Virtuous Circle and Critical Mass Pushing More Business to the Cloud, SAP Says

Competition

There has been a step change in the rate at which Hungarian businesses are switching to cloud-based services, says Balázs Ablonczy, the managing director of SAP Hungary and the man responsible for cloud sales across 16 countries in the region for the Germany-rooted enterprise software developer.

Balázs Ablonczy

“We can’t say Hungary has been an early adopter of cloud service, but we are catching up; cloud adoption started very seriously this year,” says Ablonczy, who took on responsibility for regional cloud sales from January 1 this year. He has held the Hungarian MD’s position since 2009.

“I think there are two main reasons for the change: more companies have started being interested and can see the benefits of using cloud services, and more developers are looking at a “cloud first”, making a solution that is up to 90% cloud-based, and in some cases only based in the cloud.”

In other words, Hungary has reached a point of critical mass in terms of service provision, and companies have simultaneously realized that “they must be more open” to the possibilities offered by the cloud, Ablonczy explains.  

“It is obvious that the Hungarian market has changed this year; we are seeing much more openness from Hungarian customers. The growth of the market in Hungary has been around 50% – both for private and public clients – so we are talking about something significant here.”

The growth is in all areas. Ablonczy says customers are now beginning to talk about migrating services that “we did not even dare to dream would be in the cloud” a few years ago, such as transactional data and product line information.  

Embracing the Trend

“We are also seeing more and more ‘trendy’ areas embracing the cloud, like AI, machine learning, IoT, even big data management.”

A big reason behind both the growth and the expanding horizons for what can be done in the cloud comes down to a simple concept, Ablonczy says: trust. Companies had first to accept their data was secure, and then trust someone else to handle it for them.

“The trust is there now; security was never a question: when you are talking about data protection, it has to be very advanced, even if you are talking about the latest privacy support required by GDPR rules across Europe. But now people realize that a data center is at least as secure as a small IT room in an office somewhere in Hungary.”

And in a sort of virtuous circle, that level of trust even extends to government, in Hungary and elsewhere, where SAP – and other providers – are delivering services.

“As the involvement gets more complicated, that cooperation with clients will only grow. In the next couple of years this will spread out widely, using collaborative models of utilization.”

The government is not just an important partner in terms of being a customer, of course. It helps set the framework that encourages others to embrace all aspects of digitalization, the cloud included, and most especially among SMEs.

“In the last two years we have experienced a change in the government mindset,” says Ablonczy, pointing to the subsidies – which SAP use too – available for R&D work, and efforts to make SMEs eligible for EU subsidies through the Economic Development and Innovation Operational Program, known locally by its Hungarian acronym of GINOP. The subsidies are important, particularly to small SMEs, because they are more risk averse and less interested in investing in the future, the software boss says.  

Investing vs Survival

“At the upper level of SMEs, those at a serious size, we see them going for digital options more and more. Smaller SMEs just want to survive.”

If the Hungarian economy is to become as competitive as, say, Austria, small SMEs will need financial help to digitize in order to remove some of the risks and overcome such short-termism.  

“That is why it is very important the government puts digital programs in focus, and not just in its communications, but in providing subsidies supporting SMEs making investments in their future.”

These are not unique problems for Hungary, of course. Ablonczy says in terms of the cloud, the country is roughly on a par with its Visegrad Four peers (Czech Republic, Poland, and Slovakia). Individually, the mainly smaller countries of South Eastern Europe are further behind, though collectively that market is at least as advanced.  

“Austria is much more ahead, more open to cloud solutions and turning more and more to them,” he estimates. The hope is that there will be a trickle-down effect further east.

“Austria has been influenced by Germany, where SAP is obviously a major vendor. In Hungary there are a lot of investors from Germany and Austria, and so we expect to see growth not only for line of business use such as HR or customer experience management, but also for ERP [enterprise resource planning] functions and cloud. Hungary has very strong potential for growth; we are certainly finding it much easier to catch the attention of clients.”

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