Budapest Business Journal 2721

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

HUF 1,250 | €5 | $6 | £3.5

BUSINESS JOURNAL BUDAPEST

VOL. 27. NUMBER 21

NOVEMBER 15 – NOVEMBER 28, 2019

SPECIAL REPORT

Business Services Sector

SPECIAL REPORT

Building a Shared Vision for Business Services AmCham CEO Írisz Lippai-Nagy talks about the chamber’s unique BSS Project, which brings together business services players to improve the branding of the sector.  20 SPECIAL REPORT

Shared Services Evolving Into Global Business Services The shared services sector, on a steep uphill climb in Hungary and the region, has seen a new acronym enter the market: GBS (global business services) is seen as the next step of SSC evolution, carrying huge potential for transformation. 24 SOCIALITE

Korda and the key to the Hungarian Film Industry

David Holzer talks to György Rajnai, the man who runs the Korda film studios, to find out how Hungary has become so successful in attracting foreign film productions to the country.  29

Bringing India into the Heart of Europe NEWS

Whopping Industrial Figure to Lift Full Year GDP Following weak end-of-summer data, Hungarian industry caught up in September, showing no sign of any negative impact from the slowing economies in the eurozone.  3

S

AL R PEC I

EPOR

T

Prabal Datta, general manager and delivery center head of Tata Consultancy Services in Hungary (and a runner up in the 2019 BBJ Expat CEO of the Year awards), talks to the Budapest Business Journal about the India-based company’s 18 years of growth in BUSINESS Budapest.16

Winning the ‘War for our Thumbs’

More than 1,000 members of the Hungarian banking and tech communities packed the Budapest Congress Center for the Novathon conference organized by CIB Bank, not least to hear Apple co-founder Steve Wozniak.  7

News

2|1 BBJ

www.bbj.hu

Budapest Business Journal | November 15 – November 28, 2019

THE EDITOR SAYS

EDITOR-IN-CHIEF: Robin Marshall EDITORIAL STAFF: Balázs Barabás, Zsófia Czifra,

Kester Eddy, Bence Gaál, Gergely Herpai, David Holzer, Christian Keszthelyi, Gary J. Morrell, Robert Smyth, Zsófia Végh.

LISTS: BBJ Research (research@bbj.hu) NEWS AND PRESS RELEASES:

Should be submitted in English to news@bbj.hu LAYOUT: Zsolt Pataki PUBLISHER: Business Publishing Services Kft. CEO: Tamás Botka ADVERTISING: AMS Services Kft. CEO: Balázs Román SALES: sales@bbj.hu

CIRCULATION AND SUBSCRIPTIONS: circulation@bbj.hu

Address: Madách Trade Center 1075 Budapest, Madách Imre út 13-14, Building A, 8th floor. Telephone +36 (1) 398-0344, Fax +36 (1) 398-0345, www.bbj.hu

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.

The Budapest Business Journal, HU ISSN 1216-7304, is published bi-weekly on Friday, registration No. 0109069462. It is distributed by HungaroPress.

Reproduction or use without permission of editorial or graphic content in any manner is prohibited. ©2017 BUSINESS MEDIA SERVICES LLC with all rights reserved.

BBJ-PARTNERS

VISIT US ONLINE: WWW.BBJ.HU

HARNESSING THE HIVE MIND FOR THE GREATER GOOD The coming together of rival companies in the business services sector to work towards raising awareness of the field, as reported inside our BSS special report in this issue, is certainly unusual, if not completely unique, but I wonder if it might be a herald of things to come, a world where mutual assistance trumps self-interest.

Facing down a labor crisis is not made any easier if many of your best talents have gone abroad, in search of better pay, yes, but also more interesting careers.

Hungary wants those talents to return, but for that it needs challenging roles to offer and, unless a country has a state-funded moon shot project to offer, it will need to rely on the private sector to provide those careers.

When BlackRock ’s Melanie Seymour started recruiting for roles in the company’s Budapest operation among the emigre Hungarian population in London, she came to realize this offered people a chance to come home, to pursue an interesting career in the land of their birth. (See our interview with her in the April 26 issue of the Budapest Business Journal.)

When the experiment was repeated in Germany and the United States, it proved just as alluring. People have many reasons for leaving a country to work abroad, but an interesting job is also often high up on that list. Seymour realized from conversations she had with Hungarian colleagues and friends that a lack of interesting jobs – or a lack of awareness of their existence – was also stopping people from coming back.

Her answer wasn’t simply to continue recruiting for BlackRock alone, but rather to cooperate with the likes of Morgan Stanley and Citi and MSCI. Why offer 50 jobs in one firm, when you could offer 500 across a sector?

The Business Service Sector Project is cut from similar cloth. Rival firms, who routinely poach staff from one another, are working side by side to raise awareness about what exactly goes on in a shared services center (hint: its way more than answering a telephone), the types of career that are available, and the possibilities for advancement.

This all started with some research undertaken by BT a few years back. I was so struck by it at the time that I put it on the front cover of this newspaper. The project has since been taken on and developed with the help of the American Chamber of Commerce in Hungary, an organization which will celebrate its 30th anniversary in the Hungarian Parliament just after this issue goes to print, and just before it is published.

AmCham, like all international chambers, is founded on the concept of mutual assistance. There are many examples to draw from, but the one that always strikes me is AmCham’s Regulatory Committee, which brings together some of the sharpest legal minds from rival law firms to bounce off one another (rather than into one another, as they tend to do when representing clients on either side of the conference table) in drawing up cogent responses to draft legislation.

If lawyers can move from the adversarial approach to the collegiate in the greater interest of all, and then back again, then so can anyone. I have a friend who likes to talk about “win-win” situations. I hate the phrase because it sound like marketing drivel, and most of the time it is.

But perhaps this is an exception. If business sectors can draw on a hive mind, perhaps we can all benefit.

Robin Marshall Editor-in-chief

ADVERTISEMENT

7/8. SZÉCHENYI SQUARE 1051 BUDAPEST TEL.: +36 1 377 6737 WWW.DRROSE.HU

Dr. Rose Private Hospital works with leading physicians who are accomplished experts in their profession.

Whether you come for a check-up or a treatment, book a consultation without any waiting time in more than 30 medical fields to cover all your needs. Dr. Rose Private Hospital, Obstetrics, Orthopedic Center, Budapest Plastic Surgery Institute and Corporate Health Care offer comprehensive, premium quality healthcare services with state-of-the-art medical equipment, in an exclusive setting right in the heart of Budapest.

1

www.bbj.hu

Budapest Business Journal | November 15 – November 28, 2019

News///macroscope

Whopping Industrial Figure to Lift Full Year GDP

Following weak endof-summer data, Hungarian industry caught up in September, basically showing no sign of any negative impacts from the slowing economies in the eurozone. Analysts expect that stronger industry performance in the third quarter will trigger a higher growth rate for the entire economy this year.

Changes in Agricultural Prices in Hungary, Q1-3 2018 I-III 2019 I-III Plant and horticultural products Live animals and animal products Altogether Agricultural expenditure Price differential

ZSÓFIA CZIFRA

Optimistic expectations about August’s sluggish industrial output catching up in the fall have proved right: Hungary’s industry showed a whopping 11.1% growth in September compared to the same month of the past year, while working-day adjusted data took it to 9%.

The satisfying data was published after a mere 0.3% year-on-year increase in August, and except for July’s figure - which was 12% -, this was the highest increase in the volume of the industrial output in the past two-and-a-half years.

Altogether, the Hungarian industry in the third quarter outperformed its achievements of the second quarter, boosting the gross domestic product which, following a 4.9% growth rate in Q2, could well have

domestic sales in manufacturing were 10.2% higher compared to the same month of the previous year.

5%

by

reached

by the third quarter, according analysts.

Industrial output in September, according to seasonally and working-day adjusted indices, was 3.1% above the level of the previous month.

In the second reading, published on November 13, the KSH revealed that the volume of industrial exports grew by 16% year-on-year.

Transport equipment exports, representing a 36% weight within export sales in manufacturing, went up by 29%; the exports in computer, electronic and optical products (accounting for an 18% weight) rose by 26%. Industrial domestic sales increased by 7%, within which

No ill Effects

Output was 6.3% higher in the first three quarters of this year than in the same period of 2018. Data also suggests that there are, for the time being, no signs of ill effects from the weakening German economy, especially in the automotive sector.

In Hungary, the rate of growth accelerated remarkably in the manufacture of transport equipment representing the largest weight and accounting for 29% of manufacturing: the output exceeded the relatively low production level of the previous year by 22% in September.

The volume of motor vehicle manufacturing went up

32%;

at the same time the manufacture of parts and accessories for motor vehicles rose by 13%.

ING Bank head analyst Péter Virovácz confirmed to news agency MTI that, in spite of the bad news arriving from the manufacturing sector of the eurozone, these figures mean this still hasn’t affected the performance of the Hungarian industry.

The jump in the production can be tied to the acceleration of the automotive industry which kicked off after a summer break. Paired with the electronic industry, it showed robust growth in the last month of the third quarter, he said.

Virovácz emphasized that, in light of the surprisingly strong quarterly performance of the retail sector, and the fresh industrial figures, GDP growth in the third quarter might be higher than previously estimated, and will likely come to near 5%.

Outstanding Performance

Gergely Suppan, head analyst at Takarékbank, also noted the outstanding performance of the Hungarian industry, in spite of the external factors. He predicts a 7.8% growth rate for the third quarter, following a weaker, 4.8% growth rate in the second. He agrees that the GDP growth in the third quarter might be 5%.

As for the full year, Suppan thinks the growth rate for the industrial output will be a little above 6%, following a 3.6% annual growth rate in 2018.

Gábor Regős, analyst at economic research institute Századvég, said that the high volume of investments and the weak data from the base period explain the better-than-expected performance of the Hungarian industry in September.

He also highlighted that the slowdown of the German economy has had no visible effect on Hungarian industrial output, therefore the growth rate of the Hungarian economy might have remained dynamic in the third quarter of the year. He expects strong, albeit not necessarily two-digit, growth rate for industry in the rest of the year.

Although the manufacture of food products, beverages, and tobacco increased at a rate below the industrial average,

according to KSH, inflation figures show that October saw significant price rises in alcoholic beverages and tobacco, as well as at food products.

On average, consumer prices were 2.9% higher in October than a year earlier.

Analysts say that the inflation rate finally started accelerating in October and might continue to do so until the end

of

2019,

meaning the inflation might be close to 4% at the end of the year.

It is also worth noting that core inflation, which is monitored closely by the National Bank of Hungary, reached the upper end of its corridor in October, which might trigger the tightening of the still loose monetary conditions.

Numbers to Watch in the Coming Weeks The KSH will publish labor market data on November 27, referring to the August-October period.

A day later, the statistical office will shed lights on the investment volume that was realized in the third quarter of the year. A much-awaited figure will be released on November 29: the KSH releases the GDP growth rate for the third quarter.

4|1

News

www.bbj.hu

Budapest Business Journal | November 15 – November 28, 2019

Work Starts on Speculative Build at Budapest Logistics Park Leading regional industrial developer Prologis has started work on a rare speculative building at Prologis Park Budapest-Harbor.

as much as

30%.

GARY J. MORRELL

The 14,000 sqm state-of-the-art logistics facility is currently the only speculative development by Prologis CEE. In line with other developers in the current market environment of high demand and low vacancy, built-to-suit is the development strategy of choice for developers alongside securing preleases early in the process.

At the same time, tenants are demanding more highly specified parks, and Prologis CEE has a common policy of developing buildings with BREEAM “Very Good” ratings.

“When customers need space, they expect immediate and effective solutions from us. We make it our business to continuously assess markets, locations and facilities to satisfy these needs, enable growth and keep our customers ahead of what is next,” Prologis says.

Total modern industrial stock in the Budapest area stood

at around

2.23 million sqm

as of the end of the third quarter according to the Budapest Research Forum, consisting of CBRE, Colliers International,

“Implementing BIM also enhances customer experience and drives energy sufficiently in line with our commitment toward carbon neutral developments.

Prologis-standard, energy-saving LED lighting and large skylights will cut electricity consumption by 45% in comparison to the latest lighting standards. The special-grade wall insulation and roof system, together with high-performance gas-fired heaters, will reduce heating costs by

Prologis Park Budapest-Harbor.

Cushman & Wakefield, Eston International, JLL and Robertson Hungary.

Overall vacancy stood at 2%, representing 43,000 sqm of vacant space, and there is no existing warehouse with an area of more than 5,000 sqm. The largest deal in the period was a 19,000 sqm prelease/built-to-suit deal of the new phase of BILK (Budapest Intermodal Logistics Center).

Speaking of the decision to go ahead with the speculative build at Park Budapest-Harbor, Martin Polák, managing director for CEE at Prologis says, “We focus on delivering the best solutions for our customers in the strategic locations.

We are constantly observing the market and reviewing development options in the Central European region.”

The park is located around 12 km from the center of Budapest in the outer District XXII.

3D-modeling

The new building has been designed using building information modeling, a 3D-modeling process that gives architectural, engineering and construction professionals the insight and tools to plan, design, construct and manage buildings and infrastructure more efficiently, according to Prologis.

Smart meters help optimize water, gas and electricity consumption remotely with just a single click,” commented Prologis.

Elsewhere in the region, in Silesia, Prologis is developing a built-tosuit facility for Raben Group Poland.

“Thanks to energy-saving measures, the environmental footprint will not only be smaller, but operating costs will also be lower. Building management and maintenance solutions will also be implemented, such as smart metering to control utilities via mobile phone anywhere in the world,” said Prologis.

The company has achieved a BREEAM “Outstanding” rating for the BMW CE distribution hub it built at Bratislava Park Bratislava.

Despite the current success of the Hungarian logistics market around Budapest, a functioning developer-led industrial market has not been established outside the capital. What development there has been in secondary cities is often owner-occupied, despite the activities of such major regional developers as Prologis and CTP in regional Central European cities elsewhere across CEE. “We are committed to the logistics real estate market in Budapest and we have earmarked land options for the extension of all other parks in the Budapest area,” Prologis says of its development plans for Hungary.

This latest phase of Prologis Park Budapest-Harbor is scheduled for completion in the second quarter of 2020.

Alphagon Offices Achieves German ‘Gold’ Accreditation The Central Europe developer Teichmann & Compagnons has been awarded ÖGNI “Gold” pre-certification for its 4,700 sqm Alphagon Offices, the second level of certification after “Platinum” in the third-party sustainability accreditation system.

GARY J. MORRELL

The DGNB-ÖGNI sustainability accreditation system was established in Germany and Austria and is, therefore, the organization of choice for developers and building-owners in German speaking countries, but is currently very much in a minority in the Budapest office market.

“The certification creates added-value for a building by creating environmentally and resource effective buildings. This impacts on economic and social efficiency,” said the Austrian Society for Sustainable Real Estate.

In Budapest, however, most developers and building owners tend to opt for the U.K.-based BREEAM or the U.S.-based LEED accreditation systems.

According to the Hungarian Green Building Council (HuBC) around 2% of new office buildings and 1% of operating buildings are registered with DGNBÖGNI. This compares to BREEAM with

more than

20%

of new operating buildings and over 40% of operating buildings accredited to the system.

The DGNB-ÖGNI system is seen by its supporters as being based on Central European regulations and values, and as focusing on the lifecycle of a building.

Construction of the speculative Alphagon Offices, located in District XI, started in 2011, is due to be completed in the fourth quarter of 2020.

Healthy Environment

“Our aim is to provide a healthy environment incorporating nature at all levels of the planning and construction phase. Today more tenants wish to be closer to nature and realize that the office environment affects their everyday life and also their business prospects,” said Richard Teichmann, general manager at Teichmann & Compagnon.

The complex, designed by András Reith and his team, at the time with András Debrezeni as the lead architect, includes terraces (among them one on the rooftop), is within walking

distance of a metro and provides access by a bicycle track.

Reichmann & Compagnons Property Networks previously worked on the Oktogon Ház office complex in Budapest, in addition to the redevelopment of historic buildings such as Andrássy 93, Báthory 12 and Piarist Central. In addition, the company has developed the Eco-Point office center in Kosice and is developing the Meridian 16 Logistics & Business Park in Croatia, providing the infrastructure for logistics companies.

Alphagon Offices.

1

www.bbj.hu

Budapest Business Journal | November 15 – November 28, 2019

New Leadership at KPMG Facing Changing Business Environment Big Four advisory agency KPMG’s Hungarian subsidiary turned a page on October 1, when long-term head Robert Stöllinger stepped down, to be replaced by Rezső Rózsai. We are, Rózsai said, entering a new, exciting era of change, where the priority of businesses is shifting towards managing uncertainties.

News | 5

AS UNIQUE AS YOU ARE Unique location, unique architecture and unique nature for unique people.

The new pearl of the Danube, Duna Pearl, is waiting for you with a limited-time discount offer.

Rezső Rózsai

BENCE GAÁL

At a press conference attended by the Budapest Business Journal, outgoing head Robert Stöllinger said that KPMG Hungary closed a strong financial year in September, with a revenue of approximately HUF 26 billion.

He noted that in 2003, when he took over the leadership of the firm, the number stood at only HUF 6.9 bln. In an important shift, he noted that the complexity of services offered by KPMG has grown, while the share of accounting in the revenue has fallen.

“A growing number of international groups are bringing a part of their audit activities to Budapest,” Stöllinger noted, adding that the company’s SSC audit, bank sector, and insurance sector advisory services have increased in importance.

New national senior partner Rezső Rózsai praised Stöllinger’s legacy, adding that he will not be the leader of KPMG Hungary for

16 years

like his predecessor, due to changed internal regulations. Regarding the current business environment, he noted that companies now face pressure from all directions, including from society.

