A growing sector in a declining economy
Shared Service Centers in HungaryBudapest, 22. April 2010
After the rapid expansion during the past decade, Hungary’s shared services industry is growing into one of the country’s largest employers with 30,000 jobs – reported PwC.
Shared Service Centers (SSCs) are entities formed for internal company purposes which are responsible for the migration and execution of specific non-core operational tasks that would otherwise be performed by the core businesses of the company. This focuses talent and effort on primary competencies allowing for greater employee job satisfaction. By centralizing in fewer locations companies can standardize and integrate processes allowing them to operate with greater efficiency, at a lower cost and with the flexibility to more easily respond to changes in demand.
PwC’s survey – which is sponsored by the Hungarian Service and Outsourcing Association and the American Chamber of Commerce – is the first comprehensive study about this industry. Today, there are more than 80 SSCs in Hungary, providing a range of centralized business services at primarily a regional, but in some cases at a global level. Typical services include finance and accounting, procurement, logistics, IT and human resources and involve transactional roles as well as complex, high-end, value-add activities. SSCs primarily employ graduates with strong language skills. Further to being a significant employer, the shared services industry accounts for approximately 1.2% of the 2010 central state budget in terms of employee related taxes, duties and VAT payment.
| At a Glance – SSC sector in Hungary | |
| Number of SSCs Total number of employees Employees with university / college degree Contribution to central state budget Predicted job creation |
over80 30,000 over 80% 1.2% over 2,000 new jobs in the next 2 years |
The PwC survey’s key finding was that 80% of assessed shared service centres are currently in the expansion phase of their life cycle, with their well-established operations enabling them to shift focus towards high-end value add activities. This expansion presents Hungary with a valuable and rather unique opportunity given the current economic conditions. Forecasts show that the SSC sector is expected to create more than 2,000 jobs in the next 2 years which means a current 10% expansion extrapolating from known, committed plans in an industry that is seen as key to building a knowledge based economy.
Chris Davies, Managing Director of Diageo Business Services said: “Diageo operates one of the oldest and most mature shared service centres in Hungary and our strategy is very much shared by many players in the market: shifting from standardized, transactional activities to higher complexity areas that leverage the local talent and expertise. With 80% of shared service centres still in expansion phase, our industry presents Hungary with a unique opportunity.”
The survey also confirmed that Hungary is still seen as an attractive option for locating shared services. As the key attribute of that attractiveness, respondents named highly qualified labour with strong language skills, excellent infrastructure and ‘Class A’ real estate.
“Hungary is competing well for further shared services investment; however this competition is strong, with countries and specific regions coming forward with great offerings and incentives. Certain countries have a dedicated strategy for the shared services industry and a framework in place that helps attract and retain investment – such dedicated focus would hugely contribute to Hungary’s long-term success in building its knowledge based industry” – highlighted Gyula Bunna, Director of Advisory Services at PwC.
Mike Colicchio, Managing Director of Celanese Corporation’s Budapest Business Services Center said: “One important aspect of a country’s ability to maintain a leadership position in the SSC marketplace is the development of secondary locations outside the primary city. The talent is available in major cities across Hungary, but substantial investment is needed in infrastructure and a focus should be placed on awareness of career opportunities in SSC’s. The capital is becoming more competitive due to new entrants and the expansion of existing SSCs; however, in-country alternatives need to be explored if Hungary wants to continue to attract new SSC investment.”
The recently released survey is one of a kind in providing the most complete sector overview available in Hungary together with an analysis of the strengths, risks and opportunities of the industry. PwC is planning to conduct a similar global survey in the summer as a part of the company’s on-going work to improve best practice in management and operation of SSCs.
