price-value ratio in the world. Hungary’s diverse countryside offers a wide range of outdoor activities: 11,000 kilometers of hiking routes; more than 2,500 kilometers of cycle paths; 17 golf courses; ten national parks; and many protected nature reserves for those in love with fresh air. Expatriates preferring to follow the curricula of their home countries can choose from a range of private international schools for their children.

There are also many English, German or French public and private preschools for children aged three to six.

Q

The ways of assistance HIPA offers to persons considering the option of setting up an SSC in Hungary range from providing information about the local economy and legal regulations to help in finding a suitable location, liaising with recruitment agencies as well as assistance in drafting tender applications for investment incentives offered by the government. Can you give a little more detail about the nature of assistance HIPA offers to entities intending to set up an SSC in Hungary?

A: HIPA operates under the supervision of the Ministry of Foreign Affairs and Foreign Trade. Through our extensive network of contacts in the public and private sectors, we provide investors with high-quality support for critical investment decisions, and a wealth of supplementary services.

HIPA provides information in a one-stop shop service model about the Hungarian business environment, domesticallyfinanced and European Union co-financed programs and financial incentive schemes available to investors. We offer free project management services tailored to meet the specific needs of companies.

Our services include recommending project sites and locations, organizing site surveys and viewings, preparing B2B talks and meetings with experts. Upon request, we provide help in identifying and finding suppliers and quotations as well as in drawing up lists of experts. We offer active participation in drafting applications for government industrial incentive programs. We also organize events to promote international investment and hosting business delegations.

Q

Can you describe the specific case of HIPA helping an SSC, by giving information on required procedures and providing further support services?

A: At HIPA, we design and manage every particular project in accordance with the specific needs and requirements of our customers. In each case, new projects commence with the submission of a comprehensive and very detailed questionnaire submitted to our client aimed at a reliable understanding of the investment environment in Hungary. The completion of the questionnaire usually takes place subsequent to viewing of selected sites, which is typically assisted

by HIPA on the basis of customer needs and preferences.

Q

I understand that HIPA also seeks to present the concerns of SSC owners to the government seeking thereby to contribute to the creation of a more favorable business environment. Could you recall specific cases of amending or revising statutory regulations serving the objective of an improved business environment for SSC owners, or other foreign investors?

A: In order to ensure that prospective investors find improved business conditions compared to an earlier period, the government sponsored business incentive system (IGD - EKD) has been meaningfully modified by the end of last year to provide for enhanced simplicity and flexibility in application.

An important change is that, in the future, special attention will be accorded to projects designed as regional service and innovation centers, producing high added-value and employing at least 50 people in regions eligible for the program.

Q

Is there anything else you would like to add?

A: In order to ensure that the year 2016 will be at least as successful as 2015, HIPA intends to concentrate even more than earlier on specific customer needs and objectives.

Furthermore, relying on the advantages offered by a revised industrial incentive system, we wish to contribute to increasing the number of high value-added projects implemented in countryside areas.

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1117 Budapest, Neumann János utca 1/C (1) 456-5400 (1) 456-5499 fmb-ts-itsh-info@ t-systems.com

it seRviCes HungaRy kft.

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– BT (Netherlands) Holdings B.V. (100)

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dénes láng Tamás Pók Réka Juhász

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– Citibank Holdings Ireland Ltd. (100)

kevin a. murray, Jane ellis Péter Kővári Éva Hencz

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2014

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prabal datta – Edit Bencsik

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2016. 06. 15. 20:20

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11

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19,875

689

5,382

516

400

(3)

210,191

4,730 (2014)

–

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Ÿ Ÿ

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14 25

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Ÿ Ÿ

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7 5

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30 10

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planned neW WoRk foRCe HiRed in H2, 2016

WoRk fRom Home

paRt-time WoRk

available WoRk Condition CHoiCes

flexible WoRk HouRs

aveRage WoRk entRy peRiod (days) aveRage no. of eduCation days peR yeaR

botH

inteRnal

otHeR

Client management

sales

pRoCuRement

HR

finanCe (2)

exteRnal

total net Revenue in 2015 (Huf mln)