Beyond Control

“While social expectations may carry lower penalties for non-compliance than legal expectations, they could have a larger effect on the revenue side,” he said.

According to Rózsai, the business world now faces challenges beyond its control, such as climate change and technological

advancements; success depends on how companies react to trends.

“Change is always difficult. However, preparing for an economic crisis is not the most difficult thing; preparing for growth and keeping up the tempo is,” he argued.

The pace of digitalization has changed the audit business according to him. “The day before yesterday we called something impossible, yesterday we called it unlikely, and today we call it routine,” Rózsai said.

The expert also argued that indicating audit-related problems in real-time or even predicting them have become increasingly important, as clients are able to pick between alternatives and react to the issues as soon as possible.

Recently appointed deputy national senior partner Gábor Beer argued that the attitude of the tax authority in Hungary as changed significantly compared to

For more information: dunapearl.hu T: + 36 1 800 8338 M: + 36 70 424 1331

10-15 years

ago. Instead of investigating numerous companies out of the blue, applying hefty fines, they have, “Changed from using a machine gun to a sniper rifle,” as he put it.

Due to innovations such as e-invoicing, the authorities are now easily aware of problems, yet they warn individuals and entities first, instead of issuing penalties immediately, Beer said.

The expert added that perhaps the largest challenge tax authorities face today, not only in Hungary, is the taxation of giant firms such as Facebook. Beer argued that the basis of relevant double taxation laws was laid down in the 1970s and ‘80s in Hungary, with no one able to predict the modern ways of operation of global businesses, such as outsourcing.

The launch discount is valid until December 31st, 2019.

Our prices include VAT. Please contact our colleagues for the documentation containing payment term details.

6|1

News

WHO’S NEWS

www.bbj.hu

Budapest Business Journal | November 15 – November 28, 2019

Do you know someone on the move? /// Send information to news@bbj.hu

Cirelli, van Rossum Join MET Group Board Swiss-based Hungarian energy company MET Group has announced the appointment of two members to its board: Jean-François Cirelli and Charles-Eduard van Rossum join as non-executive directors.

In 1995, he was appointed economic adviser to the President of the French Republic Jacques Chirac, a position he held until 2002, when he was appointed Deputy Chief of Staff to the French Prime Minister, Jean-Pierre Raffarin, primarily in charge of economic, industrial and labor issues.

Van Rossum is president of Ravel & Co., an independent investment banking firm based in Paris, providing advice to large corporations and financial institutions, family-owned/controlled companies and investment holding groups, and leading global private equity sponsors and sovereign wealth funds.

Prior to founding Ravel & Co. in 2017, he spent 20 years at Goldman Sachs, during which he developed significant transaction origination and execution experience within the firm’s M&A/ strategic advisory practice in London, New York and Paris.

He became a managing director in 2008 and, while a member of the senior leadership team of Goldman Sachs’ Paris office, co-managed the firm’s

Energy & Natural Resources group in EMEA as its COO from 2011 until his retirement from the firm.

Born in Amsterdam, van Rossum holds dual French and Dutch citizenship.

Liegl & Dachser Appoints Customer Manager

“To this end, we are constantly expanding our range of services for the convenience of our customers in all areas.

For example, we are currently focused on developing our eLogistics services so that our customers can check the exact status of their shipment at any time of the day, anywhere in the world.”

Generali Fund Management CEO Gergely Horváth, the CFO and deputy CEO of Generali Insurance Zrt., has taken over as CEO of Generali Fund Management, while retaining his current positions.

Horváth is tasked with coordinating the operations of the company with its strategic goals, in order to allow member companies of Generali to serve their clients in a consistent way, and to maintain close collaboration and to exchange experiences across the CEE region.

Zsuzsanna Thoma Jean-François Cirelli Cirelli serves as senior advisor at Advent International Corporation and as chairman of BlackRock France, Belgium and Luxemburg. He is a member of the Corporate Board of Sonepar SAS and the Supervisory Board of Uniper SE and Saur.

Previously, Cirelli also held various government positions at the Treasury division of the French Ministry for the Economy and Finance, where he was successively in charge of housing policy, the General Secretariat of the Paris Club, and the regulation of financial markets.

During this time, he was also an alternate director for France at the IMF.

Charles-Eduard van Rossum

Logistics company Liegl & Dachser has announced the appointment of Zsuzsanna Thoma as customer manager.

Thoma graduated in foreign trade from Budapest Business School as a logistics and forwarding expert and has 14 years of experience in her profession.

She has been with Liegl & Dachser since February 2006 and has been active in the field of bulk shipping: she started as a customer service team leader, then became an operations manager before assuming her current position. Thoma’s primary goal is to align customer needs with internal processes.

“In addition to providing fast and professional customer service, our goal has always been to provide quality service to our clients,” says Thoma.

Gergely Horváth The mandate of Miklós Konkoly, former CEO of Generali Fund Management, was terminated by mutual consent, Generali added.

ADVERTISEMENT

Grandhouse “Gala of the Five Senses” at the Four Seasons Grandhouse International will host a gala evening at the Four Seasons Hotel Gresham Palace Budapest on Monday, December 9, 2019 to celebrate the past and future of the networking club.

Called the “Gala of the Five Senses”, the evening runs from 6:30-11:30 p.m. and includes a presentation by Dr. Haroon Sheikh, an advisor to the Dutch government on geo-political affairs, called “Clash of the Cycles: a Framework for Global Change”, and a flute recital

by Zsuzsanna Virág Csabay, with works from Telemann and Piazzolla.

The dress code is smart and elegant, although the club adds

that guests should “Let your own and our senses enjoy it.”

Individual tickets cost HUF 25,000 per person, though a table of can be booked for HUF 176,000 (HUF 22,000/person).

The booking deadline is November 28; email royaards@hu.inter.net “Please keep in mind that we have only 88 seats and therefore early registration is much recommended,” says organizer Albert Royaards.

Guest speaker Dr. Haroon Sheikh works at the Dutch Scientific Council for Government Policy, where he currently focusses on AI and changing international relations. He also teaches philosophy at VU University in Amsterdam. He has written two books on geopolitics and what he calls hydropolitics. Sheikh worked as senior strategist at investment firms Cyrte and Dasym and founded the private Amsterdam-based institution Freedomlab Thinktank.

He is a regular contributor to Dutch newspapers NRC Handelsblad and Het Financieele Dagblad and his work has been featured in The Financial Times and Foreign Affairs.

2

www.bbj.hu

Budapest Business Journal | November 15 – November 28, 2019

Business

Winning the ‘War for our Thumbs’ More than 1,000 members of the Hungarian banking and tech communities packed the Budapest Congress Center for the Novathon conference organized

by CIB Bank, a subsidiary of Italian banking group Intesa Sanpaulo.

DAVID HOLZER

Novathon is an engaging, inspirational and trendsetting event that focuses on finance innovation and culture transformation. It first took place here in 2016, traveled to Croatia in 2017 and Slovakia in 2018 before returning on October 30 to Budapest.

The conference promises to address the hottest topics in banking. This year it explored how banks are responding to the challenge of FinTech, which uses technology to optimize finance.

Technologies like artificial intelligence, the Internet of Things and machine learning are all driving FinTech and disrupting the global financial landscape. The FinTech Global website claims that USD 41.7 billion was invested in the industry across 789 deals in 2018. Europe accounts

for

10%

of the market, according to global market intelligence website Netscribe.

Demand to attend Novathon, a program of presentations and discussions featuring international financial influencers and big names in Hungarian banking, was so great

carried out by Hungarian economic research company GKI revealed “market penetration for mobile banking and payments is at a minimum, with less than 10% of the population having tested online shopping or payment apps.”

One reason for this is that the Hungarian economy relies very heavily on cash.

Research by Deloitte revealed that

only

79.4%

of adults have a bank account.

Clearly, there is a significant opportunity for banks and FinTech companies in Hungary if they can reach the potential market for their products in the right way.

It is not surprising, then, that Novathon 2019 was packed and that there was a somewhat feverish worship of innovation and disruption.

Wisdom of ‘The Woz’

Anyone expecting Steve Wozniak to storm the stage at Novathon with the intensity of his Apple co-founder Steve Jobs would have been disappointed. A somewhat shambling bear of a man dressed down in ill-fitting black, Wozniak radiated humility. This came as a contrast to the pumped-up worship of disruption by speakers like Matteo Rizzi, whose shaved head and tight-fitting black t-shirt looked like an homage to Jobs.

Known as “the Woz”, Wozniak has engineering in his DNA. Asked what he thought was his purpose in life, he said: “To be a clever engineer, doing things in A and customer experience at Intesa a way others didn’t. Early on in Apple, Head of multichanel Sanpaolo Maurice Lisi (left) and Steve Wozniak. all I wanted was engineers to look at my designs and say ‘Wow!’” Wozniak’s constant impulse to invent, organizers CIB Bank changed the event to make technology better for individuals, around for a long time, not because people venue. This year, the main attraction was certainly helped make tech what it is feel they can relate to them on a human Steve Wozniak, co-founder of Apple. today. His spirit helped bring the Apple level. One of the biggest areas where Watches, iPhones and MacBook Airs of FinTechs have distinguished themselves The Move to Mobile the Novathon audience to life and drive is by providing a really high standard of Mobile is key for FinTech, and traditional mind-blowing innovations like the Internet customer care and taking a customer-first banking is scrambling to win what one of Holograms. He’s a great believer in approach when it comes to the design and speaker called “the war for our thumbs”. disruption, even arguing that companies delivery of their product.”

Another speaker announced that, by 2023, should have a Chief Disruption Officer.

It’s an approach that works extremely more people will bank using their mobile But Wozniak is also committed to well with digital natives, from Millennials than will visit their branch. defending civil liberties in the digital downwards. According to one Novathon Although bank customers have world. He helped create the Electronic speaker, seven out of 10 Millennials would historically been resistant to change, Frontier Foundation in 1990. rather go to the dentist than to their bank. this has been in part because there And he mistrusts the monopolistic, But will the FinTech approach appeal to simply hasn’t been a viable alternative. controlling elements in tech. He is Hungarians? Judging by the atmosphere at FinTech disrupters like TransferWise, particularly scathing about the so-called Novathon, the Hungarian banking industry the international money transfer service, gig economy (where, according to is gung-ho to go over the top in the war for appeal to customer intelligence and a Investopdia’s definition, “temporary, the country’s thumbs and find out. general dislike of what is seen as banks flexible jobs are commonplace and FinTech in Hungary being secretive and less than transparent. companies tend toward hiring independent Disruption Banking is an online platform They also harness the perception that tech contractors and freelancers instead of fulldedicated to financial technology, new age is modern, clever and liberating. time employees.” banking and emerging markets. In an article Another significant factor is customer Education is another passion. In 2017, this year, it turned its attention to Hungary. service. As Toby Triebel, European CEO inspired by his experiences teaching high Despite praising Budapest as a city at roboadviser firm Wealthsimple told school in California, he created Woz U, an “pulsing with tech activity”, Disruption Computerworld UK, “Banks command online learning ecosystem that, he says, Banking goes on to point out that a survey “empowers individuals (learners), higher trust because they are big and have been education and corporations to overcome the talent and skill gaps plaguing the technology industry.”

After the conference, the organizers commented, “The biggest takeaway is that banks shouldn’t only implement the latest technology, thinking they’re innovating.

A deep transformation that touches internal culture and organization is the key to succeed.”

At an event dedicated to exploring how tech and finance can penetrate more deeply into our lives than ever before, Wozniak was a breath of patchouli-scented fresh air. The “deep transformation” Novathon’s organizers hope for needs to be guided by Roundtable discussion at Novathon. the spirit of The Woz.

8|2

Business

www.bbj.hu

Budapest Business Journal | November 15 – November 28, 2019

Black Friday and Holiday Shopping Habits November may seem early to start thinking about Christmas gifts, but it is actually dangerously close to the 24th hour, especially for those who choose to order from abroad.

BALÁZS BARABÁS

Public polls at this time of year are a data goldmine both for brick-and-mortar and online shops, indicating not only the top preferences in Hungarian shopping habits, but also how much they plan to spend in making their loved ones happy at Christmas.

Readers may have noticed that shopping malls in Hungary sometimes get unusually and unexpectedly crowded. If Christmas is not yet at hand, nor the annual sales weeks, why are so many Hungarians suddenly so excited to buy? It’s the coupons.

Catalin Dit Glossy magazines periodically issue coupons allowing generous discounts in selected shops or retail chains. The promotion period is relatively short, only two-to-three days, usually in weekends. If you observe closely, the overwhelming majority of the customers are women, but that should not come as a surprise, according to the public polls.

A study conducted by price comparison portal arukereso.hu and market research company GKI Digital reveals that women,

young adults and pensioners prefer buying Christmas presents in shopping malls.

In total, more than half, 54% of the respondents choose traditional purchasing channels, while less than one-third seek out specialty shops. Male buyers prefer ordering online, mainly from domestic webshops, but

18% also

consider ordering from abroad. On average, the respondents will buy gifts for eight people.

Shopping is preceded by careful planning. Window shopping, promotional leaflets and advertisements are still important sources for information gathering, but price comparison online portals are also increasingly popular.

Finally, the figure that all managers are eager to know: how much clients are planning to spend. The amount budgeted for this year, as revealed by arukereso.hu and GKI Digital, is HUF 48,400, well above the HUF 41,000 of last year. More than one-third of respondents add that they are not scheduling any specific time for spending this amount, but will rather wait for the best promotions. As for the most popular gifts, these are clothing, cosmetics and toys, according to the poll conducted in October.

Black Friday Mania

One of the most eagerly awaited promotions is Black Friday, which this year will fall on November 22 or 29, or both, depending on the marketing strategy of each shop.

Based on data gathered in previous years (2017 and 2018), Hungarians mainly shop online on Black Friday and expect a discount of around 55% on this day. The actual discounts offered are not far from this, at around 53%, compared to 63% in the United Kingdom, 62% in the Czech Republic, 54% in Romania and 51% in Austria, a compilation by market research company picodi.com shows.

ADVERTISEMENT

Continental is working on the tires of the future Technology company Continental, best known for its premium and award-winning tires, is also one of the leading automotive suppliers in the world.

The company is proud of its innovative and future-oriented strategy, which results in numerous projects and concepts targeting both the short- and mid-to long-term future of mobility and safe autonomous driving.

But what kind of tires will there be in the future? Continental’s answer is its C.A.R.E concept, which represents the necessary technology for autonomous vehicles. The comprehensive technology system was presented earlier this year at the Frankfurt Motor Show (IAA). Conti C.A.R.E. (Connected.

Autonomous. Reliable. Electrified.) represents a fine-tuned networking of wheel and tire technology and the manageability of the desired performance characteristics. These

characteristics are also closely aligned with the requirements of electric and autonomous driving in both individual and shared mobility scenarios.

“In combination with the webbased ContiConnect Live application, Conti C.A.R.E. forms a flexible system solution that can provide a means of tire management for modern robo-taxi fleets, for example, boosting performance as well as helping to optimize costs,” underlines Ferenc Musztrai, marketing manager of Continental Hungaria Kft. Conti C.A.R.E. tires feature sensors that are built into the structure of the tire. These generate and continuously evaluate data concerning tread depth, possible damage, tire temperature and tire pressure. This monitoring system,

which goes by the name of ContiSense, transmits information on the condition of the tires to ContiConnect Live, facilitating efficient mobility management for fleet operators.

No less innovative is the idea of actively adjusting tire pressures by means of centrifugal pumps built into the wheel.

As the vehicle accelerates, the centrifugal forces within the wheel act on the pump to generate compressed air.

“This PressureProof technology keeps the tire pressure constantly within the ideal range and helps achieve a sustainable drop in CO2 emissions.

Any excess compressed air is stored in an integrated tank. PressureBoost technology then uses this air to rapidly adapt the tire pressures to various driving situations,” highlights Musztrai. And in the SilentWheel concept, Continental will be presenting a modified wheel rim that reduces the vibrations generated while driving and delivers superior ride quality.

Founded in 1871, Continental is a multinational company that manufactures safe, efficient, and performance-oriented tires for passenger cars, commercial vehicles, and two-wheelers. It is one of the foremost leaders in tire technology and tire production, with a broad product range suitable for use in a variety of conditions and applications.

And through continuous investment in research and development, Continental makes a significant contribution to mobility that is secure, cost-effective, and ecologically friendly. Continental’s goal is to build a future without fatal road traffic accidents, the technology company aims to achieve its Vision Zero through pioneering developments and world class technology.

2

www.bbj.hu

Budapest Business Journal | November 15 – November 28, 2019

A large majority of the Hungarian clients (72%) know exactly what they are looking to buy, and on average purchase four items.

The amount budgeted for spending during Black Friday was HUF 47,380 last year and is expected

to be

HUF 56,968,

according to picodi.com.

Romanian webshop Emag has been present on the Hungarian market for six years, during which time it has become one of the most important players on the online marketplace. From its very first year, Emag participated to the Black Friday promotions. Since then, clients have slightly reduced their purchases on the day, country manager Catalin Dit told the Budapest Business Journal.

“In the beginning, Black Friday had a huge impact on our financial year; around 40% of all-year sales were made in this one single day, which was enormous. Now, Black Friday equivalates with sales made during 30 average days,”, Dit says.

That does not mean that Emag’s business has shrunk, she explains.

“This means that our business has grown significantly, and the Black Friday revenues became more balanced compared to the total sales,” Dit says.

Black Friday is not only important from a revenue perspective, but also as a marketing tool: 30% of BF customers are new to Emag, clients that never made a purchase on the site before, the country manager says.

Business | 9

Purchasing Power Index Market research company GfK recently compiled the purchasing power data of 42 European countries. Purchasing power, according to the methodology, is a measure of disposable income after the deduction of taxes and charitable contributions and including any received state benefits.

