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Market Talk: ICT, a Sector of Rapid Change

Competition

The Information and Communications Technology sector is one of the most, if not the most, dynamically developing verticals, not just in Hungary, but globally. ICT does not only amend how we do our business but, sitting comfortably in our pockets, it determines how we communicate, consume content and even do our shopping. As such, any business striving to stay competitive must raise its ICT effectiveness to the highest levels.

János Stautz

According to figures from the state-owned Hungarian Investment Promotion Agency (HIPA), which operates under the Minister of Foreign Affairs and Trade, some 400,000 people are employed in the ICT sector in Hungary.  

Furthermore, Hungary’s favorable economic environment continues to attract foreign direct investment from the sector, with around 66% of total value added generated by foreign-controlled ICT companies. According to data from the Hungarian Management Consultants Association (VMTSZ), IT-related projects dominated the consulting industry with a 42% share in 2018.

“As a company with Swedish roots, Sigma Technology has been a part of a research group together with the Embassy of Sweden in Hungary, Business Sweden, and major Swedish companies operating in Hungary,” the company tells the Budapest Business Journal. “One of our research findings mapped almost 200 Swedish companies that operate in Hungary and employ about 20,000 Hungarians.”

This busy and fast-developing sector is the very battleground of fierce competition. Nevertheless, what used to be a tight race for clients has changed considerably.  

“Competition has always been fierce in the IT sector. Companies have been fighting for the scarcest resource: in the past it was new business. Today; it is talent. In general, Sigma Technology is focusing less on what others are offering in terms of their business portfolio, and more on how we can attract and keep the best people,” explains György Nagy, country manager at the group’s Hungarian unit.

Talent is Treasure

The hiring and retention of the best talent has indeed kept IT companies busy.

“In our segment, we see continuous growth and demand for skilled staff, with rising costs of manpower,” says János Stautz, a consultant working with TRL Hungary Kft., a Deltek regional distributor, chiefly selling Deltek Maconomy enterprise resource planning (ERP) solutions.  

In addition to these challenges, compliance with the fast changing legislative environment is another factor that must have an eye on kept on it.  

“Due to new and frequent changes is legislation, TRL Hungary Ltd. has to put more effort in keeping the system compliant with various requirements,” Stautz adds.

As the only Deltek distributor in the region, and given that Maconomy ERP is a unique solution for professional services organization, TRL Hungary says it sees less competition in its niche market.  

“Although we see a large number of enterprise resource system vendors on the Hungarian market, those are not close competitors for our target market,” Stautz explains. He adds that, based on client experience, it often happens that due to the limited human resources of the vendors, the real challenge is not to find a suitable system, but to find a partner capable of providing acceptable services with the solution offered.  

Stautz admits that, trying to reach larger multinational clients, TRL finds it is competing against the Hungarian arm of German multinational enterprise software provider SAP, which has regional offices in 180 countries under its umbrella.  

But he is not daunted by that challenge. “We are confident that the functionality and the cost effectiveness of Maconomy gives us a solid chance to win the business,” Stautz adds.

Despite its relatively young age, the ICT sector, has already gone through disproportionate change in just a few years. The internet started becoming commonplace from 1996 onwards, and fast-forward a bit more than a decade, Steve Jobs introduced the first iPhone in 2007, laying the first paving slab of the “yellow brick road” leading to internet connectivity on the go.

György Nagy

More Sophisticated

As the perception of ICT has changed on the users’ side, it has been developing for developers, providers and businesses too.

“There used to be a strong and sometimes counterproductive focus on cost in the past, which is now slowly transforming into a more sophisticated approach from sourcing organizations,” says Nagy, of Sigma Technology Hungary.  

“Nowadays, they are looking at other factors too, such as overall value-added, trustworthiness, reliability, or the quality and frequency of communication with their suppliers. These values were considered too soft and subjective to be used during procurements in the past, but not anymore,” adds Nagy.

Additionally, the market is changing on so many levels that keeping tabs on it appears to be a full-time occupation. Cloud computing is on the rise, but the transition of services and business solutions to the cloud can be labor intensive and costly. This, in part, further fuels the steady increase of manpower costs.  

With data security and privacy protection demands come continuous legislative changes that add to the compliance challenges. Big data keeps accumulating that needs to be curated, and should also be analyzed to deliver advantages and streamlined operations for companies; business intelligence is the new black.

With IT solutions having reached areas one would not have thought of previously, the process is far from its end, yet.  

“It was IT that first went global, and Sigma Technology expects that trend to continue, and reach into areas that are not yet affected,” Nagy predicts.

“There is a general shortage of IT competence in the world, so outsourcing will climb to new heights. It could be further fueled by potential restrictions on travel (especially flights) due to its environmental impact. We at Sigma Technology prepare for that with a strong “nearshoring” offering: setting up development teams close to the customer site,” the Hungarian country manager concludes.

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