Company Website

Client division (%)

seRviCe aReas

Ÿ

100

–

Ÿ

yeaR establisHed

9

www.bbj.hu

Budapest Business Journal | June 17 – June 30, 2016

no. of employees WoRking foR ssCs on may 1, 2016

Rank

20 3

oWneRsHip (%) HungaRian non-HungaRian

top loCal exeCutive Cfo maRketing diReCtoR

addRess pHone fax email

1991

– Hewlett-Packard Central Eastern European Holding GmbH (99.80), Hewlett-Packard Gouda B.V. (0.20)

gábor gonda Bálint Bartl –

1117 Budapest, Alíz utca 1.

(1) 229-9999 (1) 229-9000 info@hpe.com

2009

– CPL Resources International Holdings Limited (100)

simone olivo Edit Lőkös –

1114 Budapest, Bartók Béla út 43-47.

(70) 330 8462 – edit.lokos@hpe.com

1941 / 1993

Alcoa Európai Keréktermék Kft. (23.61), Fairchild Fasteners Fémipari Kft. (0.97) Alcoa Inversiones Internacionales (75.42)

istván katus – –

8000 Székesfehérvár, Verseci utca 1–15.

(22) 531-200 – –

2008

– Lexmark International Technology Sárl (100)

péter Csucska Ágota Ferenczi –

1095 Budapest, Lechner Ödön fasor 8.

(1) 501-7200 (1) 501-7311 threcbud@ lexmark.com

2007

– Nokia Solutions and Networks B.V. (100)

béla Zagyva Erzsébet Tóth Andrea Nagykálnai

1092 Budapest, Köztelek utca 6.

(20) 977-7797 – –

2010

– KCI Europe Holding B.V. (100)

péter fazekas Miklós Kádas –

1133 Budapest, Váci út 76.

(1) 880-2501 – –

2011

– AGCO International Holdings B.V. (100)

emese szakács – –

1117 Budapest, Budafoki út 91–93.

(1) 882-8263 (1) 882-8380 BudapestReception@ agcocorp.com

2005

– IBM Ireland Product Distribution Ltd. (100)

Zoltán Zerényi Krisztina Takács Dalma Dominó

8000 Székesfehérvár, Berényi út 72–100.

(22) 526-110 (22) 526-104 sfvcomm@ hu.ibm.com

1989

Individuals (100) –

szilárd ocskay Judit Nyeste Rita Lovas

1138 Budapest, Váci út 186.

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

www.lexmark.com

nokia solutions and netWoRks kft.

13

www.nokia.com

374

14

kCi HungaRy kft.

15

agCo HungaRy kft.

www.acelity.com

www.agcocorp.com

ibm dss kft./ibm Client innovation CentRe NR sZÉkesfeHÉRvÁR & budapest

276

86

Ÿ

26,337

2,668

2,300

29,901(4)

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nexon kft.

NR

www.nexon.hu

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

Ÿ

3,400

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This list was compiled from responses to questionnaires received by June 15, 2016 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

NOTES: (1) Data of business year Apr. 1, 2014-March 31, 2015. (2) Data of business year Nov. 1, 2014- Oct. 31, 2015. (3) Data of business year July 1, 2014-June 30, 2015. (4) Data of IBM DSS Kft.

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4 Socialite BBJ

WHAT’S

ON

WAGNER IN BUDAPEST Through to June 28, Palace of Arts

Curated by artistic director Ádám Fischer since 2006, the Wagner in Budapest festival is tailor-made for aficionados of the genre and has become remarkably popular in its decade-long run. In the early editions, the repertoire expanded by one opera from “The Ring of the Nibelung” tetralogy each year, and as a result the entire Ring cycle can now be enjoyed on consecutive days, just as Richard Wagner intended.

All performances will be staged in German with subtitles in Hungarian and English. mupa.hu DUNAPEST June 16-19, various venues This festival is inspired by the Danube and its cultural role in the city and to pay homage to this great waterway, the city will host concerts, theater performances, film screenings, art exhibits, literary events, and even a boat-building workshop, all with a specific connection to the Danube. Festival organizers are hoping to turn the city’s focus towards the importance of the Danube (Duna in Hungarian) and how to make better use of its many qualities and tremendous potential. dunapest.hu

Fun things to d o in Budapest for the nex t t wo weeks.