The study indicates per-person, per-year purchasing power levels in euros as an index. Consumers draw from their general purchasing power to cover expenses related to eating, living, services, energy, private pensions and insurance plans as well as other expenditures, such as vacations, mobility and consumer purchases.

In the case of Hungary, the average per capita purchasing power is EUR 7,416, roughly half of the European average of EUR 14,739. That ranks Hungary 30th, just below Poland.

Splitting the Hungarian purchasing power into monthly amount results in EUR 618 (about HUF 204,000) that a person can spend, on average. Of course, there are wide differences regionally; for instance, the residents of Budapest enjoy the highest amount at EUR 9,230 per

GfK Purchasing Power Hungary 2019

person, almost 25% more than the national average.

It is also worth comparing Hungarian purchasing power with other countries in the region.

While Moldova and Ukraine are well below the Hungarian average (the figure is EUR 1,830 in Ukraine, for example), Hungary is situated somewhere in the middle. Poland and the Czech

Republic both surpass the Hungarian level at EUR 7,589 and 9,959 respectively, while Romania is some way below, at EUR 5,881.

Western countries enjoy much higher amounts, exactly as you would expect: Austria is at EUR 24,067; Germany EUR 23,779; France EUR 20,306; and Italy EUR 17,799, the GfK survey indicates.

ADVERTISEMENT

Spectacular Novelties to Serve Teamwork

The Hungarian-owned LSK Hungária Kft. began in 1994 as a distributor of multimedia, visual and technical devices. From the beginning of the 2000s, it extended its offer with interactive whiteboards. Today, thanks among other things to governmental projects financed with EU funds, it has implemented about 25,000 whiteboard systems in Hungarian schools, together with its retail partners.

From the beginning the company looked for value-adding opportunities, for example when it localized distributed products and provided training for them, and in 2010 it raised this trend to a new strategic level.

That was when András Leveli was tasked with building a portfolio that serves corporate needs with B4B solutions. The Budapest Business Journal asked the manager about his experiences and the further development steps.

BBJ: The prototype of your interactive visual-collaboration solution was finished by 2014 as a result of intense market research and multi-year development.

Why did you focus on this area?

András Leveli: The various collaboration forms show a rich spectrum from fully informal brainstorming on a traditional whiteboard or flipchart through project meetings and on to formal presentations.

Since these processes did not have “interactive technological” support, we decided to develop our own solution that improves the efficiency of the corporate collaboration through visual information sharing.

BBJ: Your solutions are used by SMEs and multinational companies here and internationally, beginning with the financial sector and moving through the production and construction industry to agriculture.

What do your customers value?

Photo by Kelenhegyi Péter

LSK Hungária started 25 years ago as a classical visual-technical wholesaler and has grown into a developer, manufacturer and supplier of interactive visual-collaboration corporate solutions. One of its most recent innovations is a room booking system that – besides supporting cooperation – fits organically into the ecosystem of devices connected to the IoT and smart meeting rooms.

solutions with factory-like quality and we always provide the best to our clients.

András Leveli AL: Maybe the one-of-a-kind style and the ecosystem. Every customer has his or her own needs; some are looking for video-conference systems, and others would like to replace the classical flipchart with something else within their digital transformation. The essence is to first survey what the customer really needs.

Our modular solutions are adjusted flexibly to this; we always elaborate the exact structure together with the client, which means we are improving the solution together. Today this hardwaresoftware-service package has become a complex ecosystem where every component is strongly interconnected.

We supply and support our tailor-made

BBJ: Your developments keep pace with technological trends; your solutions have been integrated with the Microsoft Teams UC service and other collaboration cloud-platforms, and have been extended with BYOD support. Your newest development is a room booking system. Does this signal the next innovation wave?

AL: Our LSK SpaceTime room booking system is definitely the first example of “ecosystem thinking” that prevents the chaos that can derive from booking meeting rooms. By cooperating with the most commonly used corporate calendars, it clearly and visually displays pre-scheduled meetings near the meeting room door, while it also enables ad-hoc reservation. In the case of an extended meeting, it enables the reservation to be prolonged, or indeed, facilitates early termination if a meeting is over sooner than expected. In addition, it also indicates if there is a video-conference going on inside that should not be disturbed by opening the meeting room doors.

With our trade mark high flexibility, LSK SpaceTime is being adjusted to real life situations for which, by using the IoTbased technologies, we are developing remote management services with which IT operators can supervise the end-point devices remotely, even through smart phones.

Our hardware components are also improving. We try to develop solutions that provide a richer user experience and that can be handled more easily; for example, we enable direct note-taking into a classical PowerPoint presentation, a feature that was also developed based on user feedback.

10 | 2

Business

www.bbj.hu

Budapest Business Journal | November 15 – November 28, 2019

Divide and Conquer: The Growing Role of the COI Others may fear reduced hours or job loss. CIOs understand this. As the survey shows, CIOs see gaining employee buy-in and collaboration as the most critical factor for successful technology implementation.

• As laws safeguarding personal information increase, CIOs will be called upon to increase data security and provide better disclosures and more options for customers. More than 60% expect to play a greater role in regulatory compliance.

A chief information officers’ conference in Budapest on November 6 looked at how the CIO role has changed, and what might shape its development in the future. The Budapest Business Journal went along to sample some views.

BALÁZS BARABÁS

Conferences, public debates and articles about the current state of the Hungarian economy invariably end with one conclusion: there is not enough labor force.

The shortage has become chronic in areas requiring information technology expertise.

But there is less talk about how the role of the chief information officer changes within, or together with, company management.

In a previous issue of the Budapest Business Journal, we saw that not only are technology professionals hard to find, but it is hard even to define exactly what kind of experts are needed (see “Professionals With a ‘Very particular set of Skills’”, October 18).

Just 10 years ago, the IT and business functions were sharply separated, with little connection between each other: the IT department supplied the technology devices to the business. Since then, the environment has changed dramatically, impacting procedures too.

With the rapid deployment of broadband internet, more and more data transfer has become available, while costs have remained flat, or even fallen. Enterprise resource planning and customer relationship management systems were deployed, followed by moving into cloud technology and digital transformation (coming up: artificial intelligence technologies).

Inevitably, business employees became advanced IT users, which implied not only using technology, but also shaping or re-shaping it with requests for new features and functions. All these changes profoundly impacted the

role of the CIO, but how this position will transform, is hard to predict.

But what is a chief information officer?

According to the definition of prestigious technology magazine ZDNet, a CIO is the most senior technology executive inside an organization.

“The CIO is responsible for setting the IT strategy and ensuring that this works with the broader business strategy. In many digital businesses, the IT strategy will be the main element driving the business

“It [the CIO’s role]. will evolve organically. It is very likely that it will split into several positions: one for artificial intelligence, one for data management and so on. No one can oversee the whole area anymore.” strategy. This means the CIO needs be able to understand the broader business requirements and which to prioritize through the use of technology,” ZDNet says.

Global Survey

In April this year, Forbes Insights and virtualization company VMware conducted a global survey of 650 CIOs about the future of their role. Below are some of the findings, although, not all are fully relevant for the Hungarian market, given that all

László Behán, LeasePlan Hungária.

CIOs questioned were from organizations with annual revenue of USD 1 billion or more. With this in mind, the survey, called “The CIO of 2025: Driving Fundamental Enterprise Change” found the following: • When asked where in the company they expect their authority to increase, 60% of CIOs said they would have much greater influence over product design and development, a reflection of the growing strategic importance of apps, which have become central to the customer experience.

• Other high technology priorities include IoT applications and machine learning, two technologies that run in tandem with AI, as well as edge computing and blockchain. Though AI applications are still in their infancy, CIOs see them as the key to the future. Some 60% believe that, by 2025, AI and machine learning will be very important or critical to their business. Over half said the same of IoT, edge computing and blockchain.

• CIOs may also face internal resistance.

AI and ML will relieve employees of repetitive work and free them up for higher-level tasks, but some may be unprepared for the increased levels of responsibility or for the prospect of interacting with robots or working according to automated processes.

Hungarian technology managers agree that the position of the CIO will inevitably transform. “It will evolve organically. It is very likely that it will split into several positions: one for artificial intelligence, one for data management and so on. No one can oversee the whole area anymore,” László Popovics, head of innovation management department, OTP Bank says.

The CIO needs not only to become more specialized, but also to be able to handle the ever growing amount of incoming requests.

“As a manager, I try to keep out of as many operative issues as possible. We have set up a protocol for incoming queries and requests. All of them are redirected to the specific manager in charge, and I am contacted only if there is a glitch in the protocol, or the rules outlined there do not apply to that specific issue,” Popovics says.

The problems that will arise with the expansion of the technology are not primarily related to technology skills, he adds.

Soft Skill Issues

“These are rather soft skill issues, how people communicate with each other.

Therefore, now we aim to reduce professional training and focus rather on soft skill trainings,” Popovics says.

Operations director at LeasePlan Hungária, László Behán considers that the transformation of the CIO position is not a matter of the future, it has already been ongoing for some time, and the reason is that business began merging with IT. “IT slowly became part of the business; or, more precisely, technology became an inseparable part of the business. So there was an increasing need for a completely new type of IT professional, who is able to communicate with the business people.

Basically the information officer needed to become more and more a business officer and to learn the business. I think that started the transformation that is still undergoing,” Behán says.

But if the CIO will look more and more into business, who will oversee the technology inside the company? The classic CIO tasks will become less relevant, Behán argues.

“IT will become public utility, and it is already happening. Today, office servers do not require extremely high skills to operate; it can be purchased on the market, or as cloud service. It will become less important, like electricity: available anywhere,” he explains.

CIOs will be required in companies where there are highly complex systems in place, in sectors with production, services, banks or public services. The question is, where the CIO will stand in the hierarchy, and what attributions he or she will have in the future, Behán concludes.

2

www.bbj.hu

Budapest Business Journal | November 15 – November 28, 2019

If the Year Ends With a 9, Prepare for a History Lesson In recent weeks, European media have dedicated many column-inches to the fall of the Berlin Wall, symbolizing the end of Communism on the continent 30 years ago. But this year also marks 10 years since the worst downturn in the Hungarian economy this millennium.

KESTER EDDY

In 2009, Hungarian economic output slumped by 6.7% compared to the previous 12 months, while the average unemployment rate jumped to 10%, versus 7.8% of 2008. The national mood was grim.

In truth, all of Europe (bar Poland) endured recession that year as the global financial crisis of 2008, triggered by the collapse of Lehman Brothers in the United States in the September, fed through financial markets and into real economies around the globe.

Each and every financial jurisdiction has a unique story as to how it coped with this shock, but Hungary, because of the size and composition of its debt, was particularly vulnerable. It suffered accordingly.

The anniversary of this economic Hungarian annus horribils, along with related history both previous and in its wake, has been documented by one of the key players who battled to contain it: Júlia Király, deputy governor of the National Bank of Hungary (MNB) responsible for financial stability from 2007 to 2013, published her personal account of this tumultuous period this summer.

“A tornádó oldalszele” (“The side wind of the tornado”) is thus far available only in Hungarian (an English version is expected next year), but the author recently sat down with foreign journalists to give a verbal outline of her 430-page tome.

Király’s account of the crisis is particularly refreshing as it contains criticism of all involved, not least the MNB leadership, herself included.

“We [the central bank] should have fought much more to stop the FX lending,” she says, speaking of the population’s disastrous stampede during the 2000s into mortgage loans denominated in foreign-currency.

Despite the MNB’s warnings, the public rushed to take advantage, or so it seemed, of the low interest rates on offer. The 62-year old economist admits too that the MNB should have argued “much more fiercely” with the Finance Ministry to limit the commercial banks’ freedom to modify interest rates on retail loans. This was “a terrible failure” which only deepened the social crisis.

“People really suffered,” she says.

Credit Given

In spite of her apparent liberal leanings, Király gives credit to the policies of the

Viktor Orbán government to convert both state and household debt into domestic forint since it regained power in 2010 – although she is critical that its first efforts were aimed at the rich, rather than the average-income Hungarian.

She is critical, too, of those Fidesz leaders who, in June 2010, talked of Hungary as “the next Greece”, this just after an international effort to save Athens from bankruptcy.

“Hungary came out of the crisis by 2010.

At the beginning of 2010, this country was on a growth path,” she says. “Government debt was declining, we could already issue new bonds on the international markets, the NPL [non-performing loans] ratio of banks was below 10%.”

Hungary’s subsequent crises of 2011-12, she insists, were the result of ill-advised policies that “had nothing to do with the euro crisis” of the time.

Indeed, the only recent government to emerge more or less unscathed in Király’s work is the short-lived “technocrat” administration of Gordon Bajnai, which negotiated the rocky path of 2009 and early 2010 prior to Orbán’s first “supermajority” regime in May that year.

Király’s even-handed approach, of course, makes her account all the more credible.

The Hungarian-language publication comes with sections devoted to helping the non-financial expert better understand the story. It is to be hoped that the English language version is prepared with equal care to foster a far broader awareness of events in Hungary of those times.

In 1989, Berlin lost its wall: two decades later, thousands of Hungarians lost their walls as banks repossessed the homes of owners who defaulted on FX mortgage repayments, credit that arguably should never have been offered in the first place.

Let us hope the leaders of today and the future learn the lessons, and such historical events never come to be repeated.

The Bottom Line is a monthly column written

by Kester Eddy, a long-standing and well respected Budapest-based business and economic journalist, who has written for the Financial Times and many regional publications. The opinions expressed in the column are not necessarily those of the Budapest Business Journal. To comment on this column, or on anything else in the BBJ, email the editor at robin.marshall@bbj.hu

2nd district

2nd district

Business | 11

2nd district

48 sqm – 2 rooms, Logodi street

92 sqm – 4 rooms, LövőHáz street

89 sqm – 3 rooms, vöLgy street

Near Buda Castle, within a very nice period building, this very spacious, garden facing apartment in good condition has private gas heating. It is located in a quiet area.

Close to the Mammut shopping mall and Millenáris Park, this very spacious, well divided, street facing apartment has private gas heating.

It is situated within a period building with elevator.

This luxury apartment has been renovated in 2019 by an interior designer. The property is situated within a completely renovated, 5 apartments classical building with parking space.

46.700.000 HUF

80.000.000 HUF

97.900.000 HUF

+36.70.365.0827

2nd district

+36.70.365.0827

2nd district

+36.70.376.4138

2nd district

106 sqm – 4 rooms, FeLHévízi street

294 sqm – 6 rooms, HűvösvöLgy

402 sqm – 9 rooms, kUrUCLes

In a quiet area, this completely renovated, sunny, duplex, luxury apartment has two terraces (15 and 6 sqm) and two parking spaces. It is situated within a new built building with elevator.

This 3 storey, insulated semi-detached house in good conditions has huge terrace and 2 balconies. It is located in a green and quiet side street, only a few steps away from a shopping mall.

This beautiful, three storey villa house has 980 sqm of lot, four bathrooms, balcony and garage.

It is located in one of Kurucles area’s green and quiet side streets.

130.000.000 HUF

159.000.000 HUF

210.000.000 HUF

+36.70.365.0827

3rd district

+36.70.376.4138

3rd district

+36.1.376.6080

3rd district

74 sqm – 4 rooms, CsiLLagHegy

101 sqm – 3 rooms, római-part

87 sqm – 3 rooms, rómaiFürdő

This renovated, very well divided detached house has 292 sqm of lot, fully fitted kitchen, air conditioning system, terrace and well kept garden.

Beautiful panorama over the Danube, this very sunny and quiet apartment has living room with open kitchen, 2 separate bedrooms and 40 sqm of terrace.

Panoramic view over the Danube, this very bright apartment has living room with open kitchen, 2 separate bedrooms, huge terrace and garage possibility for 4,2 million HUF.

69.900.000 HUF

85.900.000 HUF

99.800.000 HUF

+36.70.669.5350

5th district

+36.70.669.5350

5th district

+36.70.669.5350

6th district

121 sqm – 3 rooms, BajCsy-zsiLinszky str.

53 sqm – 2 rooms, októBer 6. street

86 sqm – 3 rooms, szinyei merse street

This renovated, street facing apartment benefits of spacious, bright rooms, high ceiling and huge windows. Is located in the heart of downtown, near Podmaniczky Square.

Nice panorama over the St. Stephen’s Basilica, this completely renovated, luxury, top floor apartment is situated within a renovated building with elevator, next to Liberty Square.

This spacious, street facing apartment in good condition has living room with open kitchen, 2 separate bedrooms, 2 bathrooms and a laundry room. It is located close to Andrássy Boulevard.

94.900.000 HUF

99.000.000 HUF

54.000.000 HUF

+36.70.623.8994

6th district

+36.70.623.8994

7th district

+36.1.351.0446

11th district

92 sqm – 4 rooms, FeLső erdősor

80 sqm – 3 rooms, rejtő jenő street

68 sqm – 2 rooms, HamzsaBégi street

This very bright, street facing apartment has two bathrooms and private gas heating. It is situated within a condominium with nice common garden, close to the Andrássy Boulevard.

Next to the Magyar Theatre, this completely renovated, street facing, high floor apartment benefits of a fully fitted kitchen, separate rooms and air conditioning system.

Not far from the centre of the district, this completely renovated, high floor apartment has two bathrooms, balcony and view over a green park. It is situated within a renovated building with elevator.

68.500.000 HUF

59.900.000 HUF

64.900.000 HUF

+36.1.351.0446

11th district

+36.1.351.0446

13th district

+36.70.337.2319

22nd district

100 sqm – 4 rooms, BerCsényi street

80 sqm – 4 rooms, kresz géza street

41 sqm – 2 rooms, margaréta CoUrt

This completely renovated, very spacious, street facing apartment is situated within a building with common terrace, in the heart of the district.

