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Business Services Sector Continues to Flex its Muscles Across Hungary

Analysis

Thermo Fisher’s Budapest GBS center has been growing dynamically since its establishment in 2018.

One of the most crisis-proof segments of the economy, business service centers are thriving in this country, as evidenced by data from the Hungarian Investment Promotion Agency. They are also helping shift the focus from the workbench to higher added-value activities, a cornerstone of the country’s FDI strategy.

Thermo Fisher Scientific Hungary recently celebrated its fifth business anniversary in Hungary. The local subsidiary of the U.S.-based firm that produces high added value medical and healthcare products provides a wide range of business services to a global clientele.

With a headcount soaring from some 100 in 2018 to more than 800 now, the multifunctional global business services center has been constantly developing since its establishment. Its success story underscores the dynamic growth of an entire sector. [Editor’s note: for more on this, see separate interview on page 16.]

When Thermo Fisher set up shop five years ago, the business services sector employed 46,000 people in 110 centers in the country. By now, the combined number of BSS employees has surpassed the 100,000 mark, and there are 201 offices scattered all over the place. The industry proved so crisis-proof that, even during the pandemic, more than 10,000 people were added to the payroll.

“This trend is of utmost importance for the Hungarian economy as the country’s new investment promotion strategy strives to secure more higher added value projects, to support reinvestment efforts, and to focus on investments that rely on highly skilled talent,” Hipa CEO István Joó stresses.

The thriving business services sector fits nicely into those investment promotion priorities, and Hipa’s BSS-related figures are telling when it comes to demonstrating the dynamic growth of the segment. The agency says it has guided 103 projects, creating more than 19,000 jobs from 2014 to 2022. Last year alone, the sector accounted for over 8% of new jobs created and nearly 11% of total projects.

Climbing the Value Chain

As Joó adds, in the long run, the idea is primarily to attract deals that help the economy step up the global value chain so that the local talent pool stays home rather than emigrates and productivity surges.

This is not just wishful thinking. According to the Business Services Hungary Survey 2023, which is due to be unveiled at the end of this month, more than 80% of companies running a business services center have expressed plans to relocate high-value-added roles to Hungary over the next three years.

The survey was first conducted in 2018, a joint initiative of Hipa and 24 member companies of the American Chamber of Commerce in Hungary, including Thermo Fisher. At the time, it was a unique cooperation that paved the way to enhance awareness of the business services sector and promote talent retention, virtues that have translated into dynamically growing headcounts nationwide.

“When it comes to BSCs, the role of American companies can’t be emphasized enough, as they were the ones that launched the most FDI projects in the BSC and ICT sectors in the past nine years,” Joó notes. “Hence, they remain our crucial partners in creating new jobs in the high-added value segment.”

Another positive trend is the consistent rise in added value in terms of BSC functions. Thermo Fisher Scientific’s project is exemplary in that respect as well since its services portfolio now stretches to cover customer care, finance, procurement, payroll, services operations, IT, and Life Sciences Technical Support.

“Bringing more complex tasks to Hungary not only promotes the creation of jobs with higher added value but also improves the perception of the entire BSC sector,” Joó notes. “This win-win situation, therefore, favors the labor market and boosts employee interest toward business service centers.”

Training is Critical

Training is a critical factor that can push companies to new heights. Thermo Fisher Scientific was among the first working with Hipa in the training subsidy scheme, showcasing its dedication to long-term thinking. Upskilling has become popular with other stakeholders as well. The above-mentioned Business Services Hungary 2023 Report found that seven out of 10 business services centers provide financial support to staff for external training courses.

On the other hand, between 2022 and the first half of 2023 alone, Hipa shepherded 20 projects that received training subsidies, engaging nearly 7,300 employees. The costs of those training programs totaled some EUR 37 million, and subsidies worth a combined EUR 14.3 mln were granted.

Part of the business services sector market evolution is that cities in the countryside are inching into the spotlight. Debrecen, Pécs, Szeged and Székesfehérvár have become popular investment locations that provide excellent opportunities for young graduates and other well-educated professionals to succeed. Companies with existing centers in Hungary are now twice as likely to opt for a countryside location over Budapest when expanding their office footprint.

“This trend reflects a broader shift towards geographic diversification within Hungary. These regional towns that are home to prestigious academic institutions provide a steady influx of skilled graduates across various disciplines, fostering a rich talent pool that aligns perfectly with the demands of the business services sector,” Joó points out.

He adds that as Hungary continues to position itself as a competitive and attractive destination for outsourcing and offshoring, sustained growth is anticipated in the sector.

“With a skilled and adaptable workforce, robust infrastructure, and a business-friendly environment, Hungary is well-positioned to capitalize on the evolving global demand for business services,” the Hipa CEO concludes.

This article was first published in the Budapest Business Journal print issue of November 17, 2023.

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