GOAL! INTERNATIONAL SOCCER EXHIBITION June 22- August 22, Millenáris

Get a glimpse of the history of football through an impressive collection of soccer paraphernalia from jerseys, to trophies, to the personal belongings of the world’s greatest soccer stars from Pele to Maradona, to Ronaldo and members of Hungary’s Golden Team of the 1950s. A virtual game setup gives participants a chance to assemble their own dream team and devise coaching strategies that they can pit against other participants. There will be plenty of football computer games as well. millenaris.hu NIGHT OF THE MUSEUMS June 25, various venues Visit most of the city’s museums with only one entry ticket during the evening and late night hours of Saturday June 25; as many as 60 museums, galleries and related venues open their doors for the Budapest edition of the event. Regional museums are also taking part. Check the website for participating venues. muzej.hu MODIGLIANI June 29-October 2, Hungarian National Gallery This exhibition of Italian artist Amadeo

Diana Krall.

Modigliani features 80 artworks from international museums and private collections and reveals the evolution of Modigliani’s visual style through a series of paintings, drawings and sculptures. Grouped into five sections, this exhibition showcases the diversity of Modigliani’s oeuvre over his short lifetime. Organized in cooperation with the Réunion des musées nationaux, the Lille Metropole Museum and the Ateneum Art Museum in Helsinki. mng.hu DIANA KRALL June 30, Palace of Arts Although Diana Krall is most closely associated with jazz, the unique performance style of this five-time Grammy and eight-time Juno Awardwinning pianist and singer elevates her beyond categorization to a place among the most celebrated and inspirational artists of her time. Krall has maintained her reverence for musical traditions from a young age and frequently pays tribute to the traditional ragtime and jazz

sounds of the 1920s and ʼ30s, and to the legends of pop music from Bob Dylan to Elton John, to the Eagles and beyond. mupa.hu THE TWO GENTLEMEN OF VERONA July 1, Margaret Island Open-Air Stage Valentine loves Silvia, and Proteus loves Julia, but Proteus is fickle, and falls for Silvia as well. When Valentine plots an elopement, Proteus betrays him and Valentine is banished and joins the outlaws in the forest. What are the chances that he’ll be pursued by Silvia, and Silvia by Proteus, and Proteus by Julia, and that all will be waited upon – after a fashion – by their servants Speed and Launce and even Launce’s dog, Crab? This new production is led by a fun cast of players who will enchant with songs, romance and chaos, and propel Shakespeare’s anarchic comedy into the 21st century. Presented by Shakespeare’s Globe Theatre and the Liverpool Everyman & Playhouse. szabadter.hu

Amedeo Modigliani, Young Woman in a Shirt, 1918 © Albertina, Vienna – Batliner Collection

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MODIGLIANI HUNGARIAN NATIONAL GALLERY 29 june − 2 october 2016 main sponsor:

sponsors:

cooperational partners:

professional supporter:

2016. 06. 15. 20:20

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4 Socialite

www.bbj.hu

Budapest Business Journal | June 17 – June 30, 2016

Wine: At least dry Tokaj wines thrived in 2015

Tokaj Renaissance’s unveiling of new vintages at its Tokaj Nyitány in Budapest on June 3.

Although it was an impossible year for the famous Tokaji Aszú dessert wines, the region’s Furmints and other dry varieties did well.

ROB SMYTH

The year 2015 looks set to be a stellar one for dry Tokaj wines, although hardly any of the sublimely sticky Tokaji Aszú is being prepared due to barely any noble rot or botrytis arriving last fall to shrivel the grapes and ramp up their intensity and richness.

Dry whites made from the Furmint grape usually need time to lose their rough acidic edges but in a sign of a great vintage in which everything went right and happened at the proper time with no climatic or fungal spanners thrown in the works, some of them are already drinking deliciously. Very nice examples were premiered when the Tokaj Renaissance Association unveiled the new vintages at its Tokaj Nyitány event in Budapest’s Stefánia Palota on June 3.