In the heart of the district, this renovated, street facing apartment has separate rooms and 2 balconies. It is situated within a Bauhaus style building with elevator. Ideal for investment.

Close to the Campona shopping mall, this newly renovated, bright apartment has balcony and it is situated within a new building with nice common garden and private parking space.

69.900.000 HUF

62.900.000 HUF

37.900.000 HUF

+36.70.337.2319

+36.70.623.8994

+36.70.337.2319

grUppo t.F.m. kFt. 1068 BUdapest, kiráLy U. 102. each agency independently owned and operated. • these offers are valid, till the apartments are sold. • these information do not constitute a contractual element.

12 | 2

Business

www.bbj.hu

Budapest Business Journal | November 15 – November 28, 2019

ADVERTISEMENT

Celebrating 37 Years of Pierrot Restaurant and St Martin’s Day It was a little early to be celebrating the traditional feast day, which falls on November 11. But, if the Pierrot restaurant on Fortuna utca, in the atmospheric Castle District of Buda was offering a St Martin’s Day menu, that was fine by me.

The Castle District is rich in history.

Many of the houses that line its cobbled streets date back to the 13th century. In among them are intriguing museums. I had every intention of visiting The House of Houdini – the legendary escapologist was born Erik Weisz in Hungary in 1874 – which promised a live magic show every 30 minutes, or the nearby Golden Eagle Pharmacy Museum complete with medieval alchemy lab. But Pierrot was so convivial, our waiter so charming and lunch so delicious that we ended up whiling away the lion’s share of our afternoon in the restaurant.

Pierrot is a historic institution of a different kind. Housed in a former 13th century bakery, it opened in 1982, when Hungary was still socialist but the iron grip was relaxing. Pierrot was the first privately owned restaurant to open under socialism. Today, it’s hard to imagine how momentous its arrival must have been.

The restaurant was opened by the Zsidai family, who have made it their life’s work to restore the status of Hungarian cuisine. The cooking of Lajos Lutz at Pierrot, the first of the restaurants in what has become a discreet culinary empire, is certainly more than worthy. Before he came to Pierrot, Lutz worked at the Gundel Restaurant founded by Károly Gundel, a gastronomic genius the equal of Auguste Escoffier. Gundel passed away in 1956, the year the Hungarian Revolution was brutally suppressed.

Company ///news GSK Winds up HUF 18 bln Expansion

Pierrot is informal and friendly, cozy and airy at the same time. A grand piano in one corner, under a wall of photographs of celebrities including actor Anthony Hopkins gave it a somewhat bohemian, jazzy feel. The restaurant offers live music every night from six, ranging from traditional Hungarian folk to jazz and contemporary.

The Hungarian unit of British drug maker GlaxoSmithKline (GSK) has inaugurated a new vaccine plant in Gödöllő, (31 km northeast of Budapest), hirtv.hu reports.

The company received a HUF 1.8 billion government grant for the HUF 18 bln capacity expansion project creating 104 jobs, said Minister of Foreign Affairs and Trade Péter Szijjártó. The minster noted that GSK has been a strategic partner of the government since 2014. Christopher Hunley, managing director of GSK Biologicals, said the company’s activity at the base will be expanded as a result of the development and the plant will make components of diphtheria and tetanus vaccines. In future, the entire vaccine will be produced on site, making the process simpler and more efficient, hirado.hu adds.

Traditional Feast

OTP Earnings up 53% in Q3

St Martin’s Day is traditionally a feast day when Hungarians eat geese. My companion is strictly vegetarian but our waiter, known to his friends as Gyuszi, easily persuaded me to make mine a goose-themed lunch. My companion drank Sauska rosé, a Hungarian wine that won “Best in Show” at the prestigious American Fine Wine Rosé Competition in 2018. I stuck with good old Hungarian lemonade.

Hungary’s biggest lender, OTP Bank said its Q3 consolidated after-tax profit rose 53% year-on-year to HUF 131.6 billion, lifted by acquisitions and stronger business activity, in an earnings report published on bse.hu. Profits were well over HUF 104.8 bln, portfolio.hu estimates. Earnings per share came to HUF 504 for the period. OTP closed the acquisition of the Albanian subsidiary of France’s Société Générale Group in

March, and it closed the acquisition of SocGen’s Bulgarian unit in January. OTP closed acquisitions in Montenegro and Moldavia in July, and another in Serbia late in September. The Montenegrin and Moldavian units contributed HUF 0.5 bln and HUF 1.2 bln, respectively, to consolidated profit in Q3, OTP noted. As the Serbian acquisition was completed late in the quarter, only its balance sheet was included in the consolidation, it added. Net interest income climbed 15% to HUF 177.1 bln in Q3. Net revenue from commissions and fees increased 26% to HUF 73 bln on seasonality and stronger business activity, OTP said.

Higher Revenue, Financial Gains Boost Richter Q3 Earnings Third-quarter net income of Hungarian pharmaceutical company Gedeon Richter jumped 151% year-on-year to HUF 22.2 billion, boosted by higher revenue and a big financial gain, the company announced in an earnings report. Revenue increased 28% to HUF 127.5 bln. Cost of sales climbed at a faster clip, rising 42% to HUF 57.7 bln. Gross profit was up 19% at HUF 69.8 bln. Richter booked an HUF 8.5 bln net financial gain for the quarter, compared to a net loss of HUF 4.2 bln in the base period. Earnings per share came to HUF 119 in Q3, portfolio.hu adds.

Magyar Posta Mulls Future in Shrinking Business Segments

My entrée was foie gras brulée, seared duck liver with plum chutney and a small homemade brioche.

Guided by Gyuszi, I opted for pulled goose with red cabbage in an elegant burger-style bun with perfectly crispy sweet potato fries. My companion chose a colorful butternut squash ravioli with roasted pumpkin seeds and pomegranate. The pulled goose was thoroughly satisfying, and my companion told me that the ravioli left her enough space for dessert.

For me, this was hazelnut chocolate fondant with sour cherry sorbet. My companion had what Gyuszi described as a giant Ferrero Rocher candy with salted caramel at its heart, accompanied by a honey colored Béres Tokaj.

After our lunch, delighted at our good fortune to have been the guests of Pierrot, we wandered those cobbled streets as the afternoon sunshine turned to old gold.

Pierrot is at 14 Fortuna utca. For reservations, call +36 1 375 6971 or email hello@pierrot.hu.

View the menu at pierrot.hu.

Magyar Posta is weighing the future of some of its less-used services while investing further in its growing express delivery business, the CEO of the stateowned postal company has said, according to an article published on the website of daily newspaper Magyar Nemzet.

György Schamschula said Magyar Posta had launched a three-year program this year to transform its express delivery business involving the purchase of real estate and equipment as well as the introduction of IT systems

that make seasonal shifts in volume more manageable. What has traditionally been Magyar Posta’s main source of revenue, letter delivery and the processing of postal checks, is on the decline, he said. The company is considering the discontinuation of its newspaper delivery service, which has contracted markedly, as well as its little-used letter box service, he added. Schamschula said Magyar Posta’s headcount is close to 30,000, and just 1% of those positions are unfilled, magyarnemzet.hu adds.

2

www.bbj.hu

Budapest Business Journal | November 15 – November 28, 2019

The U.S. Repo Market: A Harbinger of Recession?

Recent irregularities in the U.S. repo market may be early indicators of an upcoming recession, as was the case in 20082009 and before the dotcom crash of 2001, Les Nemethy and Sergey Glekov warn in their regular corporate finance column.

The Corporate Finance Column

Spike in the U.S. overnight repo rate in September 2019

10 8 6 4 2 0

6

9 10 11 12 13 16 17 18 Source: Datastream from Refinitiv

The repo market is crucial for the health of the financial system, as it used by banks to obtain short-term liquidity and the size of the repo market is substantial: according to data from the Securities Industry and Financial Markets Association’s US Repo Market Fact Sheet published this year, the average U.S. daily repo and reverse repo outstanding was USD 3.9 trillion in 2018.

Hence, the recent turbulence in repo markets should be of interest not just to bankers, but to any astute observer of the financial system, who wishes to have a deeper understanding of the direction in which markets are headed.

The Federal Reserve Bank of New York defines the U.S. repo market as the federal funds market that consists of domestic unsecured borrowings in U.S. dollars by depository institutions from ADVERTISEMENT

other depository institutions and certain other entities, primarily governmentsponsored enterprises.

In an overnight repo transaction, holders of U.S. Treasuries and other bonds sell their securities to other institutions with allowance made to repurchase those securities the next day at a set price. The difference between the sale price and the repurchase price is the effective borrowing interest rate, or the Effective Federal Funds Rate. This EFFR is calculated as a volume-weighted median of overnight federal funds transactions.

Repos are sometimes known as “sale-and-repurchase agreements” or “repurchase agreements”. In a repo transaction, one party sells an asset (usually fixed-income securities) to another party at one price and commits

Business | 13

to repurchase the same asset from the second party at a different price at a future date.

If the seller defaults, the buyer takes title to the asset and may sell the asset to a third party to offset his loss.

The asset therefore acts as collateral and mitigates the credit risk that the buyer has on the seller. Repos may be overnight (e.g. a duration of one day) or term (a duration up to one year, but typically up to three months).

Ideally, collateral should be free of credit and liquidity risk, therefore government bonds are most commonly used collateral in the repo market. In the United States, Treasury securities account for about two-thirds of the U.S. repo market, according to Repo FAQ by International Capital Market Association .

The exhibit below illustrates the rather nasty gyration that occurred in midSeptember 2019 as it shows the intraday US repo rate. The spike signifies that liquidity in the system was freezing up.

To restore liquidity and counteract the spike, between September 17-24 the New York Fed injected a whopping USD 270 billion into the banking system and committed to continuing daily repo operations through October 10, 2019. The Economist magazine called this event “an alarming echo of the financial crisis”.

At the beginning of October, the New York Fed announced a further extension of daily repo operations to November 4, 2019. Those efforts have succeeded in calming markets for now. The EFFR decreased significantly over last month. However, money market stress is expected to rise again towards the end of the year, when banks concerned about liquidity requirements may be less willing to lend their reserves (see “New York Fed offers to inject more liquidity into the banking system,” Reuters, October 24).

You might call a gyration in the repo rate a canary in the mine shaft, just like the inverted yield curve (the subject of one of our earlier articles), indicating the possible approach of a recession.

Every investor and every business owner should have an appreciation of the direction in which the economy is headed, as these guide our investment decisions.

We trust that reading our blog will provide a level of understanding as to some of the tools used by financial experts.

Les Nemethy is CEO of EuroPhoenix (www.europhoenix. com), a Central European corporate finance firm, author of Business Exit Planning (www.businessexitplanningbook. com) and a former president of the American Chamber of Commerce in Hungary.

14 | 2

Business

www.bbj.hu

Budapest Business Journal | November 15 – November 28, 2019

A Future Made in Central and Eastern Europe Central and Eastern Europe will play an increasingly important role in the European Union’s economy in the future. Digitization and current technological changes can give the region further impetus but to benefit from them, these economies need to stay open to new technologies and be able to adapt quickly to the changing environment.

ZSÓFIA VÉGH

These were the most important messages change, as well as the framework from The Future’s “Made in CEE” conditions that the state must create to conference organized by the Germansupport R&D and innovation.

Hungarian Chamber of Commerce and “In order to create a future you need Industry (DUIHK) at the end of October. to have a solid basis,” Palkovics said.

The DUIHK has already been running “Normally, the Hungarian economy is several programs to help its members strongly linked to the German economy; better prepare for the above mentioned still, we have [seen] some sort of a changes. One is Netzwerk Digital, an decoupling we were looking for an answer initiative launched earlier this year, the aim too,” he continued. of which is to support member companies with pragmatic solutions and by sharing experience to apply digitization successfully.

Speakers at the conference – László Palkovics, Minister for Innovation and Technology, Johannes Teyssen, chairmanCEO of E.ON SE in Essen, HansPaul Bürkner, president of the Boston Consulting Group in Frankfurt, and Thomas Narbeshuber, vice president of BASF’s chemical company – agreed that the region is now an indispensable element of European value chains and that its importance will continue to grow in the coming years.

The countries of Central and Eastern Europe could also benefit from the opportunities presented by today’s rapid technological changes, such as digitization and development towards “Industry 4.0”.

In his keynote speech, Teyssen, talked about the importance of the region and László Palkovics how CEE and Hungary can become successful in a future characterized by swift social and technological changes.

Part of the explanation for the “I believe CEE should be well prepared decoupling of the Hungarian and to prosper from these changes. The German economy is the proportion of ability of these nations that have learnt high-tech production: Hungary is on the to embrace change will put them in the right place in the more digital place that is same level as Germany and Denmark, and regarding the ratio of high-tech ahead,” he said. exports, Hungary is number one in R&D Framework Europe, the minister said.

Minister for Innovation and Technology Some may say that the fact that László Palkovics addressed issues Mercedes decided to bring manufacturing related to digitization and technological here has nothing to do with the level of

“Made in CEE” roundtable discussion. technological development. Yet it does; in deed, many of recent investments made in the country are made by companies with a high-level of high tech – and they have also decided to bring activities such as research and development here, he argued.

The minister also listed the number of challenges the country needs to tackle in order to become a more innovative country.

Among these are financing, collaboration between organizations and structural changes in the system.

“The Hungarian R&D system has many challenges; people could witness the fights that happened as a result of the restructuring of the researching and science network,” Palkovics noted, talking about the arguments over the summer with the Academy of Sciences.

Funding is also low, he acknowledged.

The state will increase its R&D funding

by

25%

next and in 2021 and 2022 as well, which means that it will double the current level, he added.

Greater Cooperation

Another issue the minister highlighted is a lack of willingness by many organizations to cooperate.

“They are quite individualist: universities are not working with each and the level of cooperation with and between companies is not high either. We have to deal with that as well,” Palkovics said.

R&D funding as percentage of GDP falls short of the European average, and will remain under the 3% target figure set by the European Union for 2020.

With the measures announced, Hungary is likely to end close to 2%, but the target to reach by 2030 should be

3%, he added. In the next funding period, the EU will set aside its biggest budget for R&D yet: as of 2021, the European Union’s Horizon Europe program will

allocate

EUR 100 billion.

In order to successfully tap into this, cooperation – between countries as well – is key, the minister said. Talking about the composition of R&D funds in Hungary, the minister said that currently the majority of financing (75%) is made by the private sector. This will change in the coming years; by 2021, community funds will provide a third.

“The Hungarian R&D system has many challenges; people could witness the fights that happened as a result of the restructuring of the researching and science network.”

The speakers talked about the impact of digitalization and technological breakthroughs on the labor market and society. According to Teyssen, a successful digital transformation requires an appropriate culture.

Above all, employees need to be encouraged to acquire digital knowledge.

Palkovics acknowledged that Hungary still has some work to do in developing people’s digital competences.

Boston Consulting Group president Bürkner agreed: Workers need to be prepared for this new era and investment in digitization needs to be encouraged, he said.

3

www.bbj.hu

Budapest Business Journal | November 15 – November 28, 2018

Special Report Business Services Sector

Budapest BSC Puts Tata at the Heart of Europe

16

Market Talk: Maturity key to SSC Growth

18

Countryside Case Study: BP in Szeged

19

Building a Shared Vision for Business Services

21

Focus on Curiosity, Creativity and Complex Problem-solving Skills

22

Budapest vs Countryside: Where to Place Your BSC?

28

Hungary’s BSCs have long since moved beyond call centers and workbenches.

What does the future hold?

16 | 3

Special Report

www.bbj.hu

Budapest Business Journal | November 15 – November 28, 2019

Budapest BSC puts Tata at the Heart of Europe Prabal Datta, general manager and delivery center head of Tata Consultancy Services in Hungary, talks to the Budapest Business Journal about the Indiabased company’s 18 years of growth in Budapest.

ROBIN MARSHALL

BBJ: Tata Consultancy Services established its Global Delivery Center in Budapest back in February 2001. Why did you choose Budapest, and how has the center changed since then?

Prabal Datta: Our business in Hungary is at the heart of our European operation. We support our customers from Europe and around the globe from here. TCS selected Hungary, and Budapest as its first –and until now only – European Delivery Center, as it offered a wide-ranging talent pool and proximity to client locations. The stable economic and legal environment was also highly valued when the decision was made 18 years ago. As you may know, TCS’ business in Europe has been experiencing double digit growth. That puts an important onus on us to ensure we continue to provide the highest value to our customers as they embark on their journey on transformation and growth. It means we have to constantly deliver the higher and higher value-added capability required for the digital age. I am happy to share that our focus on creating

global or regional headquarters, which gives flexibility to run operations in different domain centers. Solutions provided by TCS to its more than 80 global clients in different industries and geographies from Budapest requires one hub for operations. Other university cities in Hungary like Szeged, Pécs or Debrecen do, however, play an important role in our Academic Interface Program.

capabilities and superior execution have helped us double size in the last three years.

Not only the size; we are adding more and more value-adding services to our portfolio.

BBJ: How many people are currently employed, and what is the range of functions performed at the GDS? PD: In 2001, we have started with a few dozen IT engineers; today, TCS employs more than 2,500 associates from across all domains and geographies. The focus of our services is in Digital IT and cognitive business operations.

We have a very diverse multi-generation, multi-ethnic workforce. It is critical for us to be empathetic, to collaborate with our customers and other TCS entities, adapt to changes and continue to provide superior service. At TCS, we are very proud that we are able to contribute to the technological advancements and the digital economy in Hungary, Europe and worldwide.

BBJ: Hungary has a very tight labor market. Do you have any concerns, or, indeed, actual problems, in finding suitable workforce?

PD: We continue to experience a significant demand for our services. We are expecting to grow in the coming years both in numbers and higher value-added work.

