Foreword (Written by CUB and EY

FOREWORD

The Business Services Sector is still crisis-proof. This statement has been confirmed during the current pandemic situation and the crisis it generated, as the sector did not shrink or stagnate; rather, it grew in 2020. At the same time, this health crisis is different from a “traditional” cyclical economic downturn and affects this sector differently as well. According to our research data from October 2020, the growth of previous years (on average 19%) may decrease in the Hungarian Business Services Sector by one third by the end of the year. However, the expectations of the centre’s managers for the future are still encouraging; hopefully, new foreign direct investments and the expansion of the existing centres will be able to put the Hungarian market back on a higher growth path in 2021.

As with the wider economy and the whole of society, the business services sector will not be the same after COVID-19. The “new normal” will indeed bring several vital changes to this heavily labour-intensive sector. The future of work disrupts the key dimensions of the work environment: who does what, from where and how? While work from home has been utilized in the sector, on the one hand it was to avoid a constraint (if the company’s headcount has grown more strongly than the available rentable office space), and on the other hand, as part of an employer branding program, a benefit for employees who need more flexibility. In the future, it will become a basic organizational efficiency tool for BSCs. The pandemic is not only transforming offices space, but amplifying the digital transformation, which will bring a higher level of virtualization and automation like never before, and will be spread through cognitive technologies in those areas that can still only be done with human resources. It will expand the territorial range of labour supply and may further reduce the capital-centricity of the Hungarian sector. All of this is building into the strategies of corporate executives, who are also repositioning nearshoring locations and strengthening back sourcing activities in the international capital movement.

Compared to the data of the HOA study published in 2019 (120 centres and 55,000 employees), the number of Business Services Centres increased by more than 70% in 2020, and the number of employees also increased by almost 35%. However, this does not so much show the real expansion of the sector, but is the result of our more accurate information gathered about the market. This year’s research has never been preceded by such accurate market analysis. Therefore, one of the most significant results of this year’s HOA study is a better mapping and presentation of the Hungarian Business Services Sector than ever before. However, this process is not yet complete, as further market expansion is expected by identifying some smaller players that are not yet known, as well as expanding the sector boundaries to research and development service centres. This insight not only improves the perception of the domestic market for new potential investors, but also more accurately shows the sector’s contribution to the domestic economy and at the same time allows the sector to represent its interests more strongly.

For the first time this year, the results of the research go beyond the domestic framework. The introductory part of the study tries to paint a realistic picture of the regional location and growth potential of the Hungarian Business Services Sector. In 2020, the research questionnaire has served as a benchmark for Hungarian centres for the sixth year in a row; this year, we also harmonised the research questions internationally with the annual ABSL questionnaire to create an international comparison. This harmonisation will lay the groundwork for further research collaboration, better integrating HOA into the international network of the business services centre community.