From Nobilis, the Birtok Furmint 2015 positively oozed quince – one of the

most characteristic and distinctive of Furmint’s notes – and had just the right balance between fruit, oak and nuttiness.

Nobilis spontaneously ferments its wines from the wild yeast inherent in the grapes and the cellar. While this is riskier than controlled fermentation with cultured yeast, a “ferment on the wild side” can lead to more complex and often subtler aromas and flavors developing in the final wine –provided everything goes well – with potentially more flavor-enhancing chemical reactions going off. The flip side is that more can go wrong, with other reactions causing off-flavors to develop when the grapes aren’t quite perfect or something dirty gets into the wine from the cellar. However, everything turned out for the best in this wine.

Nevertheless, not everything turned out for the best in 2015. Péter Molnár, who owns the Bodrogkeresztúr-based Nobilis together with his winemaker wife Sarolta Bardos, mentioned that there was hardly any botrytis (or noble rot) last year due to the heat making the skins of the grapes very thick. The autumn rains were not able to break the thicker-than-usual skins of the grapes. Tokaji Aszú quite simply cannot be made without botrytized grapes.

Clean and controlled Molnár is also the managing director of the much larger Patricius

Borház in Bodrogkisfalud. Patricius Sargamuskotaly 2015 was impressive for its varietally pure floral, fruity and grapey attack, as well as lively acidity, and was more exciting than the winery’s Furmint. The precision and focus brought about by a clean and controlled fermentation with cultured yeast, which is usually favored by the risk-averse larger wineries, can really bring out the freshness and fruitiness in the wine, as in this case. The Sárgamuskotály grape often makes flabby, lazy, often sicklysweet wine, but when it gets sufficient acidity, as it can in Tokaj, the results can be very exciting indeed. It appears to be a great vintage for Sárgamuskotály (also known as Muscat Blanc or Yellow Muscat), which is Tokaj’s third most planted grape (after Furmint and Hárslevelű – the latter also showing very well in the 2015 vintage). 2013 was also an excellent year for Sárgamuskotály, although 2014 was something of a write-off – as it was across the land.

However, there was some sunburn on the Sárgamuskotály grapes in 2015, according to Sauska winemaker Gábor Rakaczi, which you could feel in the wine coming out a touch cooked, rather than the usual floral.

The fledgling Carpinus winery refreshed my later waning palate at the Tokaj Nyitány tasting with an invigorating, zesty and limey Furmint

2015 that was made entirely in the tank in order to seal in its considerable fruitiness and freshness. István Bai, who runs the winery together with his sister Edit Bai, said they kept lots of green cover to avoid the effects of the sun.

This is important as some of the grapes for this wine came from Tarcal’s Deák vineyard, which is the Tokaj region’s most sun-kissed vineyard. Tasted earlier this month at a Tarcal producers’ event, Majoros Birtok Tokaji Deák Furmint 2013 revealed suitably tropical and delicious notes of mango and pineapple on the nose and palate, with great length and concentration. Incidentally, the high acidity of 2013 allowed this wine of 8g/l residual sugar to still be released as a dry wine.

A recently formed organization known as the Tarcal Kulturális Egyesület (Tarcal Cultural Association), including some of the town’s finest winemakers, is hoping to raise the profile of this slightly overlooked area – which is actually a very good place to make wine. Its loessbased soil yields an elegant, smooth and fruity take on Tokaj, which serves up a smoother alternative to the oftensharper style from the pure volcanic cocktail of soils from Mád. However, there’s also volcanic (dacite and andesite) bedrock lurking under the loess, so the story is not as simple as some make out, and neither are the wines.

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www.bbj.hu

Budapest Business Journal | June 17 – June 30, 2016

23

PROMOTION

Szamos steps up its game at Parliament

Budapest Business Party Budapest’s business community mingles on the Danube at the June 3 Budapest Business Party. Celebrating its fifth anniversary, the Budapest Business Party, an unconventional networking event to help local companies combine business and leisure activities, was held on the Europa Boat. The event, which offered an opportunity for B2B networking, was attended by representatives of more than 50 companies and many chambers of commerce active in Hungary. The event’s main sponsor was the Hungarian Exim Bank. ’We decided to create a night where we could fight the [economic] crisis together, look ahead and go for new cooperations in a happy and relaxed atmosphere. After five years of successful parties I am enthusiastic about what Budapest Business Party has attained,’ said a statement from one of the organizers.