Hence finding, onboarding and engaging the right talent and continuously upskilling these to meet the future demands of

business will continue to be one of our key focus areas. TCS has always been proud to attract high potential, skilled talent and to grow that talent within the company.

“Our focus on creating capabilities and superior execution have helped us double size in the last three years. Not only the size; we are adding more and more value-adding services to our portfolio.”

BBJ: How easy is it to find a suitable office space for your size requirements?

PD: We are very lucky with our planning ahead, finding the right partners. We are located in District XI and able to rent office space to cater for our growth needs.

BBJ: Have you ever considered a BSC in one of the provincial Hungarian countryside cities?

PD: The way we set up our business center does not allow multiple locations for services.

Captive centers provide services for their

BBJ: Tata, along with Apollo Tyres and the Jaguar Land Rover engineering center, are the most obvious examples of Indian commerce in Hungary. Do you think others might follow your example?

PD: Over the past years, as a local business player, TCS has been promoting Hungary as a place of investment, and been active in different professional organizations who work for a more competitive country and business environment. Hungary’s business climate has become more and more favorable for investors, which means we are in the right place.

BBJ: This year you were a runner up in the BBJ Expat CEO of the Year awards.

What did this award mean to you and the company?

PD: First and foremost, it was a great honor and a humbling experience to be chosen as one of the best among so many great people who are creating value for their company and Hungary every day. We as a company were extremely proud of that recognition. It was an acknowledgement of the hard work 2,500 people at TCS put in day in and day out for our customers to grow and transform.

BBJ: And your plans for the future?

PD: For our future plans we foresee that, as companies progress on their digital journey, the demand for our services will increase significantly. So, I think we will continue to expand in coming years. We will continue to invest in our associates to build their capabilities for the Industry 4.0 world. Already almost our entire workforce is Agile ready; that means to they are more equipped to deliver higher value faster to our customers. We plan to have more centers of excellence for different technologies and methodologies in Hungary supporting our customers. We will also continue fostering STEM [science, technology, engineering and mathematics] education for the next generation.

ADVERTISEMENT

Ask for the Budapest Business Journal’s daily English-language premium newsletters

NOW Ask for a ten-day trial!

and get the latest news about Hungary, the region and the energy industry direct to your email intray early each work morning

Contact: circulation@bbj.hu

· Tel.: +36/1/398-0344

E L B I X E L F

S N O I T U L O S T FLEE

usive l c x E • g n i c d • n o i a r n e fi p t lee ntal F e r • s h g t on easin m L 2 l 1 a n r1 tio .hu/en a Opera ase” offers fo t t o dgetfl e u L | b i n l i u „M nta e get.h r d u b m r @ te tflotta e g Short d u 4|b 0 486 0 7 1 +36

Fuel consumption: 12,4 – 5,2 l/100 km, CO2 emissions: 283 – 137 g/km

18 | 3

Special Report

www.bbj.hu

Budapest Business Journal | November 15 – November 28, 2019

Market Talk: Maturity is key to SSC Growth In the past decades, the recognition of shared service centers in Hungary has improved from the traditional “backoffice” view to an important factor contributing to better operational efficiency and revenue growth.

While Hungary was at the forefront of SSCs half a decade ago, emerging markets today may threaten the country’s longlasting reign.

CHRISTIAN KESZTHELYI

In the past few decades, Hungary has become a mature shared services center market with SSCs focusing on transformation and the optimization of their operations, and not just on head count growth.

“SSCs were able to continuously improve their processes with ‘traditional’ process improvement techniques, but they are close to reaching the limit of such methodologies,” László Vágó, advisory manager at PwC Hungary, tells the Budapest Business Journal.

“But this is not the end of the journey; due to advances in automation and digitization, SSCs have the unique opportunity to expand their scope, integrating increasingly more knowledgebased processes alongside transactional processes, and folding more functions into SSCs,” he adds.

His views are shared by peer Balázs Horváth, director of Shared Services and Outsourcing Advisory at KPMG in Hungary.

“Low value-added jobs are being automated or outsourced to an offshore location. With that, a variety of new activities and tasks land at the centers that require new skills from the staff,” Horváth says.

He adds that the scope of services in the SSC market has seen the biggest change, which will be further boosted by automation efforts, which are not yet visible at the moment.

Digital Future

Automation, digitization and artificial intelligence are topics that increasingly come into the center of any business discussion. Some 87% of Hungarian CEOs interviewed plan to implement measures to improve operational efficiencies for

revenue growth, the eighth Hungarian CEO Survey by PwC has revealed.

“Being affected by their nature, shared service centers are leading in efficiency improvement, and about to get a digital upgrade supporting the organizations enhancing their improvement. For decades, SSCs have empowered enterprises to generate efficiencies of scale, reduce processing costs and cycle times, and increase the quality and accuracy of services. By combining transaction functions such as HR, finance, procurement, IT and legal into a consolidated service hub for the entire company, SSCs have delivered significant business value,” PwC’s Vágó argues.

The Hungarian SSC market has gone through such an evolution that it is no longer seen as only offering back-office functions that focus only on process efficiency improvement and cost reduction, however.

“Organizations are increasingly looking to generate more value from their SSCs

Réka Komáromi and are trying to take advantage of new and emerging technologies such as robotic process automation, artificial intelligence, and cognitive technologies,” Réka Komáromi, associate partner of Advisory Services at EY tells BBJ. “Consequently, the talent requirements for delivering services required for conducting business operations are changing. A differentiation strategy for Hungary compared to other markets in

the region would be welcomed in order to ensure further growth in the shared services sector,” she adds.

Strong Growth

Central and Eastern Europe has certainly benefited from the development of the SSC industry, delivering strong annual growth rates in the past decade. This stems from the expansion of SSC services on offer, as well as on migrating more complex and high valueadded services into the centers. This market sees increasing competition for Hungary, which has traditionally been a frontrunner.

“While Hungary was at the forefront of the SSC market 5-10 years ago, we now see other markets emerging in the region, showing strong growth in the SSC industry. The Baltic region, for example, has seen significant growth over the last few years and is less saturated compared to Hungary,” Komáromi of EY Hungary says.

That said, the maturity level of the Hungarian SSCs has clearly increased and business models are becoming more complex.

More value-added activities are being added to the existing scope of the centers.

“In the past years we have observed that mature centers have been adding scope like transformation management, acquisition integration, demand and supply planning, application development and marketing,” Komáromi adds.

“Mature Hungarian centers have established end-to-end processes with global process owners reporting into the SSC organizations. The model ensures closer cooperation with the business partners and gives the SSCs a seat-at-thetable with increased influence on the global corporate strategy.”

Low-risk Destination

Central and Eastern Europe is still considered a low-risk destination providing a skilled talent pool with a strong availability of foreign languages.

However, that is something of a doubleedged sword. The availability of talent is making mature locations saturated, leading to wage inflation and difficulties in attracting and retaining talents.

“Top skills for shared services organizations are process excellence/ continuous improvement, functional expertise in, for example, finance processes, HR and customer service,”

Komáromi says. Nevertheless, emerging new technologies – AI, data analytics and automation, for instance – are reshaping the market, and players need to be prepared for these transformations.

“The market has become larger with more and more mature SSCs, in turn developing a need for more employees to meet the growing demands, and a

Balázs Horváth different set of requirements: higher experience, more entrepreneurial attitude, higher ownership and more willingness to taking responsibilities to respond to the more complex job requirements,” Gergely Baksay, employer branding and communications director at Roche Services and Solutions, tells the BBJ. “The market employment is at its peak and as the SSC market matures, roles that are more complex will likely be available, and in turn, the need for simpler, operative roles may be lower. Competition is quite high to get the best talent on the market and companies are developing a portfolio of benefits to differentiate themselves. The stability and central location of Hungary in Europe as well as the educated workforce means it remains very attractive for companies to implement a SSC here,” Baksay adds.

“The labor market was tough in the last couple of years, although that is a little more relaxed at the moment. Salaries have been amended to reflect demand but that is offset by the weak forint,” Horváth of KPMG concludes.

3

www.bbj.hu

Budapest Business Journal | November 15 – November 28, 2019

Countryside Case Study: BP in Szeged

ZSÓFIA VÉGH

“When we saw the constant development at the Budapest center, we started to think about where to continue,” Viktor Knezevics, head of BP’s Business Service Center at Szeged tells the Budapest Business Journal.

“We assumed that this way [looking at a secondary city] we could reach a wider pool of talents. Coming from a countryside city, I am aware that many people move to the capital because they have no other choice. Would there be such a choice, many would stay,” he explains.

Following an analysis, the Hungarian management together with BP’s global business services unit, shortlisted three countryside cities and visited each. Based on the availability of labor force and universities, transportation and the real estate landscape, they picked Szeged.

“We did our research and found that the university’s output of potential professionals with skills we need (not only fresh graduates, but also those already on the job market) seemed satisfying,” Knezevics explains.

On September 26, 2016 the company and Minister of Foreign Affairs and Trade Péter Szijjártó made a joint announcement of the investment. Exactly one year later, the Szeged center was opened. By then, the company has recruited approximately

200

employees,

who were temporarily located at other offices and at university lecture halls until the refurbishment of an old office building could be finished.

Why not Budapest?

Among the options BP had considered were opening a new center in Budapest, moving to another capital city elsewhere in the region, or finding a location in the Hungarian country.

Establishing a new unit abroad would have offered no real competitive

effectively during work. “It is more important that we have sufficient, capable and qualified workforce.”

The one real downside of countryside locations is real estate: finding category “A” office buildings is difficult. Large property developers in Budapest are reluctant to take risks, while countryside firms may lack the resources to launch develop, Knezevics says.

“Companies with the intention of setting up shared services don’t have two or three years to wait. We were lucky to have found an old factory building that we renovated and converted into an office. Should BP need another office at a countryside location, we would have a hard time finding a quality office building,” he says.

BP in Hungary

Viktor Knezevics advantage; despite the 170 km distance between Szeged and Budapest, they are treated as one unit, the director says.

Budapest was off the list because the market was already very saturated. “Even in the countryside, we have been able to create an enterprise at this scale that covers a wide spectrum,” Knezevics says.

Although he says the Szeged center is not short of skilled professionals, there were signs of acute nation-wide labor shortage visible from the beginning.

“Still, we have been able to reduce staff fluctuation below 10%, well below the sector average which stands at 20-25%”, the director says. “We agreed to increase headcount

to

500

by end of this year; we reached this figure more than a month sooner.”

Most employees come from the immediate region, or have moved back from Budapest, but there are also a few employees from the ethnic Hungarian populations in Transylvania (Romania) and Vojvodina (Serbia). Some 10 employees were moved temporarily from the Budapest center to support BP’s activities in Szeged in the beginning. Five of them decided to stay for a longer term, Knezevics notes.

When it comes to recruitment, the management has no difficulty filling a more general position (for example, an English-speaking accountant).

Finding professionals for more special combinations, such as a German-speaker well-versed in IFRS, is more of a challenge.

In Budapest, there may be a wider selection, Knezevics admits.

In terms of the activities the Szeged center deals with all mayor SSC/BSC roles, from finances through procurement to customer service. There are a couple of activities, like the intercompany hub or Air BP, which were moved to Szeged to give the center its own identity, the director says.

University Collaboration

To ensure that the pool does not dry up, BP remains in close cooperation with the University of Szeged, which was already running a course on SSC skills before BP moved to the city. Since then, the two parties have been crafting the curriculum together: Many of the lectures are held at BP’s center to make it more tangible

for students exactly what is going on in a BSC and to enable students to learn about functional processes.

Salary levels in general are on average 10-15% lower than in the capital city; at lower levels it is more marked, while in the upper level positions, it is fading. But wages will catch up across the board in the long run, Knezevics notes. The language command of employees and student is good enough for them to communicate

BP, one of the world’s leading integrated oil and gas companies, established its GBS center in Budapest in 2009. Its centers in Budapest and now in Szeged provide a wide range of services in 13 different languages for all of BP’s businesses and customers. The activity managed from BP’s Global Business Services organization in Hungary (which comprises both the offices in Budapest and Szeged) includes finance and accounting, procurement, tax, HR, trading and customer services as well as settlement support for BP’s trading business. Some 85% of BP’s employees in Hungary hold advanced degrees, their average age is 32 and more than half speak two or more languages fluently.

INSIDE VIEW

Innovative Recruitment Solutions on a Transforming Market György Bucsku

Business Services & Talent Sourcing Manager HAYS HUNGARY

The SSC sector experienced a stable period in 2019. The dynamic growth that defined the previous years slowed down and centers were more focused on expanding their existing portfolio towards the provision of global operations. Investors began to focus on delivering measurable business values, efficiency and innovation rather than solely concentrate on cost saving when considering Hungary.

Yet, this year showed significant discrepancy between the salaries offered by most SSCs and candidates’ expectations.

In order to retain the talented workforce and stay competitive on the labor market, companies are pushed to increasingly start focusing on their employer branding strategies. Offering more attractive non-financial benefits and contributing to a more stable work-life balance are both indispensable. In this regard, the opportunity for home office is no longer an added bonus but a mandatory element for almost all positions.

The loyalty of the current workforce and the reputation of the sector has been strengthened by the fact that companies

are eager to create more high-value added functions. Positions which are not attractive enough or low-value added are transferred to Asia or automatized.

Nevertheless, automation is generally well received by employees and those who are affected have managed to find new, complex, decision-demanding or projectbased jobs within the centers.

The changes mentioned above have a significant effect on recruitment agencies as well. Companies consider agencies as consultants; therefore, the need has increased for market-wide research and salary benchmarks. In order to provide the best possible service and find the most talented candidates, agencies are starting to put more effort towards campus recruitment and alternative channels.

Furthermore, SSCs are more likely to use the recruitment process outsourcing (RPO) model and employ external recruiters at their own premises to manage the endto-end recruitment process. In order to satisfy this need, Hays offers to set up special onsite recruitment teams who are dedicated to help the client to maximize their effectiveness and talent attraction during major projects. By using an RPO service the client receives a flexible, quick and cost-saving solution which is tailored to its unique needs.

www.hays.hu

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

The story of BP in Szeged dates back to 2015. By then, the British-based multinational’s service center in Budapest, which had opened in 2009, had grown at such pace that the management started to look for a location for a new unit.

Special Report | 19

20 | 3

Special Report

www.bbj.hu

Budapest Business Journal | November 15 – November 28, 2019

Building a Shared Vision for Business Services The Budapest Business Journal speaks with American Chamber of Commerce CEO Írisz Lippai-Nagy about its unique BSS Project, which aims to bring together business services players to improve the branding of the sector.

ROBIN MARSHALL

Írisz Lippai-Nagy, CEO of AmCham.

Photo by Lázár Todoroff.

• Considered a great potential career

use AmCham’s platform. In February 2019, the initiative was taken to the next level by becoming a new project of AmCham Hungary. Now, we have more than 20 BSCs, a few consultant companies, and the Hungarian Service and Outsourcing Association supporting the initiative, and the project has been titled BSS Hungary.

choice for secondary school and higher education students, university students, and their parents; The sector which attracts the most Hungarians working abroad and foreigners to Hungary.

In line with our mission and vision, a detailed strategy was designed, including a communication and branding plan, as well as event related action points.

•

BBJ: What are its basic goals? ÍL-N: The mission is to raise the awareness and attractiveness of the sector, and to promote BSS as a career choice. We also outlined our vision; namely, the business services sector will be: Among the top three sectors in terms of awareness (Randstad employer brand research 2020; No. 8 in 2018);

•

Photo by Hajnalka Hurta

BBJ: What was the inspiration for the BSS Project? Írisz Lippai-Nagy: The story began with BT’s Generation Z survey, where the company asked youngsters about their expectations, beliefs and fears regarding their careers and work opportunities. The results showed that a major portion of respondents had never even heard of the business service sector (BSS). However, twothirds of those who are familiar with the industry find service centers favorable career destinations. Thus, our next goal crystallized: we had to raise awareness of this sector in the labor market.

Upon the invitation of BT, a few BSCs started working together on a sector branding project in 2018. Members, most of them competitors, identified the differentiating advantages and created a common value proposition of the industry.

Moved by the urge to take the initiative to the next level, the members agreed to

BBJ: How unusual is this, in your experience? ÍL-N: We have several Policy Task Forces and committees working within the AmCham network, where companies from certain industries work together with the purpose of creating the ideal environment for their respective sectors, and improving the competitiveness of Hungary through legislative proposals, action plans, and position papers. We have seen great alliances and very effective representation of our members’ interests within these working groups, uniting expertise and personal dedication. However, BSS is the very first industry-branding project in our history and we see an astonishingly high level of commitment to this unique project from our partners. Despite the fact that it entails cooperation between competitors, the BSS Project has also become a real community.

BBJ: How many companies are involved?

Is this being driven by AmCham, the companies, or both? ÍL-N: Currently, 22 companies participate in the project, most of which are business service centers,

but our ranks are boosted with various professional partners like HR consultancy firms and the HOA. The number of companies joining the project is growing; currently, they include: Albemarle, Aldi, Blackrock, BP, BT, Celanese, Citi, Corning, CPL Integrated

“BSS is the very first industry-branding project in our history and we see an astonishingly high level of commitment to this unique project from our partners. Despite the fact that it entails cooperation between competitors, the BSS Project has also become a real community.”

Services, Diageo, Deloitte, Eaton, ExxonMobil, IBM, Karrie Hungária, Lexmark, National Instruments, Randstad, TATA Consultancy Services, Thermos Fisher Scientific, and Unisys.

We operate in two workstreams: Sector Branding and Events. The project is driven by AmCham; however, most of the work comes from the member companies. Both working groups have regular meetings which are often hosted

3

www.bbj.hu

Photo by Hajnalka Hurta

Budapest Business Journal | November 15 – November 28, 2019

Special Report | 21

PARTNER CONTENT

The BT Brand: Creating a Unique Environment The Budapest Business Journal talks with Zoltán Szabó, general manager of the BT Regional Operations Centre, about what the British-based company is doing to promote family-friendly practices at offices in Budapest and Debrecen.

BBJ STAFF

by different member companies to get to know each other better. There is even an in-house competition within the event working group members to decide who provides the most delicious food during the meetings.

relatability are very important for the success of this project.

An open-doors event series, titled “open_doors@business.services” was also organized throughout October and November, where 15 companies invited young talents to their offices, providing BBJ: What steps have been taken? an inside look into the work and the ÍL-N: Besides creating a branding strategy culture of BSCs. and an employee value proposition framework, a brand-new bilingual BBJ: Is there any state involvement? website (bsshungary.com) was launched ÍL-N: This is an industry-cooperation to provide relevant information about based project; however, we are keeping the sector, accompanied by social media our government partners informed. We channels to connect with the younger have regular communications with generation. the Hungarian Investment Promotion Beyond that, two major events Agency and keep them posted on were organized in 2019. In early progress and achievements. The BSS October, a stage was dedicated to project will be represented at the annual the BSS Project at the HVG Job Fair, HIPA-HOA Business Services Hungary one of the largest and most important 2019 conference on November 28 at career events in the country.

Hotel Kempinski.

AmCham hosted panel discussions delving into the mystery behind BBJ: How will you judge the project a business service centers and success? providing an overview of the career ÍL-N: This year is a pilot period for the opportunities the sector offers. project. We have set up KPIs, mostly on I think it is a testament to the how successful we are in reaching out devotion of the members that, in these to our target groups. However, in this panels, more than 30 participants-case, evaluation cannot be based simply employees ranking from CEOs to on figures. There is a major intangible career starters—had the opportunity to result, so in my view, this cooperation is share their experience and perspective already a success. we managed to bring of their career in BSCs. We wanted the so many competitors together to work discussions to be both informative towards one goal. That is what AmCham and personal. Authenticity and does. It is truly inspiring.

BSS Project meeting at the AmCham offices. Photo by Hajnalka Hurta.

BBJ: Retaining staff is as important as finding them today, and BSCs often have a high “churn” (staff turnover) factor.

What is the churn percentage at BT ROC, and what do you do to keep hold of staff?

Zoltán Szabó: BT (British Telecommunications) established its business services center in Hungary in 2007. Like other BSS companies in the country, we work mainly with “Generation Y” colleagues: the average age is 31 in our company. Since the amount of available workforce is getting lower year by year, not just attracting but retaining people has become important. Our churn figures are below the market average. Having a 2,500plus organization, it is always challenging to be competitive, especially on such busy job markets as Budapest and Debrecen.

This is why I consider our churn figures as great achievement and it is a great proof that our employer branding strategy is working well. We have been able to create a unique environment by offering a large scale of programs that have boosted our engagement. Social programs, team and volunteering events, a wide range of learning and development opportunities and the family-friendly attitude, just to mention a few examples.

BBJ: Given the tight labor market, one obvious source are mothers returning from maternity leave. How does BT try to maximize this potential?

ZSz: BT has won the family-friendly company of the year award three times, and we have been a family-friendly mentor company since 2017. This is a great recognition for those programs we implemented in order to support our colleagues before establishing a family and when having children. This is not just about helping the integration of mothers returning from maternity leave, but helping them during pregnancy with a private healthcare package, as we do with all of our colleagues, and also keeping the connection live with them.

We provide the opportunity to do parttime, flexi and remote work where it is possible in order to help out parents in organizing their lives with children.

BBJ: How does BT measure how successful it has been in creating a family-friendly environment?

ZSz: Our family-friendly company culture is well-known in the job market and it is also proven by our colleagues.

Zoltán Szabó, general manager of the BT Regional Operations Centre Our measures towards the creation of a family-friendly environment have contributed to the fact that every second colleague has children. We are dedicated to continue developing those measures and to help our colleagues – both before or after having a family – retain a healthy work-life balance.

BBJ: Somewhat unusually, the BT ROC comprises offices in Budapest and Debrecen. Are there any significant staffing differences between the two (churn, age, gender split, returning moms etc.)?

ZSz: Besides the size difference between our offices (1,900 people in Budapest, nearly 700 in Debrecen), we have reached totally similar numbers, the gender split is 50-50% in both offices, the age average is the same as well.

However, churn is below our company average in Debrecen, because of the less saturated labor market in the region.

BBJ: Family-friendly policies are important for the staff of today.

What is BT doing about attracting the workers of tomorrow?

ZSz: We build a strong community where people are in the focus, we provide a decent benefit package above the market average and an opportunity to build a long and exciting career. BT has been here for the past 20 years and we are planning for the next decade already, hence job security with us is a proven fact, too.

22 | 3

Special Report

www.bbj.hu

Budapest Business Journal | November 15 – November 28, 2019

PRESENTED CONTENT

Focus on Curiosity, Creativity and Complex Problem-solving Skills 2020 The business services sector (covering business process outsourcing (BPOs) and business Services centers, or BSCs) has become one of the fastest growing areas of the Hungarian economy, attracting a high level of investment into the country, the Hungarian Investment Promotion Agency tells the Budapest Business Journal.

BBJ STAFF

The importance of the sector is shown by the fact that more than 55,000 employees are working at 120 business service centers in Hungary. The number of negotiated BSC projects by the Hungarian Investment Promotion Agency (HIPA) was 10 during 2018. As a result of these projects, 1,243 jobs will be created in Hungary. During this year, several new centers were opened and significant R&D centers were established with the support of HIPA. When it comes to the BSC industry and R&D centers, Hungary has moved up the value chain. There is a clear trend that companies are increasing the number of high value add positions and are implementing digitalization. Moreover, BSCs plan to expand in the short-term in Budapest and also in countryside locations, therefore the spread of robotics does not result in downsizing.

The skills and competences of the local talent pool contribute significantly to the expansion of the centers in Hungary. As technology and automation will continue to take on more repetitive processes, increased emphasis will be placed on human resources with qualities and skills such as curiosity, creativity and complex problem-solving.

Engaging new talents, training employees and retaining people are key for the centers. The number of employees in the sector is increasing every year and the availability of skilled labor is the major factor in considering Hungary as a preferred location.

As the use of data analytics and automation becomes extensive in this field, employee skill sets are also likely to undergo change. Specialist roles such as data analyst, finance analyst, and software engineer are rising. There is an increasing demand from the companies to find colleagues with advanced skills in data management, data forensics, design thinking and behavioral science.

Significant Players

There are significant market players in Hungary sending strong signals to the BSC sector as they are developing their existing activities by adding business services of R&D to their operations.

French multinational pharma Sanofi considers its new office in Budapest not as a simple BSC, but a Center of Excellence (see separate box).

Swiss multinational healthcare company Roche first opted for Hungary in 2006, choosing Budapest for its service center providing financial, HR, and IT support. This year, Roche selected Hungary as the location for its first Center for European Pharmacovigilance (PV HUB). The PV HUB to be established in Budaörs will be the largest such office of its kind for the global biotechnology company, and will analyze the medicine safety-related data of the Roche pharmaceutical products, creating 25 high added value jobs.

BP’s unit in Budapest, belonging to Global Business Services (GBS) Europe’s one of the first GBS offices, was established in 2009. Taking the successful operation in the capital as a basis, BP’s second office in Hungary was launched in Szeged, at a renovated and reconstructed textile factory in 2017.

The new center planned to reach a staff of 500 employees by 2020, but that was already achieved this year.

Taking the number of employees into consideration, these two locations raise Hungary to the group of the five most important countries within BP, and puts Szeged in the ten most important cities within the company.

BP provides services in 16 languages in the fields of finance, accounting, procurement, and tax, as well as HR- and commerce-related support and customer service.

Latest: Tesco Business Services & Technology Center Tesco Business Services & Technology was established in Budapest this year and started running its first live operations in March. The hub will support Tesco’s businesses in Hungary, Czech Republic, Poland and Slovakia by providing key processes with improved efficiency, accuracy and standardization across markets. Meanwhile, the technology team will work on global tech development projects. The office has grown to 200 colleagues already, currently supporting payroll, HR administration, supplier management, helpdesk and technology. Tesco will continue to ramp up recruitment for business services and technology roles during 2020 as more work is transitioned to the hub.

Tools and Mechanisms

HIPA provides management consultancy services for investors and prospective investors not only during planning and preparations but also in the phase of implementation and operation. The agency puts a great emphasis on continuous communication with and feedback from the representatives of the BSCs, but it also has incentives to offer.

In the case of an investment resulting in the creation or expansion of a business service center, creating at least 50 new jobs in the countryside, a non-refundable VIP cash incentive can be provided, based on an individual government decision.

There are different tools and mechanisms to support innovation and R&D activity in Hungary as well. Nonrefundable VIP cash subsidies for R&D projects are available in Budapest and countryside. The aim here is to enhance the R&D activity of large enterprises and the creation or expansion of R&D competence centers in Hungary.

New Initiatives

HIPA welcomes and supports the new initiatives of the BSC sector in Hungary.

Together with Hungarian embassies and consulates in Germany, the Netherlands, the United Kingdom and the Unites

3

www.bbj.hu

Budapest Business Journal | November 15 – November 28, 2019

States, HIPA has organized career networking events with a special focus on helping companies to reach out a previously untapped potential workforce, Hungarians living abroad.

These events enable companies to contact young professionals and students who are considering or actively looking for job opportunities in Hungary. The first event was initiated by BlackRock, a company that has attracted more than 12% of their workforce from abroad. During 2020, new events will be announced and new locations added to the series.

The BSS Attractiveness Forum, an industry-cooperation on sector branding, has been launched by AmCham Hungary. (Editor’s note, more on this, see Pages 20-21.)

There are significant market players in Hungary sending strong signals to the BSC sector as they are developing their existing activities by adding business services of R&D to their operations.

On a regional level, the results and achievements of the “Debrecen Business Service Centers Roundtable”

should also be highlighted. Seven companies are working in close cooperation in order to define and develop educational paths for the sector and to raise public awareness of these opportunities. Currently, the Debrecen BSC Roundtable is working on the accreditation process for business services training for secondary school teachers together with the University of Debrecen.

On November 28, the HIPA-HOA (Hungarian Outsourcing Association) Business Services Hungary 2019 Conference will demonstrate the latest trends of the sector and BSC cooperation platforms in Hungary as well as the results of the latest industry survey.

Special Report | 23

Latest: Sanofi Business Services Budapest Sanofi Business Services in Budapest serves subsidiaries in Europe and North-America in seven languages. The new business unit announced this year starts its operation with a staff of more than 100 professionals working on support activities in the field of HR and finance, but Sanofi plans to hire a total of 350 people by the end of 2022.

Sanofi Business Services will drive value creation to allow its business divisions to focus on core competencies and the best way to get healthcare to patients faster.

ADVERTISEMENT

&

in Hungary Research Development 2019 is available now!

WHAT CONSTITUTES R&D? • GOVERNMENT SUPPORT: HUNGARIAN INVESTMENT PROMOTION AGENCY, NATIONAL INNOVATION OFFICE • WHY CHOOSE HUNGARY? • REGIONAL COMPARISONS • THE LABOR CRISIS • R&D SUCCESS STORIES

Order: Business Publishing Services Kft. +36/1 398-0344; circulation@bbj.hu

24 | 3

Special Report

www.bbj.hu

Budapest Business Journal | November 15 – November 28, 2019

Shared Services Evolving Into Global Business Services The shared services center sector, on a steep uphill climb in Hungary and the region, has seen a new acronym enter the market: GBS (global business services) is seen as the next step of SSC evolution, offering more complex and versatile services, carrying huge potential for transformation.

CHRISTIAN KESZTHELYI

Today we are witnessing an evolution of shared service centers into global business services that allow a customer experience focus, managing more complex execution and value creation through continuous improvements.

“BSCs provide more complex, end-toend services across multiple processes and functions or geographies with a higher level of ownership and accountability, and allow the customer to have a different experience,” says Gergely Baksay, employer branding and communications director at Roche Services and Solutions.

Rowin Verschoor SSCs typically provide transactional activities: the relative simplicity of the tasks allows for simple transitions of activities to the center and quick economies of scale. The responsibilities for a GBS are more complex and challenging and can be used as an engine to transform the business.

“On the one hand, this change creates growth opportunities for SSC professionals, by presenting new challenges and development opportunities for the employees of a company; on the

other hand, it may also promote more movement between companies for the same reason,” Baksay says.

“The competition in the SSC/BSC [business services center] market is stronger than ever. While it makes it harder for the companies to recruit, it is an opportunity for employees and also an opportunity for employers to differentiate and build eye catching employee value propositions that may result in a better match for both parties,” he adds.

“The key differentiator is that GBS is global, manages third party service providers and generates value to end customers. All SSCs in Hungary tends to differentiate themselves to be a CoE [center of excellence] or GBS these days, but only a few are really able to step up,” he adds.

The real difference between an SSC and GBS is a question of maturity and complexity,

Global Transformation

The GBS model clearly opens up the possibility for more interesting career challenges, Réka Komáromi, associate partner of advisory services at EY Hungary tells the Budapest Business Journal.

“The GBS model is multi-functional and focuses on optimization around processes. GBS organizations have reached lean, cost-efficient operations and have established an agile operating platform.

Going forward, this enables them to drive digitalization and enable a superior customer journey,” she adds.

GBSs are seen to carry the potential to be the transformation engine for the wider organization, and with good reason: a GBS tends to know more about the processes, owns more data and can leverage more technology than any single function.

“It’s a pioneer of cross-functional working. Depending on the maturity and remit of an organization’s GBS, there are some necessary steps to realize that potential. GBS focuses on creating customer-centric, digitized process flows across functions and geographies,” Komáromi says.

“Innovation is in the DNA of the modern GBS, and emerging technologies managed by GBS can support exceptional performance across the organization. But at the same time GBS units will remain lean, cost competitive and efficient,” she explains.

Alphabet Soup

SSC, BSC and GBS sounds like a recipe for alphabet soup. What is the difference? “In my terminology, BSC is a Global Business Services Center (GBS),” Balázs Horváth, director of shared services and outsourcing advisory at KPMG Hungary, tells the BBJ.

Tjeerd de Waar he adds. “Pure SSCs will not survive on the market for long. It also has to be said that many of today’s SSC are not able to operate [global] shared services due to process, IT or other weaknesses,” Horváth says.

Whether we talk about SSCs or BSCs or GBSs, the biggest challenge in Hungary today is to create a mid-term vision where these centers can introduce the right automation tools, have robust scope, be an automation engine for the entire parent company and serve their end customers by being relevant to the overall business, according to Horváth.

Emerging technologies, to no surprise, are changing the GBS market, too.

“Blockchain, AI, digital finance, and other emerging technologies will be incorporated in enterprise automation as a lot of processes will be carried out differently,” says Tjeerd de Waar, manager at EY advisory services.

New Normal

“Disruption is the new normal, and it requires transformation. Organizations

of all sizes, in all sectors, are experiencing disruptive change caused by exponential advances in technology and volatile, uncertain market conditions,” de Waar adds.

“New business models are being driven by new players that seem to rewrite the rules almost overnight. In other words, disruptive technologies are fundamentally changing markets. Digitalization will mean that companies need to transform their business model in the very near future. It will drive reduction of headcount and changing job profiles to more creative and value-added roles in the GBS centers,” he explains He believes the GBS model, with time, will evolve into yet another acronym: Intelligent Business Solutions (IBS), where the latest digital technologies will be integrated in the end-to-end global process model. IBS will embrace agile business solutions and redesign the organization for digital capabilities, which will be present across all functions in the organization, he says.

“I expect that every company will start of continue their automation roadmap and create a GBS environment, where they not just service their internal stakeholders but also generate value to the end customer by being an analytics and automation hub,” Horváth of KPMG says.

State-of-the-art technologies will also help amend recruitment. “GBS organizations face a major shift in how they recruit and retain talent,” Rowin Verschoor, manager at EY advisory services, tells BBJ. “But more importantly, GBS can help drive a completely new data-driven approach to talent management within the retained organization; uniting functions and HR planning with a transparency never seen before. The universal adoption of process automation, intelligent automation and ultimately artificial intelligence within GBS will mean that people will routinely work alongside advanced bots, uniting talent and technology. But technology is supposed to serve humans, so it should be designed as an enjoyable, productive experience from the beginning,” he concludes.

3

Special Report | 25

CEE’s No. 1 Office Tenants Drawn by Problem Solving, Costs and Efficiency

international schools, they want places that can draw workers from across the globe.

Luckily, Budapest fits the bill nicely. (As an aside, I think Wizz Air deserves a medal for opening up so many additional CEE cities to more foreign investment.)

www.bbj.hu

Budapest Business Journal | November 15 – November 28, 2019

SSCs are a key component of demand in the office sector and a vehicle for inward investment across CEE. Gary Morrell spoke with Thom Barnhardt, founder and CEO of CEE Business Media Inc., who has operated in CEE for 25 years.

The firm organizes awards events for investors into the region, including the CEE Business Services Awards and CEE X-Tech Awards in Warsaw, the USA-CEE Investment Awards in New York, and Tokyo’s Japan-Europe Investment Awards.

GARY J. MORRELL

BBJ: Could you define an SSC in the CE context?

Thom Barnhardt: Shared services centers are always subsidiaries of the parent holding company, and provide services to their global HQ and offices located worldwide. The idea is that by centralizing commonly-used internal services that all subsidiaries use (such as Finance & Accounting, HR services, IT/Technology), the company can save lots of money by streamlining these processes, and delivering them from a lower-cost location.