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ENIKŐ SZILÁGYI, HOT JAZZ BAND

July 13-14, Óbudai Társaskör • July 15, Óbudai Társaskör Enikő Szilágyi lives in France and dedicates her life to French chansons, the songs of Kurt Weill and sings her own poems, and others written for her, set to music. This time, twice in July, she will sing popular songs by Edith Piaf and Jacques Brel. Alceo Passeo will accompany her on the piano. Tamás Bényei led Hot Jazz Band follows her for an event of Óbudai Nyár (Summer in Óbuda) in the concert series called Muzsika a kertben (Music in the Garden) at Óbudai Társaskör. Come and sing with the band as they make impromptu selections from their repertoire of songs

by Kálmán Latabár, Gyula Kabos, Pál

BBJ_2412_socialite.indd 23

Jávor, Andor Ajtai, Katalin Karády and Klári Tolnay under the chestnut trees of Óbudai Társaskör. obudaitarsaskor.hu jegymester.hu

Although its official opening is still a few days away, the latest addition to the Szamos Marcipán empire has opened for business on Kossuth tér adjacent to the Hungarian Parliament.

Unlike its predecessors, the brand new Szamos Cafe features all the modern accoutrements to appeal to a young and fresh clientele while keeping a firm grasp on a historic heritage that spans over a century.

The shop offers locally produced confections such as the world renowned Szamos treats and chocolate bonbons while also catering to more health conscious customers with a line of lighter meals from breakfasts, to soups, to salads, and sandwiches to eat in or take away. Szamos also has a range of coffees including the classic Viennese dark roast and a lighter, more contemporary brew.

All this is available in a modern, thoughtfully decorated space with charcoal and natural wood accents unified by an original, large-scale, monochrome mural designed by local artist Hanna Kürthy. The upper level gallery features a more formal dining area for longer lunches with table service and warm dishes.

Additional features of note include the open pastry kitchen and Szamos chocolate museum, as well as the chocolate shop and chocolate school on the upper floors. There is also a meeting

room for special events that provide wonderful views of Kossuth tér with the Hungarian Parliament building in the background.

The location was clearly carefully selected for foot traffic and because no other venue of its kind exists in the vicinity, and this is clearly good for business.

Szamos is known, of course, for its fine, sweet almond paste, but also for its chocolate confections, both of which put the firm on the sweet map many years ago. The confectionery was first established in Hungary in the early 1900’s under the skillful hands of confectioner Mátyás Szamos, who trained at some of the most renowned cake shops in Budapest under some of the country’s most esteemed confectioners before setting off on his own. He began by producing marzipan roses in large quantities, first with the help of his family and later in a factory setting. Nowadays, Szamos’ grandchildren run the business, which features a large network of cake shops.

Szamos Cafe 1055 Budapest, Kossuth Lajos tér 10.

Opening times: Monday - Friday: 7.30-19.00 Saturday - Sunday: 9.00-19.00 E-mail: parlament.cafe@szamos.hu Phone: 06-1-269-02-16 Facebook/szamostoday

2016. 06. 15. 20:20

DID YOU KNOW ABOUT THE SSCS? 214,000 SQ M OFFICE SPACE HAS BEEN TAKEN-UP BY SSCS IN THE PAST 5 YEARS.

THE CURRENT EXISTING STOCK OFFERS LIMITED AVAILABILITY FOR SSC-S.

90% OF THE SSCS ARE LOCATED IN GRADE A OFFICES FROM A TECHNICAL PERSPECTIVE.

SSCS ARE FORCED TO THE FUTURE SUPPLY.

HAVE A REAL ESTATE EXPERT IN YOUR TEAM!

www.cbre.hu

BBJ_2412_socialite.indd 24

2016. 06. 15. 20:20