So for example, ExxonMobil decided years ago that instead of having separate F&A functions in every country in Europe, it could centralize this process in Budapest.

Then the services naturally expand into common HR services, technology, etc. And inevitably, as the companies’ managements get comfortable with the quality of the services delivered, the SSC (also referred to as a captive service provider or business services center, center of excellence, or global business services) begins to provide more value-add services.

We see this in companies like Morgan Stanley or State Street in Poland, who are providing hedge-fund accounting, and pension funds services.

BBJ: Are SSCs facilitating the development of and providing employment in cities outside the capitals?

TB: Absolutely. There were questions (silly questions, in my opinion) about fiveseven years ago about whether “secondary” cities can attract the investment. And this is clearly proven as cities like Gdansk and Poznan in Poland have been very successful bringing in SSC investors, as well as cities in Romania like Cluj and Iasi, and Brno in Czech Republic. In Hungary, cities like Debrecen and Szeged are much smaller population centers, so they won’t get big SSC investments, but they will get quite a few and the impact is big. Debrecen won “Top Emerging City of the Year CEE” at our awards event two years ago.

Corning Hungary accepts its USA-CEE Business Services Award in New York.

BBJ: Are companies establishing headquarters with SSC functions in addition to R&D and more complex functions?

TB: Absolutely. And it is a natural progression, as the “local” SSCs prove their capabilities and build trust internally in the organization. CEE’s disadvantages coming out of “communism” were poor marketing and sales skills, for example. But their advantages were very strong mathematics, problem-solving, engineering, languages, etc., which are a perfect fit for global corporations which can now hire these services globally. Internet and digital connectivity has made this possible.

BBJ: What percentage of office take-up and estimated demand comes from SSCs in Hungary and CE? TB: I don’t have the exact numbers, but in cities like Krakow, the number is well over 60%. I think in bigger cities like Budapest or Warsaw, the percentage is lower, but still might be in the 30-40% range. Clearly and with no doubt, the SSC/BPO sector is the number one tenant across CEE.

“Clearly and with no doubt, the SSC/BPO sector is the number one [office] tenant across CEE.” BBJ: What do you see as the pull factor for companies in the region?

TB: Highly-educated workforces in the skills that they need (IT/technology, European languages, mathematics/ analytics, etc.) I strongly believe that Hungary’s early embrace of foreign direct investment has driven this subsequent wave of SSC investment, since the global accounting firms and global corporations have incubated and trained large numbers of Hungarian management to top, international standards.

By contrast, the region’s biggest competitor is India, but CEE wins when companies need to have French or Swedish or German speakers. And CEE also wins when companies need management teams to solve problems; in Poland, the skill of “kombinowac”, to find an extraordinarily creative solution when no resources are available, is wonderful in this environment.

I know that Hungarians and certainly Russians have this too!

BBJ: How central is your event to promoting the SSC sector and what does it say about the development of the sector in CE? TB: Our CEE Business Services Summit & Awards is the leading such event in the region. We have sold out every year, and it is becoming more international every year; last year we had guests from 27 countries.

While each year someone says the SSC market in CEE can’t keep growing as much, it continues a steady growth of about 8-10% per year. The sector now employs more than 500,000 people across CEE, and these are at above-market wages, so it’s an aspirational sector.

BBJ: What proportion of this is down to financial reasons and what proportion is due to issues such as skills and languages etc.?

TB: Yes, Budapest and Gdansk and Cluj are lower-cost locations than San Francisco, London, and Copenhagen. So partially it is driven by so-called “cost arbitrage”, but that’s only possible because the skills are also there. As well as the supporting ecosystems of SSC centers; new investors can come in and poach well-trained staff from other SSCs, and we see this all the time.

BBJ: What needs to be provided in an office environment to facilitate a functioning SSC? TB: In short, whatever leads to better retention of staff, such as the quality of the office interior and the quality of the location with regard to access to transportation links and public amenities. The next generation wants to be part of the global green solution, so sustainability is important.

BBJ: What are the locational requirements for an SSC? TB: Easy access via public transport; a “cool” area to work in, with services and a certain style to the area. We can see in Warsaw that some of the locations that were hot office development centers 15 years ago are now way out-of-fashion, and office valuations there are suffering.

And from the perspective of international investors choosing locations for their new SSCs, air access is key. They need academic centers, they want cities with

Thom Barnhardt BBJ: What is the criteria upon which the Corning office in Budapest won at the recent USA-CEE Business Services Awards in New York?

TB: Corning is just a world-class company.

They started their SSC in Budapest more than 10 years ago, and it has evolved into a strategically key center for the company.

For example, from Budapest, they are providing Treasury management to their whole group, they are on the leadingedge of implementing Robotic Process Automation, and they have been able to increase transaction-volume by 50% while decreasing transaction-costs by 25%. I think the jury recognized this.

26 | 3

Special Report

www.bbj.hu

Budapest Business Journal | November 15 – November 28, 2019

Shared Service Center Operating Companies

www.it-services.hu

4,808

–

–

–

–

–

✓

–

–

✓

✓

40 5

–

Ÿ Ÿ

Ÿ

paRt-time WoRk

flexible WoRk HouRs

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

botH

inteRnal

exteRnal

otHeR

Client management

sales

pRoCuRement

HR

finanCe

total net Revenue in 2018 (Huf mln) 60,310

Ÿ Ÿ

available WoRk Condition CHoiCes

Ÿ

planned neW WoRk foRCe HiRes in H2, 2019 yeaR establisHed

it seRviCes HungaRy szolgáltató kft.

Client division (%)

seRviCe aReas

WoRk fRom Home

1

Company Website

no. of employees WoRking foR ssCs on august 1, 2019

Rank

Ranked by no. of employees working for SSCs on August 1, 2019

oWneRsHip (%) HungaRian nonHungaRian

top loCal exeCutive Cfo maRketing diReCtoR

addRess pHone email

Ÿ

Ÿ

– T-Systems International GmbH (100)

erik slooten Katalin Riedl Ollárné –

1097 Budapest, Tóth Kálmán utca 2/B (1) 456-5400 fmb-ts-itsh-info@ t-systems.com

✓

250 2007

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

zoltán szabó Attila Szűcs Máté Fazekas

1117 Budapest, Budafoki út 91-93.

(1) 777-0000 bt.roc.communications@ bt.com

✓

Ÿ

– N. Chandrasekaran (100)

prabal datta – Edit Bencsik

1117 Budapest, Alíz utca 4.

Office Garden 3.

IV. emelet (1) 886-8000 hungary.info@tcs.com

Jamie anderson, viktor knezevics Éva Újhelyi –

1095 Budapest, Soroksári út 32–34.

(1) 866-6300 hungary@bp.com

2006

bt RoC kft.

http://bit.ly/btcareershungary 2,500

2

2

tata ConsultanCy seRviCes ltd. magyaRoRszági fióktelepe

2,500

21,265

Ÿ

✓

✓

✓

✓

✓

✓

✓

–

–

✓

–

✓

–

✓

–

–

✓

✓

✓

✓

2001

www.tcs.com

bp business seRviCe CentRe kft. www.bp.com/hungary

4

5

6

Citibank euRope plC magyaRoRszági fióktelepe/Citi seRviCe CenteR budapest http://www.citibank.com/ emeaservicecenter/hungary/ csc-hungary.htm

ibm HungaRy inteRnational sHaRed seRviCe CentRe kft.

2,370

31,262

✓

✓

✓

–

✓

✓

–

✓

–

70 8

✓

✓

✓

200 2009

– BP Investment Ltd. (100)

2,100

Ÿ

✓

✓

✓

–

✓

✓

–

✓

–

Ÿ Ÿ

✓

✓

✓

Ÿ

1985/2005

– Citibank Holdings Ireland Ltd. (100)

kevin a. murray, Jane ellis Márk Szentpáli Smid Beáta

1138 Budapest, Váci út 80.

(1) 374-5000 –

1,750

22,525

✓

✓

✓

–

✓

–

–

–

✓

Ÿ Ÿ

–

–

–

Ÿ

– IBM Europe B.V. (100)

edina drabik Andrea Szőke –

1092 Budapest, Köztelek utca 6.

(1) 777-1055 info@hu.ibm.com

Ÿ

– Vodafone International Holding B.V. (100)

dóra debreczeni, adrienne benedek, yapici Cevdet Yapici Cevdet Tamás Sztaricskai

1087 Budapest, Hungária körút 40–44.

(70) 460-8000 –

Ÿ

– ExxonMobil Petroleum & Chemical BVBA (100)

Romke noordhuis – –

1139 Budapest, Váci út 81-85.

(1) 344 3400 BudapestGBCCommunication@ exxonmobil.com

Ÿ

– Genpact Luxemburg S.A.R.L. (100)

sriram nagarajan – –

1138 Budapest, Váci út 117–119. – communication.europe@ genpact.com

www.ibm.com

7

vssb vodafone szolgáltató központ budapest zRt.

1,700

20,708

✓

✓

✓

✓

✓

–

–

✓

–

Ÿ Ÿ

Ÿ

Ÿ

Ÿ

✓

✓

✓

www.vodafone.hu

8

exxonmobil global business CenteR HungaRy

1,683

Ÿ

✓

✓

–

–

✓

✓

–

–

✓

Ÿ Ÿ

1,000

NA

✓

✓

✓

✓

–

✓

–

✓

–

Ÿ Ÿ

www.exxonmobil.hu

9

genpaCt seRviCes HungaRy kft. www.genpact.com

Ÿ

Ÿ

Ÿ

2004

2007

2004

2018

3

www.bbj.hu

exteRnal

inteRnal

botH

–

–

Ÿ

Ÿ

Ÿ

11

unisys magyaRoRszág kft.

896

8,762

–

–

–

–

✓

–

Ÿ

12

Cpl Jobs kft.

589

4,225

–

–

–

–

✓

✓

13

ibm Capital HungaRy kft.

500 (approx.)

10,447

✓

–

–

–

–

14

Celanese magyaRoRszág kft.

491

4,934

✓

✓

✓

–

316

4,694

✓

✓

✓

3,277

✓

✓

✓

15

www.nokia.com

www.unisys.hu

https://cpljobs.com/hu/

www.ibm.hu

–

lexmaRk inteRnational teCHnology HungaRia kft.

kCi HungaRy kft. www.acelity.com

300 (approx.)

17

Randstad souRCeRigHt kft.

200 (approx.)

18

www.randstadsourceright.com

tHeRmo seRviCes kft. (tHeRmo fisHeR sCientifiC)

200

2,014

NA

–

✓

✓

–

–

–

www.agcocorp.com

aRConiC-köfém székesfeHéRváRi NR Könnyűfémmű Kft.

Ÿ

Ÿ

5,397

247,880

✓

✓

✓

✓

✓

✓

1083 Budapest, Bókay János utca 36-42.

(20) 977-7797 –

– UNISYS Interntaional Services B.V. (100)

norbert makk, gary edward purvey – –

1062 Budapest, Váci út 1–3.

(1) 298-9000 ugshadmin@unisys.com

✓

✓

✓

–

–

Ÿ Ÿ

✓

✓

✓

100 2009

– Cpl Resources Ireland Holdings Limited (100)

simone olivo Edit Lőkös –

1062 Budapest, Teréz körút 55. A/2 (1) 501-5460 edit.lokos@cpl.ie

–

–

–

✓

Ÿ Ÿ

Ÿ

Ÿ

Ÿ

Ÿ

– IBM Global Financing Investments B.V. (100)

alan knight – –

1138 Budapest, Népfürdő utca 22.

(1) 777-2111 info@hu.ibm.com

✓

–

–

✓

–

– 5

✓

✓

✓

10 2007

– Celanese Corporation (100)

istván katona – –

1134 Budapest, Váci út 80–84.

(1) 672-7400 –

–

✓

–

–

–

✓

Ÿ Ÿ

✓

–

✓

45 2008

– Lexmark International Technology Sárl (100)

péter Csucska Levente Barát Alexandre Cole

1095 Budapest, Lechner Ödön fasor 8.

(1) 501-7200 karrier@lexmark.com

–

–

–

–

–

✓

Ÿ Ÿ

✓

–

–

Ÿ

– KCI Europe Holding B.V. (100)

John panther – –

1132 Budapest, Váci út 22–24.

(1) 880-2501 –

✓

Ÿ Ÿ

Ÿ

Randstad Hungary Kft. (100) –

michael smith, lívia tóth – –

1093 Budapest, Czuczor utca 2-10.

(30) 836-5364 info@ randstadsourceright.eu

–

Ÿ Ÿ

Ÿ

– Thermo Fisher Scientific (100)

dénes láng Miklós Koczor Réka Juhász

1134 Budapest, Váci út 43.

(1) 686-1000 facility.budapest@ thermofisher.com

–

Ÿ Ÿ

Ÿ

– AGCO International Holdings B.V. (100)

emese szakács – –

1117 Budapest, Alíz utca 4.

(1) 882-8300 Lilian.Seres@ agcocorp.com

Ÿ

Arconic Európai Keréktermék Kft. (Ÿ) Arconic Inversiones Internacionales S.L. (Ÿ)

tamás Horváth – –

8000 Székesfehérvár, Verseci utca 1–15.

(22) 531-200 erika.sas@arconic.com

Ÿ

– ES Hague B.V.(Ÿ), ES Hague II B.V. (Ÿ)

zoltán Czibók, tamás szabó-sinka – –

1114 Budapest, Bartók Béla út 43-47.

(1) 279-8000 cegugyek@hp.com

Ÿ

– Cooper Industries Trading Unlimited (100)

ian bryce yule, ivica Rajkovic – –

1123 Budapest, Nagyenyed utca 8–14.

(1) 328-6868 csabaszende@eaton.com

–

–

–

✓

✓

–

–

–

–

✓

✓

–

–

✓

✓

✓

–

–

✓

✓

✓

–

✓

–

–

✓

✓

✓

✓

2007

2016

2010

2016

2018

2011

–

Ÿ Ÿ

Ÿ

Ÿ

Ÿ

1991

–

–

✓

2000

11,522

Ÿ

Ÿ

Ÿ

Ÿ

Ÿ

Ÿ

Ÿ

Ÿ

Ÿ

eaton enteRpRises (HungaRy) kft.

Ÿ

228,058

✓

✓

✓

✓

✓

✓

–

–

✓

Ÿ Ÿ

NR = not ranked, NA = not applicable

béla zagyva Erzsébet Tóth Rita Sebők

✓

Ÿ

Ÿ= would not disclose,

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

Ÿ

Ÿ Ÿ

www.eaton.com

Ÿ

Ÿ

dxC teCHnology NR magyaRoRszág kft.

NR

addRess pHone email

Ÿ Ÿ

www.arconic.com

www.hp.hu

✓

top loCal exeCutive Cfo maRketing diReCtoR

Ÿ Ÿ

www.thermofisher.com

agCo HungaRy kft.

NR

✓

oWneRsHip (%) HungaRian nonHungaRian

– –

www.lexmark.com

16

✓

Special Report | 27

planned neW WoRk foRCe HiRes in H2, 2019 yeaR establisHed

otHeR

–

WoRk fRom Home

Client management

✓

nokia solutions and netWoRks kft.

paRt-time WoRk

sales

✓

10

available WoRk Condition CHoiCes

flexible WoRk HouRs

pRoCuRement

✓

Company Website

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

HR

36,042

finanCe

total net Revenue in 2018 (Huf mln)

950

Client division (%)

seRviCe aReas

Rank

no. of employees WoRking foR ssCs on august 1, 2019

Budapest Business Journal | November 15 – November 28, 2019

–

✓

✓

1941

This list was compiled from responses to questionnaires received by November 13, 2019 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

28 | 3

Special Report

www.bbj.hu

Budapest Business Journal | November 15 – November 28, 2019

Budapest vs Countryside: Where to Place Your BSC? Budapest is, without a doubt, a favorite with tourists from all over the world and it is so for a reason. The city’s great architecture, excellent infrastructure and cool vibe are the very same qualities make the city a popular location for shared services centers, or business services centers as they are more commonly known now.

ZSÓFIA VÉGH

These have been thriving in the Hungarian home over the past 10-15 years; many of the largest multinationals have brought service functions here. The availability of skilled workforce has played a significant role in that decision, as has the fact that labor costs less than in the West (though this seem to be a less important consideration these days).

Overall, Budapest is firmly on the map of international locations for BSCs. It may not be on par with Frankfurt, or New York – and certainly not salary wise – but it is definitely competitive within Europe with, for example, Dublin.

“Many organizations chose to come here because of the infrastructure and the skillset of professionals,” Balázs G. Nagy, president of the Hungarian Outsourcing Association tells the Budapest Business Journal.

BP’s BSC in the southern city of Szeged.

He cites the UN as an example; the organization has an international pay scale, so salary was not a consideration when selecting the site. Companies tend to choose to come to Hungary because there is added value – it is no longer call centers they wish to establish here.

According to the 2018 survey by HOA and HIPA, which gives a 360-degree view of the market, the main reason for companies to move their services to Hungary were efficiency and productivity (38%). Cost arbitrage is still high up the list (at 34%), but service quality (22%) and skills and availability (17%) are also significant.

Countryside Offer?

So what can a Hungarian countryside location provide if Budapest has so much to offer? To start off, it is not a fair comparison, according to Nagy. Budapest is a city of 1,752,286, while the second city in Hungary, Debrecen, has population of just 201,432 (both sets of figures are from the Central Statistical Office, and dated to the start of this year).

Still, there are many advantages to establishing a center in a provincial city.

There is an independent talent pool, which may be easier to call on. Due to smaller

Business Services Centers: The Numbers Have It Increasing the number of locations for BSCs by improving conditions makes business sense. According to data by HIPA, the importance of the sector is shown by the fact that more than 50,000 employees at the 110 companies operating on the Hungarian market provided 1.2% of Hungarian GDP in 2018 and 1.6% of the entire Hungarian exports, while 1.1% of all employees work

in these centers. Of that total, 32,769 worked in Budapest, and 7,584 in Tier 2 cities (Székesfehérvár 2,830; Debrecen 3,616; Szeged 864; Pécs 274). The number of employees working in the business services sector in Tier 2 cities increased last year, with the highest growth in terms of employed people was achieved in Debrecen, Szeged and Székesfehérvár.

labor market size and the relative lack of opportunities in the countryside, a company can make more “noise” and draw more skilled/talented employees than in Budapest, Nagy says.

The relationship with universities, which can provide a constant supply of well-educated graduates is more direct – large universities and companies in the capital are more overburdened, the HOA president adds.

Salaries may be lower (though not necessarily for managers), but the cost of living is lower too. One can achieve a better work-life balance by not having to commute hours to work. The management of the city may also be more flexible; a local transportation company may be more willing to add a stop than in Budapest, the president notes.

Countryside service centers first appeared about four or five years ago – and though a number of them have been opened only after a first BSC was established and operating successfully in Budapest, not all come from a “second wave”.

International Competition

Flowserve in Debrecen, is one example: the city won an international competition to host the firm thanks to its infrastructure and university, as well as the municipality’s development activities.

“Countryside cities see this as a sector for the future and are willing to catch up,” says Richárd Ránki-Kovács, managing director of HOA. In Debrecen, business have teamed up and created a roundtable to promote the sector’s reputation, raise awareness, and shape/improve education, Ránki-Kovács says. They are in close cooperation with the local university, which has added subjects to its curriculum. A similar working group was created within the American Chambers of Commerce, involving a higher number of players.

A number of other cities are also working hard to attract business centers, with the aim to ensure employment for graduates. The pool of skilled workforce and productivity play a more important role than cost arbitrage, Ránki-Kovács confirms.

Balázs G. Nagy HOA has been organizing a series of professional events for companies: this year they have held sessions where countryside cities Debrecen, Szeged and Miskolc presented themselves to company heads. The events will continue next year with cities such as Székesfehérvár and Győr.

Office space is a bottleneck, HOA acknowledges, but is something that cities have started to focus on.

“In Debrecen, for example, a newly developed category “A” office have been developed; Szeged is also planning some developments, as does Miskolc, where they are planning to convert municipality offices,” Ránki-Kovács says.

4

www.bbj.hu

Budapest Business Journal | November 15 – November 28, 2019

Socialite Korda and the key to the Hungarian Film Industry how many of the international film community return to Budapest and the warm affection that so many of them have for the city and their local colleagues. This speaks volumes about the hard work put in by local players to put Budapest so indelibly on the world film map.”

From a PR point of view, it’s hard to measure impact. But it is clear that the fact that big productions shot in Hungary are in the news adds to the positive image of the country and has a knock-on effect on tourism.

The good times for Budapest seem set to continue for now. Production expenses

David Holzer talks to György Rajnai, the man who runs the Korda film studios, to find out how Hungary has become so successful in attracting foreign film productions to the country.

were

HUF 125 billion

To give you an idea of just how versatile the Korda facilities can be, HBO’s “Succession” is set, broadly speaking, in The HBO series “Succession” centers on modern day America. The Netflix series the amoral, backbiting Roy family as they “The Last Kingdom”, which has just fight for control of a global media and finished shooting its fourth season at the leisure empire created by patriarch Logan studios and is now in post-production, is Roy. A few weeks ago, the family and their set in ninth century Anglo-Saxon England. acolytes went on a supposed team-building Apart from all the other advantages retreat in the Hungarian countryside. of filming in Hungary, the key reason is Curious to find out why, I spoke to the country has a very strong tax rebate György Rajnai, CEO of Korda Studios in system. In June 2018, this was increased Etyek, about 30 km west of Budapest. The from 25% to 30%. studios are named for Hungarian-born film To explain what this means in more Solid System producer and director Sir Alexander Korda. detail, Rajnai put me in touch with Károly And why do filmmakers choose Hungary?

It has seven state-of-the-art soundstages, Radnai, a partner in Hungarian firm “There are a number of reasons. The system OrienTax Zrt., who contributed to a 2016 including one of the biggest in the world, nearly the country has in place to service foreign study of the film industry’s economic productions is extremely solid. Our currency impact on the country. doesn’t fluctuate much. If it does, it gets The lengthy report looked at what the to accommodate productions, and almost weaker, giving filmmakers a better return. film industry means to the economy, what 7,000 sqm of warehouse and workshop areas. It’s safe to film here. There are plenty of return the government gets on what it There’s also plenty of space for set comfortable places to stay. We have spends on film production and the benefits construction as well as themed backlot excellent, affordable production facilities. of positive PR from film production. I’m not sets. The studio began by providing There are between three and five companies an economist, so I’ll put what Radnai told facilities for other production companies, to choose from for each service needed me in the simplest terms possible. but has been producing its own movies for and our crews are fantastic. We now have The rebate has a big impact on around more than two years.

GDP. Overall tax income as a result is Rajnai, who has a degree in banking and significantly more than the rebate itself. finance, spent more than 15 years outside But, since the report was published, other Oscar and Emmy award-winners heading Hungary working in the United States, the taxes have been reduced so the impact United Kingdom, Belgium and France. He has departments. Hungary can also play is not as profound as it might have been. different seasons, unlike somewhere like been running Korda for the past five years.

In 2016, the number of people working LA, and it can double for cities like London, in film in Hungary was around 10,000.

“I’m more of an operational guy than Paris, Moscow or Berlin.” a passionate movie person,” Rajnai Transportation, rental and construction companies and hotels all benefit.

BrodyLand, which provides boutique accommodation and a popular members club in central Budapest, is one of the organizations that has benefited from the film industry.

DAVID HOLZER

told me. “But it’s certainly not a boring industry. And, of course, I appreciate the fun it provides.”

The number of big budget movies made in Hungary, including this year’s “Gemini Man”, is impressive. What is the studio’s role in the films it is involved in?

“We mostly work for foreign studios via two large local production service companies. We have just done our first major co-production as a production service provider, a USD 30 million project with CBS that will put us in the major league.”

in 2017/2018 and are expected to be roughly the same in 2019.

All available crew and sound stage resources were used. This meant prices went up, but it also increased the danger of the Hungarian film industry losing its competitive edge at a time when Poland and Romania are keen to attract film industry big money.

It’s good to see that Korda Studios is reinvesting some of its profits into a film park which will shortly re-open to the

6,000 sqm

15

Warm Affection

Korda Studio Center

Co-founder Peter Grundberg told me, “At BrodyLand, we’ve hosted, accommodated, fed and watered numerous local and visiting film cast and crew. It’s been a privilege and great fun, with wonderful friendships being formed. We’ve noticed

Károly Radnai public. The revamped park will show how films are really made, from how producers get money to what happens in production.

Visitors will be able to role play as, among other things, producers and writers but perhaps not stuntmen or women. According to Rajnai, the concept has already been praised by foreign filmmakers.

The studio also takes part in schemes to encourage young Hungarian filmmakers.

One of these, created by the Hungarian Film Find and funded by 0.5% of the budget of foreign filmmakers, provides training for people who work in film, from cameramen to accountants. The studio offers its facilities free of charge.

Let’s hope we’re about to see a new generation of Hungarian filmmakers make their mark on the world scene.

Find out more about Korda Filmpark at kordafilmpark.hu.

30 | 4

Socialite

PRESENTED CONTENT

www.bbj.hu

Budapest Business Journal | November 15 – November 28, 2019

When The Kitchen Caters, Guests can Celebrate With Piece of Mind Gábor Marosvölgyi, director of catering at The Kitchen Caters, the catering service of the Kempinski Hotel Corvinus Budapest, looks back on how the business has grown since it was launched in 2016.

BBJ: How many events do you handle a year, and what is the range?

GM: We easily manage 80-100 events annually for anywhere between 15 and 1,500 persons.

BBJ: What are the latest trends in outside and event catering?

GM: Office catering and flying buffet.

Instead of traditional buffets, show cooking and interaction. Induction ovens and lamps are hot, pun intended. Green

“Our strength is that we deliver the same high standards and quality in any environment, be it an industrial hangar or an elegant location such as the Museum of Fine Arts.” and sustainable catering. Farm to table.

And we take dietary restrictions and requirements very seriously.

BBJ STAFF

BBJ: The Kitchen Caters was launched in 2016. Three years on, what have the highlights been to date, and how has the service evolved over time?

Gábor Marosvölgyi: The concept of The Kitchen Caters is based on quality, creativity, flexibility and reliability. Our existing and new clients come to us for exactly these same reasons, which is why we have been able to grow the business year by year. We deliver not just Kempinski Corvinus standards, but the best restaurant standards too outside the hotel. Competition is fierce in town but, by taking catering ahead of the curve, we also mitigated the challenges of that competition.

Of the many highlights in the past three years, I fondly remember the opening party in a beautiful private villa in Dunakanyar with a stunning view over the river. We took the guests to the venue by boat. We also catered some 1,700 guests at a factory opening. We organized a three-day Indian wedding for 500 guests, while we managed a flying buffet/buffet combo catering solution to host 1,500-plus people at another company event. It took more than 100 staff.

always also hold thorough training for chefs and servers alike, and provide briefing before the events.

BBJ: What is the most difficult challenge you have been asked to fulfil, and what was the most unusual venue?

GM: Our strength is that we deliver the same high standards and quality in any environment, be it an industrial hangar or an elegant location such as the Museum of Fine Arts. The functions of this recently renovated historical museum were enhanced specifically so it can host events and provide a spectacular backdrop.

Another advantage we have is that we can always fall back on the 24-hour backup at Kempinski Corvinus. For example, the rain started coming down at the Indian wedding, which was held in Buda Castle.

We immediately opened and set up the ballroom at the hotel and transferred 500 guests, the catering apparatus and staff there. Home and dry! That was only an option – and a doable option – because of the infrastructure, and importantly, Kempinski Corvinus’ Ten Rooms event space is flexible enough to handle such lastminute arrangements, however crazy.

BBJ: How many people make up The Kitchen Caters team? Do you ever have to take on additional temporary staff? If so, how do you maintain quality?

Gábor Marosvölgyi GM: The core of the team numbers 15 and we almost always employ temp staff. Given the volume of work, we tend to end up working with the same temporary aides a lot of the time. We

BBJ: What sets The Kitchen Caters apart from your competitors? Why should a business, an organization or an individual choose you?

GM: Aside from restaurant quality, our strength lies in the smart management of the hotel’s resources.

We’re competently capable of delivering the highest standards in any outside venue and location.

We are also ahead of the competition in terms of preparing fresh meals, and the flexibility of our menus.

We always have back-up for dietary choices and restrictions, even in circumstances when we are not in advance informed of allergies, for example. There are less complicated situations too: the host may have booked a limited range of drinks only, like soft drinks and wine but guests are asking for beer. We’re prepared for all eventualities. We can’t say no!

We also have state-of-the-art equipment to make sure we are able to prepare fresh meals on the premises.

We provide our own plates, glasses and cutlery for up to 1,200 persons.

Indian food is becoming more and more popular, and we now have our own Indian chef, Dhanpal Singh Negi.

It has happened already that a client specifically requested an Indian menu after sampling various menu options.

Socialite | 31

4

www.bbj.hu

Budapest Business Journal | November 15 – November 28, 2019

Hey, ho! Let’s all go Volcanic and Organic It is easy to dismiss the Chardonnay grape as uninteresting and too ubiquitous to make unique wine, and adhere to the ABC philosophy (Anything but Chardonnay) when choosing what to drink. However, when you taste a good one you realize why this Burgundyoriginating variety is planted all over the winemaking world.

ROBERT SMYTH

It’s basically a bloody good grape!

When you an encounter a great one, it is one of those grapes that can act as a fine articulator of terroir yet also be unmistakably itself with a current of vinous electricity running through it – a charge of pure, unadulterated Chardonnay.

Such was the case at Borjour’s Somló Nagykóstoló tasting, held at the Stefánia Palota on November 8, when István “Stefan” Spiegelberg poured a spontaneously fermented and barrel vinified Chardonnay from the 2017 vintage that perked up the palate with a generous amount of fruity freshness.

It costs HUF 6,000 directly from the cellar (spiegelberg.hu), which is the same price as his other impressive wines made from the more conventional local varieties of Olaszrizling, Furmint, Hárslevelű and Juhfark, the latter being almost exclusive to Somló.

Somló is Hungary’s smallest region, but it is certainly capable of producing big, explosive wines from its volcanic basalt soils. Of the region’s young guns, the wines of Bálint Barcza appear to have stepped up a gear with the 2017 vintage.

His Furmint 2017 is pure and juicy, with lime, pear and green apple notes and a very smooth yet textured palate. It was spontaneously fermented in the tank, then aged in used oak for three to four months, with the oak barely detectable, yet helping the wine pick up texture and complexity though allowing oxygen gently in. This is a good buy at HUF 3,800 a bottle direct from the winery, barczabor.hu.

Back in 2014, one of the legendary figures of Somló Hill, the much-loved Béla Fekete, who was then approaching his late

Vineyard in Somló, Hungary.

80s, sold his winery to the trio of Ákos Dölle, György Emmert and Gábor Riesz, who were intent on preserving the great man’s trademark style.

Several years on and Béla bácsi (“Uncle Béla”), now in his 90s, still consults at the winery and the wines are as rich, layered and complex as ever. You can still also find the last wine made and bottled by Fekete himself, the Hárslevelű from 2013, for

The natural wine movement continues to be as polarizing as it is exciting. The treatments do not quite totally blast away the bugs and fungal diseases that blight the grapes in the same way as pesticides might do, sometimes resulting in a few twists of nature bringing about some funky flavors.

HUF 4,150 from Borårum. (Incidentally, the previous vintage 2012 is still available for HUF 3,150 from Bortársaság.)

Traditional Methods

Fekete Wines almost totally eschew the use of modern technology to vinify mainly in a traditional manner, using an old press and old barrels, although the 2013 Hárslevelű did see a bit of stainless steel.

After skin contact of between two and four hours, spontaneous fermentation was carried out in Hungarian barrels of 1,000 liters, followed by 12 months of ageing in the same type of barrels, and then another two years in stainless steel tanks before bottling, presumably to keep the wine fresh and prevent it from prematurely oxidizing.

The Fekete Wines are built for the long haul and are aged for years in the cellar before release, which serves to chisel down the sharp edges as the acidity mellows and aged notes give the wine that additional “X” factor.

Fekete Wines will be one of 40 Hungarian producers pouring their wares at “GoVolcanic”, a three-day event that will be held at Holdudvar, on Budapest’s Margitsziget (Margaret Island), from November 29 to December 1.

The other Hungarian regions represented are Mátra, Tokaj, Bükk and Balaton, with Hungarian producers from Ménes and Szerémség (in present day Romania and Serbia) also in attendance.

They will be joined by a host of foreign wineries from Etna, Vulture, Soave, Lessini, the Canary Islands, the Azores, Tekov, Slovakian Tokaj and France.

Additionally, there will be vinous presentations held by the likes of John Szabo (a Canadian Master Sommelier with Hungarian roots and author of “Volcanic Wines: Salt, Grit and Power”); Elizabeth Gabay, Master of Wine; and U.S. wine blogger Alder Yarrow.

Astounding Wines

The guest of honor will be another Somló legend, Imre Györgykovács, who is rarely found outside of the region, where he has long turned out astounding wines from his sole hectare of land.

His Nagy-Somlói Tramini 2017 (HUF 6,150 from Bortársaság) is a remarkable wine as it flies in the face of the assumption that you can’t make high quality wine from this aromatic grape.

Vinified in old barrels, it certainly does capture the rosewater, lychee and floral aromas associated with the grape but without

overpowering the olfactory senses. Then, it gives and gives on the sublime, structured and very long palate that balances out the aromatic appeal of the nose.

Meanwhile, the annual Mitiszol? (literally “What are you Drinking?”) is the year’s big Budapest tasting of so-called “natural wines”, i.e. wines made without the use of pesticides and herbicides and such like artificial products, with natural treatments such as copper, sulfur and orange oil used to spray the vines.

It will be held this year in a new venue for the event, in Bálna, on Saturday (November 16). The idea is that by using natural organic and biodynamic treatments, the soil comes back to life and the terroir can better express itself in the wine, while the consumer also gets a clean, uncontaminated product.

The natural wine movement continues to be as polarizing as it is exciting. The treatments do not quite totally blast away the bugs and fungal diseases that blight the grapes in the same way as pesticides might do, sometimes resulting in a few twists of nature bringing about some funky flavors.

ABC can also be used to refer to Anything but Cabernet, that is Cabernet Sauvignon, a key component of so-called Bordeaux blends. Hungarian takes on the Bordeaux blend will be poured at the Bordói November Nagykóstoló (Grand tasting), which will be held at the Corinthia Hotel on Saturday (November 16).

Of the Bordeaux varieties, it is Cabernet Franc which appears most at home in Hungary. This year’s “Franc & Franc”, which puts the lesser known Cab under the spotlight, will be held in the grape’s Hungarian epicenter of Villány from November 22-23.

® A MINŐSÉGET KÉPVISELJÜK

C H R O N O S K I A D Ó É S M Á R K A B O LT: 112 4 B U D A P E S T, A P O R V I L M O S T É R 5 .

TELEFON: +36-1-214-9095, +36-1-224-7380 · e-mail: naptar@chronos.hu megtekintésre ajánlott weboldalaink:

www.chronos.hu · www.lanybook.hu · www.ivory.hu www.appeel.hu · www.castelli-notes.hu